Libra's leader laments limitations of legacy networks
Co-creator of Libra, and current head of Calibra David Marcus has published an article on Medium providing further explanation as to why Libra was founded and to explain the benefits of the Libra protocol (or, a new core network) for payments, because:
the advantages of digital currency transmitted over a blockchain — notably when it comes to broadening access and lowering costs of financial services — weren’t as evident to others as I assumed they were.
It is surprising that Libra and Facebook did not anticipate the level of skepticism that would meet the Libra Project, Marcus is right that there is still a significant amount of inertia in favour of existing systems.
Marcus rightly points out that almost all existing "money networks" are based on legacy systems, many of which were first built in the 70's or 80's when computers were radically different to those available today. Despite ongoing upgrades over time, many of these networks (Such as ACH, European Payments Council, SWIFT and RT1) still have limited interoperability and are generally closed networks. He says:
Long story short, building on top of existing rails and across disconnected payment networks won’t reduce cost, open up the market to more innovation, nor lower the barrier of access to modern financial services as much as building a new infrastructure with a very stable, high quality global medium of exchange supporting it.
Marcus also points out that most current payment services and wallets have similar interoperability limitations, and generally operate in siloed systems with limited reach. Clearly, limited reach is unlikely to be a problem which effects Libra.
In drawing a comparison between remitting $100 from the US to Argentina, Marcus insists that while doing so would cost up to $50 using existing remittance networks (assuming participating banks are using SWIFT), a similar payment could be made using wallets, merchants and services on the Libra network at incredibly low cost, with near real-time settlement, and with no need to consider liquidity pools or other conventional intermediary problems.
Reinforcing a comment we have made a number of times regarding how Libra ought to be regulated, Marcus notes that Libra's framework is closer to a protocol than a service provider:
Just like [Simple Mail Transfer Protocol (SMTP)] allowed any email provider to interoperate with other email providers, Libra can be the 'protocol' that will enable fast, cheap, and stable money movement across service providers, institutions, and people all around the world.
The need to go back and push out more education on why the current payment and banking systems are old, riddled with security problems and in need of replacement is a reminder that its easy to get caught up in a bubble of blockchain technology without realising that most users / regulators / politicians don't have the bandwidth to get across disruptive technologies and that an educative approach is needed at the first instance.
Thanks to Tom Skevington for his assistance with this piece.