The old adage about giving a dog a bad name certainly applies to Facebook these days. Politicians and pundits of every ideological stripe feel free to lash out at Mark Zuckerberg whenever he comes to Washington, even when his visit has nothing to do with Facebook.
This week, the Facebook-bashing bled into Zuckerberg’s testimony on Capitol Hill regarding his newest venture, Project Libra. This is the most ambitious venture yet by an American company into the cryptocurrency market, one that could raise the status and reputation of this revolution in financial transactions — and maybe prevent the future of that revolution from being dominated and controlled by China.
Cryptocurrencies such as Bitcoin, which is essentially digital cash exchanged on the Internet, gets lots of harsh criticism, some of it richly deserved. They’ve been accused of being simply a vehicle for money-laundering; as a way of securing the network, they rely on a widely dispersed ledger to keep track of transactions, instead of a single centralized source, and some cryptocurrencies have been vulnerable to spectacular acts of hacking. Bitcoin in particular is subject to major market fluctuations that give some investors, and regulators, periodic heartburn.
Above all, cryptocurrencies are a direct challenge to one of government’s longest-standing and most important monopolies, that of a national currency. It’s not surprising that their advent since 2009 has triggered considerable pushback from the financial establishment as well as from governments, including ours.
Pushback is also what Facebook gets from both ends of the political spectrum plus the middle. The social-media company has been hammered for everything from inadequate privacy and permitting foreign election interference that supposedly got Donald Trump elected president in 2016 to muzzling conservatives and propagating fake news. Most of the steps Zuckerberg has taken to correct these issues are either ignored or dismissed as inadequate — as when Alexandria Ocasio-Cortez slammed Zuckerberg on Wednesday for daring to include The Daily Caller in the company’s new list of organizations it consults for fact-checking.
But what critics on the House Financial Services Committee of the caliber of AOC and chairwoman Maxine Waters fail to understand is that Project Libra actually goes a long way toward solveing what ought to be their real concern, the security and future of global financial transactions.
For example, contrary to myth, the Libra currency won’t be “owned” by Facebook. It will be run by a consortium of companies and organizations, the Libra Association Council. It will avoid wild market swings by connecting its value to a basket of historically stable currencies such as the dollar, the euro, and the Japanese yen. Libra is also not digital cash but a currency of account for transactions, so it’s not possible to stockpile the digital assets for money-laundering or other nefarious purposes — one of the counts against Bitcoin. Then for safety’s sake, Libra has come up with a virtual wallet, called Calibra, which can prevent fraud by verifying every user’s transaction — a method similar to that used by PayPal. (In fact, former PayPal employees will be overseeing Calibra.)
Still, safety, privacy, and security protections are probably the biggest legitimate issues surrounding Libra. Facebook can easily address them, however, by using quantum technology, or blockchain, to protect the underlying architecture of its distributed ledger.
As I explained in for National Review of George Gilder’s book Life after Google:
Essentially, information in a blockchain exists as a shared — and continually reconciled — database. The blockchain database isn’t stored in any single location; no centralized version of the information exists (as it does in Google’s Dalles data center) for a hacker to penetrate. Instead, it’s hosted by millions of computers simultaneously, like a spreadsheet duplicated across an entire network whose data are constantly updated and accessible to anyone on the network.
With some minor modifications, this is true for Libra as well. The problem is, future quantum computers will be able to decrypt the complex algorithms that asymmetric encryption systems, including blockchain, use to secure almost all electronic data. Instead of being the answer to all our cybersecurity vulnerabilities, including those of cryptocurrencies, blockchains could become just as vulnerable as web browsers or the cloud.
If Facebook uses the occasion of Project Libra to build a quantum-safe cryptocurrency (using, for example, quantum-resistant algorithms to support encryption) that’s invulnerable to quantum hacking — or to any other kind of hacking — it will not only be a major contribution to the future of cryptocurrencies, but it will show America how to make all our data and networks quantum safe and secure.
Unfortunately, the attacks on Facebook have caused several co-sponsors, including PayPal, to drop out of Project Libra. Zuckerberg admitted during his testimony that he may have to abandon the entire venture if federal regulators don’t relent. That could be disastrous, because there’s another player eager to get into the cryptocurrency fray: China.
Soon after Facebook broke the news about Project Libra, China announced that it was going to launch its own cryptocurrency with the help of its biggest companies. It would be a historical and economic travesty if China became the world’s leader in the future of digital currencies, while the American company best able to reshape the future of this market was forced by its own government to bow out.
And we’d have no one to blame but ourselves — and our misguided antipathy toward Facebook.
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