TOPSHOT - The US Capitol is seen in Washington, DC on January 22, 2018 after the US Senate reached a deal to reopen the federal government, with Democrats accepting a compromise spending bill.
MANDEL NGAN/AFP/Getty Images
TOPSHOT - The US Capitol is seen in Washington, DC on January 22, 2018 after the US Senate reached a deal to reopen the federal government, with Democrats accepting a compromise spending bill.
Now playing
02:39
NYU professor's warning about Facebook's cryptocurrency
Liverpool co-owners John W Henry (left) and chairman Tom Werner have seen the club's fortunes improve since taking over the club in 2010.
Michael Regan/Getty Images Europe/Getty Images
Liverpool co-owners John W Henry (left) and chairman Tom Werner have seen the club's fortunes improve since taking over the club in 2010.
Now playing
01:56
Football executive apologizes for European Super League plan
NEW YORK, NY - SEPTEMBER 07:  Venus Williams speaks onstage at theCURVYcon Powered By Dia&Co on September 7, 2018 in New York City.  (Photo by Slaven Vlasic/Getty Images for theCURVYcon)
Slaven Vlasic/Getty Images for theCURVYcon
NEW YORK, NY - SEPTEMBER 07: Venus Williams speaks onstage at theCURVYcon Powered By Dia&Co on September 7, 2018 in New York City. (Photo by Slaven Vlasic/Getty Images for theCURVYcon)
Now playing
03:03
Venus Williams: Major tournaments can succeed this summer
AirTag
Apple
AirTag
Now playing
01:17
See AirTag, Apple's new device for tracking your lost stuff
John Oliver addressed the recent fatal police shootings of Daunte Wright and Adam Toledo in a passionate monologue on "Last Week Tonight."
Last Week Tonight/HBO
John Oliver addressed the recent fatal police shootings of Daunte Wright and Adam Toledo in a passionate monologue on "Last Week Tonight."
Now playing
01:38
John Oliver to White Americans: 'March in the streets'
WASHINGTON, DC - DECEMBER 12: U.S. President Donald Trump departs on the South Lawn of the White House, on December 12, 2020 in Washington, DC. Trump is traveling to the Army versus Navy Football Game at the United States Military Academy in West Point, NY. (Photo by Al Drago/Getty Images)
Al Drago/Getty Images
WASHINGTON, DC - DECEMBER 12: U.S. President Donald Trump departs on the South Lawn of the White House, on December 12, 2020 in Washington, DC. Trump is traveling to the Army versus Navy Football Game at the United States Military Academy in West Point, NY. (Photo by Al Drago/Getty Images)
Now playing
02:18
Trump said electing Biden would crash the markets. It didn't
Scene video following a crash involving a Tesla Saturday night in Spring, TX
Scott Engle
Scene video following a crash involving a Tesla Saturday night in Spring, TX
Now playing
01:09
Fatal Tesla crash had no one in the driver's seat, police say
CNN
Now playing
03:22
Bank of America CEO reveals his top worry about the economy
US Navy
Now playing
01:28
Pentagon confirms UFO video is real, taken by Navy pilot
marte fotos volcan olympus mons sistema solar hope ultravioleta perspectivas mexico_00000411.png
marte fotos volcan olympus mons sistema solar hope ultravioleta perspectivas mexico_00000411.png
Now playing
04:12
Why we are going to Mars
Twitter | @brady9dream
Now playing
02:10
Pet owners pitch their pups to be dog brew's 'Chief Tasting Officer'
Now playing
01:32
Scientists turned spiderwebs into music and it sounds like a nightmare
LONDON, ENGLAND - DECEMBER 07:  A visual representation of the digital Cryptocurrency, Bitcoin on December 07, 2017 in London, England. Cryptocurrencies including Bitcoin, Ethereum, and Lightcoin have seen unprecedented growth in 2017, despite remaining extremely volatile. While digital currencies across the board have divided opinion between financial institutions, and now have a market cap of around 175 Billion USD, the crypto sector coninues to grow, as it continues to see wider mainstreem adoption. The price of one Bitcoin passed 15,000 USD across many exchanges today taking it higher than previous all time highs.  (Photo by Dan Kitwood/Getty Images)
Dan Kitwood/Getty Images
LONDON, ENGLAND - DECEMBER 07: A visual representation of the digital Cryptocurrency, Bitcoin on December 07, 2017 in London, England. Cryptocurrencies including Bitcoin, Ethereum, and Lightcoin have seen unprecedented growth in 2017, despite remaining extremely volatile. While digital currencies across the board have divided opinion between financial institutions, and now have a market cap of around 175 Billion USD, the crypto sector coninues to grow, as it continues to see wider mainstreem adoption. The price of one Bitcoin passed 15,000 USD across many exchanges today taking it higher than previous all time highs. (Photo by Dan Kitwood/Getty Images)
Now playing
03:10
Bitcoin has an energy problem
Accused $50 billion Ponzi scheme swindler Bernard Madoff exits federal court March 10, 2009 in New York City. Madoff was attending a hearing on his legal representation and is due back in court Thursday.  (Photo by Mario Tama/Getty Images)
Mario Tama/Getty Images
Accused $50 billion Ponzi scheme swindler Bernard Madoff exits federal court March 10, 2009 in New York City. Madoff was attending a hearing on his legal representation and is due back in court Thursday. (Photo by Mario Tama/Getty Images)
Now playing
03:11
Bernie Madoff, infamous Ponzi schemer, dead at 82
Now playing
05:18
Coinbase CFO: We're an on-ramp to the crypto economy
A man checks vine buds during the burning of anti-frost candles in the Luneau-Papin wine vineyard in Le Landreau, near Nantes, western France, on April 12, 2021, as temperatures fall below zero degrees celsius.
Sebastien Salom-Gomis/AFP/Getty Images
A man checks vine buds during the burning of anti-frost candles in the Luneau-Papin wine vineyard in Le Landreau, near Nantes, western France, on April 12, 2021, as temperatures fall below zero degrees celsius.
Now playing
01:37
See how French winemakers are trying to save their crops from frost
(CNN Business) —  

Facebook’s Libra cryptocurrency could change global commerce and finance, becoming a new way for people to send money and pay for things.

Facebook (FB) announced Libra in June and expects to launch it early next year.

What is Libra?

Libra is a cryptocurrency developed by Facebook. The company says Libra will make sending money online cheaper and faster, and it will improve access to financial services, especially for people without bank accounts or with little access to banking.

How will Libra work?

Libra and the technologies to use it will be built upon a blockchain platform called the Libra Network.

A blockchain is made up of a series of servers (also called “nodes”) that record and validate every transaction made on the network. Unlike with many other cryptocurrency networks that allow any server to join the chain, the Libra Network is a “permissioned” blockchain, meaning only certain servers will be able to connect to the chain.

Facebook says that will allow the network to run faster than other cryptocurrencies, making Libra practical for everyday uses like purchasing something online.

The network is built with open-source code, meaning any developer will be able to create a digital wallet or other tool to use Libra on top of the network. Facebook has said it will eventually transition the Libra network to a public blockchain, though it has provided no details on that process.

Who will oversee Libra?

Though Facebook envisioned and developed the infrastructure for Libra, it will not manage the digital currency. Instead, an independent, nonprofit organization called the Libra Association will oversee Libra’s launch and govern the currency.

The Libra Association is a consortium of companies and nonprofits from around the world based in Geneva, Switzerland. It has 28 founding members — including payments, technology, telecommunications, venture capital and blockchain companies, as well as nonprofit organizations. Members include Paypal, Lyft, Coinbase and Mercy Corps, among others. The association hopes to have 100 members by Libra’s launch.

The association will have two main roles: Member organizations will operate the servers to run the Libra Network, and the Libra Association will manage the reserve that will back Libra to ensure its stability.

How will Libra remain stable?

Facebook says Libra’s value will be less volatile than that of Bitcoin because it will be backed by real currencies. But unlike some other “stablecoins,” Libra’s value will not be fixed to any single physical currency (cryptocurrency exchange Coinbase, for example, offers a stablecoin backed 1:1 by US dollars).

Instead, Libra will be backed 1:1 by a reserve “basket” of fiat currency bank deposits, including the dollar, euro and Japanese yen, and government securities. This means its value relative to any one currency will vary.

What is Calibra?

Calibra is a Facebook subsidiary created to develop products and provide financial services using Libra.

The division’s first product will be the Calibra Wallet, a digital wallet that will let users store Libra and send it to friends like they’d send a text message at “low-to-no-cost,” Facebook says. The Calibra Wallet will be a standalone app, and will plug-in to Facebook’s Messenger and WhatsApp. Other companies and entities will also be able to develop wallets and other tools to use Libra on the network.

To protect user privacy, Facebook plans to keep the Calibra subisidary independent. The company says Calibra will not share customers’ account information or financial data with Facebook except in limited circumstances such as preventing fraud or complying with the law, or unless users have agreed to the sharing of their data.

What’s in it for Facebook?

Facebook expects Calibra will enable more transactions between users and businesses on its platforms, which could generate more ad revenue for Facebook. The company hopes to eventually offer more financial services and create new revenue streams through Calibra.

Facebook says it will not use Calibra users’ data for ad targeting.

What are critics saying?

Lawmakers and regulators are concerned about a new financial tool that will suddenly be available to Facebook’s 2.4 billion users, and they are scrambling to determine how to oversee it. Facebook will attend two public Congressional hearings this week, to evaluate Libra’s potential impacts on consumers and global financial systems. Some have proposed legislation to stop Libra altogether.

In a press conference Monday, Treasury Secretary Steven Mnuchin said the government is worried Libra could be used for human trafficking, purchasing illegal drugs and other illicit uses. Last week, Federal Reserve Chairman Jerome Powell told Congress Libra “raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability.”

Facebook said it is willing to delay its entrance into the cryptocurrency market to work with regulators, though that may not stop the Libra rollout altogether.