What Do We Do About Libra? by Lucas Geiger (Devcon5)

Mucca Mucca Mucca i maka is a phrase I learned here in Osaka and the local dialect which means hello greeting but it literally means are you making money which seems appropriate for Def Con so Def Con are we making money so many of you know me is the co-founder of wireline the p2p application network tomorrow we have a big demo with our CEO rich burden don't miss it tomorrow at 12 but this is a story about what happened when we started looking into using Libra on our application network so Kryptos come a long way seems like everybody wants to be involved in it including this guy Mark Zuckerberg now obviously there's a lawsuit coming so what a sea change for crypto I mean really it's entered the mainstream and you know who would have thought from the days of Bitcoin that we might have a something that looks like a cryptocurrency reach perhaps four billion people and so I think it's a there's a moment here where everybody working in crypto should feel some sense of gratification of the work that we've been doing the research the open source finally paying off into something that can go mainstream so I'm gonna say something that I think might not go well with this crowd but I think Libre is gonna become the de facto currency of the internet now that might just be because of the sheer reach of Facebook and its partners and they're going to be able to reach between all of the Association members around four billion people so anything they do is going to be relevant but I actually think that there's a lot to like about Libre I think the stable coin design is quite compelling especially for developing nations so and I'm surprised actually a lot of people in crypto don't know the details of this what Libre is doing is it's creating basically a currency fund so a basket of currencies where one Libre gives you Redemption on that basket of currencies and that's a really compelling story for people around the worlds that live in governments that don't have you know sustainable financial and fiscal policies and what's interesting about this again is a historical moment for a non-governmental currency that's a blend of other currencies it's not a new idea you know IMF STRs and John Maynard Keynes with bank or we've had this idea for a long time so this is really exciting another thing that's going to come to the mainstream through this platform is this idea of trust minimized financial automation so smart contracts and it could become widely spread through disassociation so that's the good part now everybody here I think knows the problems with how Facebook is deploying this so the design of Libra is effectively of as a it's designed as a bank as a full Reserve Bank it takes deposits from end users that goes into a trust that trust yields interest that interest gets paid out to the investors of the bank the Libra Association members and so in the Libra association is kind of a misnomer it's not a not-for-profit thing associations in Switzerland are basically LLC's they could have LLC's in the US and what gets worse about this Bank is that it has a distinction of having the ethics of uber the censorship of visa and the privacy of Facebook these are the people they're going to be making decisions about this global bank and everything that we understand about the Libre Association so far leads us to believe that governance decisions are going to be made only by the investors in the bank so and this only it starts to get worse when you start thinking about the scale of this Bank and it possibly being too big to fail because it being a being in a super national jurisdiction you know in Switzerland and other countries whose gonna bail out this Bank if it runs into trouble for example in a regime of negative interest rates what does this bank look like so lots of governance problems there and how are we as a society trying to solve these governance problems wrong way with government solutions now if you feel the same way I do about government solutions I don't think that we should hold too much hope for solving this these issues so I think there are two outcomes that can happen from Facebook engaging with governments on one side Facebook can is going to engage in regulatory capture and so the end of that path is the bank too big to fail and basically Facebook can just go jurisdiction shopping to find you know a country that can say give them give them a regulation that says well this isn't really a bank whether it does bank like things and Libra isn't really an investment it's a sexual currency so that's the path they're on now and I think they'll likely get it the other the other one which I think oddly we have people in the crypto community rooting for is that we managed to corner Facebook the government somehow miraculously managed to coordinate and put Facebook into a corner and then Facebook is gonna do something lame like venmo or WeChat and I think that that would be a mistake I think that's a missed opportunity for Humanity but it's worse for crypto because now we're gonna have empowered regulators that think they know something about crypto and are gonna prevent any project like this from happening again so how could we steer this to somewhere in the middle or on another plane you know what how could we expand this the set of possibilities here well so I went around and spoke to some of my friends and crypto some the leaders of the crypto projects and you know that one idea kept coming up which is basically the only tool we have in blockchain governance and it's hard Forks basically the state of the art that we have in governance in crypto you know generally hard Forks I think of them as a prank and I think a lot of people suggested to fork Libre as a prank and sometimes these pranks can you can walk away with with a lot of money I'm looking at youth hit corn cash there's but if we you know zoom out the forks are an important feature of open-source this is very interesting game theoretic mechanic where I have to listen to my community I have to include their some of their innovations their governance their use cases lest they fork my code rebranded and and stop contributing back to me so soft Forks so rather Forks create a kind of soft power between contributors of a network and of and of code to the original maintainer so how can we use this tool that we have to create a new space for discussion a new space for innovation and something that expands for the set of stakeholders so a few of us got together and look at these wonderful names here just they're all stars in crypto these people have given a lot of blood sweat and tears to making public good financial platforms work what did we decide to do well we're gonna collect all the people that are excluded from Libre we're gonna fork the Libre code and fork the community and create a new network that we call open so we've been working on this for four months and for the trolls out there move your fingers away from the keyboard now there is no token sale there is no equity there's no company behind this there are no investors so relax this is all grant funded and funded from personal money of the contributors so this is time to thank the interchange Foundation and the good boys at cosmos for the generous grant to kick this up to the next level and many thanks to the wireline and OS coin teams for the resources given to get us started so what we want to do we intend to lock the door open to libre libre des designed as a walled garden and I think wall gardeners don't work generally in in software but they certainly don't work in this new era of financial automation there's trust minimized I've spoken to Libre Association members and they have told me when I asked them directly can my application be stopped on the facebook network and they said what we haven't decided that yet it's a very bad sign so for anybody that is excluded locked out forbidden there's going to be an open and compatible network so these are the guarantees we need to provide for that so the three things that we need to do and this is how we're gonna measure our success anyone that's impacted by Libre should participate in its governance that could be half of the world's population so half the Earth's population should participate in governance and have recourse to fin tech platforms smart contact platforms are going to produce a lot of value in the coming decades and we just let users share in that value in a meaningful way three move smart contract language and smart contracts generally enable new types of business categories and let's let businesses innovate with it without the risk of their app being stopped so this is our strategy this is how we're gonna get those three things we need a type of technical compatibility and we need a financial compatibility on open Libre so the technical compatibility might seem straightforward but it's not we need to get the move language which there's a lot to like and and our team is very excited about it we think it would be possibly the compatibility layer for all blockchains it's that good but the first thing we need to do is get the movie em to run on a consensus engine that is permissionless so if you actually go into the code the Libre code today the Libra VIII the Libra consensus is predicated on all the nodes knowing each other so that's not gonna work for for the vision that we have so we need to make some meaningful changes disassemble vn the movie in' and Libra consensus and reassemble it financial compatibility so technically compatibility is necessary but not sufficient we need financial compatibility meaning if a contract gets moved from Facebook's chain to open Libra chain it's not sufficient to just have the contracts work correctly we need the money to represent the same thing so the open Libra coin is going to be a peg to Libra it's not gonna be a new reserve currency it's going to be pegged to Libra now this introduces a number of problems we can't have any dependencies on the Facebook change meaning we're not going to be able to do atomic swaps we can't have a contract on the Facebook chain that is holding all of the deposits all the collateral for the open Libra chain because that could be cut off at any time second constraint we have Facebook's Libra will grow to a size of recent estimates 10 to 20 trillion dollars worth of Libra circulating on the Facebook network so hypothetically if open Libra had 1% of the volume of Libra Facebook's Libra that would be a hundred or two hundred billion dollars worth of open Libre circulated there isn't enough crypto in the world to collateralize that in a maker Dow Construction so we're are we after four months of working on this so we've had a bunch of deliverables we've been working quietly a lot of this is design architecture and frankly in validation of designs but today we're actually really happy to announce something that we call movement so if you go to github open Libre you will see the scaffold the the first designs and scaffold of what we're calling movement and that is where we're taking the move virtual machine and creating all the interfaces for it to work on top of tender mint a BCI so what does that mean you'll be able to run a state machine with the movie em and the movie smart contract language and use all that tooling and you're going to be able to get your State replicated through permissionless consensus and use all the wonderful tools from the cosmos SDK to be able to create a proof of stake system so go check that out now and you know many thanks to now who worked over the weekend to make this happen for us to deliver it thank you now but most of the work going forward and we're actually most of the work we've done frankly and going forward is going to be around governance so everyone working here we're working on a collective project which is creating financial infrastructure as a public good and you know Bach chains haven't solved the governance problem in fact hard Forks seem to be the only thing we have but there's a superset problem which is public goods generally speaking our unsolved problems in economics and sociology we don't know how to fund make decisions maintain a public good without literally having an army behind it so this is a category of hard problems but Facebook's decision to do this as a effectively other company in Switzerland you know is a mistake they haven't actually shown and in the intent or or possibly the intent to understand the problem or to solve the problem but as yet openly but we have to do that so right now we don't claim to have the answers for governance but we do claim to understand the problem if you've seen some of the names up there these are these are some of the thought leaders in governance and public goods but importantly how are we going to get this done the initial partners the initial owners of the open libre governance ardent so today we're happy to announce as a governing member of open Libre the Red Cross specifically the Danish Red Cross a lot of people don't know this but the Red Cross works on a lot of financial innovation for the bottom billion to create resiliency in communities around the world for example they have this wonderful project around community currencies in East Africa the Red Cross has been around for 160 years I think and they have this very powerful model all the time do no harm and informs all of their decisions so we've asked them we've invited them to be our guardrails in our process of formalizing the governance help us do no harm so thanks to Adam Bornstein our delegate from the Red Cross for making this happen so I'm gonna wrap up as everybody recognized this headline anybody this is the message that was in the first transaction on the Bitcoin blockchain on the first block so this is a reminder that crypto came from some very scary economic times there was this opaque convoluted fraudulent over engineered financial system that nearly brought the world to go over a cliff I was I remember that time and so today sorry to say this to folks in this audience but it seems like Libra is going to inherit the legacy of Bitcoin and Libra is going to inherit the legacy of smart contracts so as a society are we just doing the same things over and over with new tools it doesn't have to be that way so this is an invitation to come help us steer the future of Libra and Libra we trust in facebook we don't if you are a business excluded by Facebook who would like to use it and don't see yourself being able to you should write eleftherios this is his twitter handle are your nonprofit and you want to participate in governance you want to do this in the right direction that's my twitter in there and are you technologists and distributed systems lots of neat puzzles for you to work on you should contact now and finally PayPal call me I'm ready you