Flourish in a Flash: How Facebook's Libra May Change Ecommerce

Episode Transcript

Please note: Transcripts are computer generated.

Holly G:

Hey everybody, and welcome to another episode of flourish in a flash. And today we're going to talk about something a little different. We're going to talk about Libra. I know a lot of you guys have been hearing about it in the news and we've gotten some questions about, you know, what is it? Should I be worried about it? How can we use it? So we thought we would bring in an expert who can help us answer these questions. So I'm very excited today to introduce Hannah Rosenberg, who is the managing director of the Blockchain Institute here in Chicago. So Hannah, welcome to the show. Thanks. It should, I am looking forward to this conversation. It's going to be a lot of fun. I think so. So, hey, why don't you go ahead and tell everybody a little bit about yourself and then we'll jump into the Libra discussion.

Hannah R:

Yeah, so I have been in the Bitcoin crypto space for good seven years now, so yeah, it's been awhile. Um, so I have a background in ecommerce web development. I do some commerce stuff via my business. Velas Commerce, but full time gig and managing director of the blockchain institutes. And so we teach people blockchain and I do a lot of the bitcoin and commerce courses here at the institute. This is, yeah, this is a situation I've been watching closely.

Holly G:

No kidding. And for our audience in particular, you're kind of the perfect person to talk to because you do look at ecommerce and the cryptocurrency space. So I'm really excited, to discuss this today. So can you give everyone just like a quick explanation of Libra, like where it's coming from and um, you know, how it's different from bitcoin. I think that's the other question we get a lot is like what's the difference?

Hannah R:

Yes. Yeah. And this is really important because there are really huge differences and Libra sort of describes itself as a decentralized blockchain in the crypto currency. And you can think of it in that way, but these things are all very, very debatable. So bitcoin is just a software project, completely open software project. This is a very controlled system. You know, and it's an association, so it is not directly controlled by Facebook, although at the moment they are, you know, control over it. But it won't be entirely controlled by them. Well, it's a lot of people that argue, is it actually technically a cryptocurrency kind of technically on the background in the, on the back end. It's not exactly a blockchain that you can think of it that way. You know, compared to traditional finances is a very decentralized system compared to Bitcoin, not so much. Right. So this is more a in association of businesses that will be managing this. So it's much more decentralized than paypal, but you know, not decentralized compared to something like bitcoin. So it's sort of a private version of Bitcoin, which make changes quite a lot of things.

Holly G:

That's interesting. So as a retailer, I guess, um, what does that mean for me? Like if I'm advertising on Facebook or something, I mean, is that gonna change the way I'm paying for things in that ecosystem? Or I guess like what, what are the implications of that?

Hannah R:

Yeah. Specifically for retailer, right? So if I'm selling something, you know, and this is interesting because you have to think of who's the target audience and who's going to actually be using this. Right. And so I think in the US right, we don't have a lot of incentive to switch to something new, right?

We have credit cards, we have, you know, Amazon prime and Paypal and all of these things. There's not a huge reason for us to switch to anything new. So it'd be very interesting to see how much it catches on here. The more interesting thing is it might bring, you know, this project sort of claims to be targeting, you know, the unbanked in a lot of places and it's, so there's an interesting argument there. Is it going to bring all these new people into, you know, a market? I don't think so because I mean it might bring people into a market there, but if you're talking about US-based retailers, I doubt it because you still kind of have to have some sort of third party intermediary to manage some sort of disputes. Right. And if you don't have Visa to reverse some sort of credit card charge or Paypal to do that, then you're still probably not going to interact with someone on the other side of the world who has shared no intermediary with.

And I don't know that Libra or Calibra wants to put them selves in the position of mediating disputes the way Paypal does. Perhaps they will. And so I think depending on how they do that depends on whether or not a retailer here in the states is going to say get a new customer. But we can really go down this rabbit hole for a while. Right. Because it's another thing, one thing that really interests me here is could Facebook become some sort of ecommerce marketplace? Oh, cause you, you know, there already is, you know, the Facebook marketplace and you know, I, I've never sold anything on there personally, but you know, lots of friends and family have. But then all of a sudden as you're looking in the app, you just might have a pay button sitting right there, you know? And so that's really interesting.

Will people then start selling things on Facebook's platform, like I don't know. So that one really interests me a lot. Um, but on that topic and it also, well let's, let's, let's leave it there for the moment. Yeah. They could become any commerce player and that would be really, really interesting.

Holly G:

I think that'd be fascinating.

Hannah R:

Yeah. But again, I don't know how much it, we're going to be motivated in the, to switch to something different. But banking here is just, I see Libra as being competition for banking here in the states a bit because, you know, I went in the other day, I had an issue with a business checking account and a small issue and they said, Oh, you have to open a whole new account and it's going to take 45 minutes and you have to bring people in to sign things and sitting there going like, oh, Libra is going to eat your lunch, you know. So that, that might put a lot of pressure on banking services here in the states. And that would be really interesting.

Holly G:

Well that's, that is interesting because I would say, hmm. I mean, I totally agree. I mean, we've gone through the same thing where like, you know, um, my business partner, Kristen lives in Seattle and I'm here in Chicago and there's, oh my gosh, if we have to do anything, oh yeah. Forget it. You know, so it does, I, that totally makes sense. And I think what interests me about Libra is how it is taking a lot of middlemen out of the, out of a lot of the payments ecosystem, which I think is what makes it so complicated to do anything super innovative. I mean, when you think about Venmo, right? I mean, again, that was a behavior switch. I'm, I'm using Venmo all the time. I'm using chase quickpay, things like that. But all it is, is ACH. They've just rebranded. Like, you know, that's all it is. And so, I mean, do you think this sort of changes, you know, for me what excites me is when I look at payment processing, what could this do in that space? Um, I think that would be something interesting because you know, especially people who are using an anonymous currencies like gift card or promotion points or things like that, you know, payment processing is that processing and security is a huge concern for all of us, especially online. Right. So what are your thoughts around Libra in that specifically?

Hannah R:

This one's really interesting too because Libra, um, for as many concerns as I have about it, which we could get into, um, but it has the potential to really bring a lot of people into crypto and to make this crypto commerce thing actually happen. Because if you, you know, you've worked with credit cards, I've worked with credit cards, they were not designed for the Internet and I don't want to bash them too much cause it was probably fantastic tech for its day, but it is just, it was never made for the Internet. It is not at all appropriate for the Internet. And when you look at crypto now, crypto has its own problems, but you can't pull money out of someone's account with Crypto, you know, and you can send someone a transaction broadcast. It's, you know, totally unencrypted and no one can pull further money out of your account.

So, you know, it has its own problems, but using crypto as the potential to just eliminate credit card fraud as we know it, you know, which is remarkable. So if people started decide to start using Libra, that opens the door for other cryptos as well. Because if you have an ecommerce site, um, and then you want to start integrating crypto, the workflow on the back end for that, the logic is just entirely different rather than using a standard payment processor. And so trying to integrate crypto stuff into traditional services is a bit tough. You have to hack the workflow. Yeah. But then if we have a situation where all these ecommerce platforms suddenly start to adapt to a crypto workflow, then that really opens the floodgates there. You know? And it's, really interesting.

Holly G:

I think that's potentially one of the more exciting things about this because you know, as we put together content, whenever we're doing the conference or whenever we're starting with a client, one of the first things we talk about is integration with your, your ecommerce site. And then second is how you have to protect yourself, um, with different types of payment differently. Like, you know, give card sometimes wants to be treated like a product, but it is not a product. It is tender. It is very easy to hack that system and it has to be multilayered. And I think that is one of the most complicated things that we deal with is understanding the changing landscape of fraud. And so with Crypto, I think there's just and, you know, I keep saying gift card, but I really do think in particular gift card as an anonymous currency. Um, and with, you know, the money laundering we see through it and things like that, there's just this huge, huge opportunity here to take like five layers out of the equation. And to say that feels like I'm exaggerating, but I'm not, when I think about some things we built, you know.

Hannah R:

Compared to what we could do, we look at our current systems and like, oh, we could do this so much better cause we've just taken old stuff and then somehow hacked it into a website and it's really ready for an overhaul. And this, this might be the thing that pushes it there. And that's really exciting.

Holly G:

Oh yeah. Now I, I'm, I'm excited to see where this goes and I know, um, it's a, you know, there's going to be some things that happen in the courts pretty soon. I know there's some push back. Can you talk a little bit about, you know, what we're seeing from the legal system and why people are concerned?

Hannah R:

Yeah. Yeah. So what I've been following is sort of, um, the hearings that are going to happen real soon and, uh, and their concerns and you know, to get really off on a tangent in philosophical here, right. What if there's broaden into crypto is I, I've, I studied economics and I fell really in love with monetary policy and monetary theory and how that impacts just the, the global financial, political structure of the world. Yeah. And when I found something like Bitcoin, then I realized that if this succeeds in being, you know, a very common currency that really has the potential to genuinely change the political, political, and financial structure of the world, you know, and so I've seen that for awhile. And then when I read this, this letter, right, that's for the hearings and you look at the second line, there are, let me see.

Yeah, it's a second line. It appears that these products may lead themselves to an entirely new global financial system that is based out of Switzerland and intended to rival the US monetary policy and the dollar. And I saw that in that for me is just, I think that's a massive moment in this cryptocurrency thing. And I've been like, I feel like no one's paying enough attention to that. Y'All don't understand how epic that is because I've seen that that has that potential. Right? But now we see that that has that potential. And and so in some ways you say, should the government be concerned? Yes, they should be horribly concerned because this, this genuinely does have a potential to change the structure. Now I'm not worried because I think this will be, um, if it actually does succeed in changing the financial structure of the world, I see that as being a very, very good thing.

I think that will eliminate a lot of issues we have around, you know, the banksters and all that good stuff. But it's, I can understand why these people in this place would go, oh no, wait, this is a problem. And from their perspective, they're entirely correct. Really interesting. If you look at some of the other concerns they have, you know, they mentioned cybersecurity. I'm like not quite sure what they're concerned is there, you know, cause this is, you know, better and more secure crypto in general, the structure of it is more secure than credit cards. They mentioned hacking and the hacks that have happened, you know, on various different crypto exchanges. Again, at least in the first iteration of Libra, I don't see that being a concern because it isn't like crypto. It is a privately controlled thing, so it's not immutable the way cryptocurrency is. So it's more like a credit card system where you could roll back some sort of hack that happened

Holly G:

Can you just for people who are maybe very new to what cryptocurrency is, can you explain immutability and why that's important?

Hannah R:

When I say we always talk about, you know, blockchain being an immutable ledger and basically what that means is uneditable no one has added in block in bitcoin specific in this context, no one has admin rights to that database. No one can go back and undo that transaction, which is why they often call it like digital cash, right? Because it's final. When you hand someone a $10 bill, you can't push a button to undo that after you've left the store, you know? But Libra, I don't it, at least in its first iteration, they say, oh, in five years we're going to plan to open it up. Okay. Maybe then, but in its first iteration, it's not going to be immutable. Now you have this entire, you know, association of businesses. So they're not going to just be rolling back a little things here and there, I don't think. But were there any kind of massive hack on the system? You know, you could all just say, okay, you know, we're gonna roll that all back. And so I don't see the type of hacking that they're, uh, they're comparing it to hacking of sort of bitcoin exchanges. And I don't think that's a fair comparison there.

Holly G:

I don't think so either. And I think, again, this is where I think confusion about what is blockchain? What is Bitcoin, what is, what is Libra, what is, you know, etherium, or you know, I mean anything. I think there's, I'm excited actually that the courts are paying attention to this right now because it's going to mean that someone's gonna have to get up there and like break things down. You know, on a very national stage.

Hannah R:

And then if Facebook is successful in getting this project to go forward, well they've just done a huge favor to crypto currency industry in general, you know, and that, that could be really, really amazing. So we'll have to see. We'll have to see. But it's a lot of potential.

Holly G:

Yeah, there really is. And I think it's going to be very interesting to watch all this happen because I do think the fact that people are confused by this system and are, you know, the concerns like you're saying that are being voiced, I get where they come from, but they also come from a place of just misunderstanding too.

Hannah R:

So I tend to sometimes be the world through the lens of just power structures. Right. And this is part of why I love crypto because it has a flattening effect on that sort of stuff, which can be very interesting. Yes. You look at this and you say this does change power structures in finance and economics, you know, and so people are concerned about it or rightfully so. But going back to the differences between, um, Libra and something like bitcoin when it gets really, really important to note that they are very different animals and their impact on the world because of that will will be very different. Bitcoin is just, you know, well it's not just but open source project, right? No one controlling it, no one doing that. So it plays by sort of a completely different set of rules. Not something like Libra function similar to that, but it's very based in the old system. So like, okay, well we're going to bank the unbanked, which is awesome. But the reward reason why the unbanked aren't banked is due to more political business type of reasons. And so if you have a system that's still based in that existing structure that caused the problem, I don't know if it can effectively address the problem.

Holly G:

Well, and I would agree with that because two reasons. Number one, I think, you know, being in prepaid prepaid cards were supposed to bank the unbanked, but then you get into KYC. So when do you get to know your customer? Well, you don't, often times these people don't have a license or an eye, something to identify them, don't have proper id for. That also means they don't have utilities. They're paying for an address that they can attach it to. So I am, I kind of, I see where you're going with that. And then, yeah. The other thing is that if Libra is not a truly, I mean if it, if it's not truly like immutable and someone could theoretically hack it in a way that you couldn't like Bitcoin then okay. I kind of, I get the concerns there because when I think about, well, if someone swipes money off of my credit card, I'm insured, I'm getting my money back. Right? I'm not liable. So who's taking care of that? I think it's going to be a big question that happens with this.

Hannah R:

To me, how this plays out is all going to depend on what happens with the wallets. How many wallets? I've heard Facebook, I can't remember the guy's name, Facebook executive that's behind this one. Say That, oh, there's going to be other wallets on the system. Well when you know, five, 10 years or at launch, you know? . And so, and then what does the Calibra wallet is supposed to be custodial? So it's going to hold your money for you. Does that mean they then handle disputes if someone into your account, do they fix it for you? Um, all of these sorts of things are really going to determine, I think how this actually plays out. It's going to come down to how many wallets there are and how exactly the cleaver wallet functions. Interesting. And that could lead us right into all the privacy concerns.

Holly G:

Oh, totally.

Hannah R:

There are plenty of, because they, you know, and I listen to the Facebook executives response to this letter and he says, well, the protocol is anonymous. Like there's no identity, you know, linked on the protocol. So you can, you can view the entire blockchain still not see who's doing what. It's like, okay, sure. That's a nice argument. Except that the one database that will be linking everyone's actual name, do everyone's blockchain activity is going to be owned via Facebook subsidiary. Okay. That there's a problem. Yeah, totally. There are again agreeing with, you know, the these hearings and the regulators concerns. There is a huge privacy issue there.

Hannah R:

Yeah. So and again it all depends on what you do with the wallets, you know, cause if it's just collegial holding their people's wallets and there are seven other of them that you can use, then that lessens that concern. But if, if Collibra is going to have the monopoly for five years, that's big issue one, it sort of.

Holly G:

to me that it says such a different flavor than any other sort of currency crypto or otherwise. Cause then it's just you're like you were saying earlier, it's just a banking system. It's a closed loop system in yes. If it has no value, it's it, it is branded currency essentially. That's all it is. That's what it is.

Hannah R:

Which is terribly interesting itself. But that, that is what it is. Yeah. Yeah. It may say they're going to open it up and it's going to be a public chain and it's going to be proof of stake and all this. But if you read it, it says, we're going to plan to start opening it up in five years. So in five years we'll start to plan to open it up. Like Ah, it's not, that's not very confidence inspiring.

Holly G:

Well, and if it is on running on its own rails within its own ecosystem, I would, uh, circle back to what we were saying at the beginning of the podcast. It'll be interesting to see if there's a marketplace, some sort of ecommerce, uh, like platform that develops out of this because in the end, what else are they going to do with it? Yeah. Five years. It's not going to be opened up.

Hannah R:

Yeah. So I could see that happening and see that being really interesting in some ways. I'm very, very, I have some friends who are really frightened by Libra and seeing very dystopian future here with massive financial surveillance. And I can't tell them they're wrong to me to be a possibility, but just Libra has the potential to really crack open this market. You know, if it happens. And I just, there's two big things, just changing the psychology of it. You know, right now in most people's heads, cryptocurrency is like this weird thing you do day trading with or maybe buy some drugs with, you know, like it's, this is off over here. Like I'm not going to do that. That's weird. That's strange. You know, Facebook starts doing, it's a very appeal to authority type of thing, but all of a sudden people are going to be like, oh, okay. You know, it's so it, it makes people psychologically, um, prepared for using, you know, a different unit of account thinking about things differently. And then technically, if, if you know, retailers start using this and if ecommerce platforms change their workflow to incorporate Crypto, then you've made the tech ready and you've made the people ready and then we'll see what happens.

Holly G:

So here's the million dollar, the million Libra question. I mean, how long do you think it will be? Five years or do you think it'll be longer? Shorter? What do you, what if you had to take a guess, what do you think before we're at that.

Hannah R:

Before this successfully opens floodgates? All right, well there's a lot of variables. So let's assume that the hearings don't go too badly for Libra and that this moves forward and that it launches at the end of 2020 and it catches on then I think within a couple of years, 2023, 2024, you'll really see a wave of commerce that that is a complete guess don't, don't come back to me in 2025 and telling me how wrong I was.

Holly G:

Well, this is all really exciting. I am excited to see where, um, the hearings go and uh, cause I again, like you're just saying that's gonna be, I mean that's a lot's gonna ride on that timeline.

Hannah R:

You know, I'm, because I'm not the hugest fan of Facebook and the privacy issue is I want to hate on the project, but actually from a technical perspective, reading the technical paper, it's pretty decent. And then just what really blows my mind about this is that it's such a sign of crypto really, really changing things, you know? And so for that reason, I am just like delighted and giddy about the project.

Holly G:

I think it's going to be really fun to watch. And you know, the other thing is, and I just, I like to remind our audience is that, you know, Facebook is not just Facebook, it's Instagram. It's, it's a lot of things that we kind of forget that, you know, Facebook has their hand in that we're all using and think are very separate. So, um, it will, I mean, I think the messaging and their access to people's phones in particular,

Hannah R:

Their reach is huge. They're whatsapp too, right? So their, their reach is just massive. And I thought something today was then that that letter, it said, it's like they have access, they have, their reach is like a quarter of the world's population. Like it's just epic. And so if you can introduce a quarter of the world's population, get them comfortable with using crypto. Like wow, of course if brought some data mining, you know, financially surveil a quarter of the world's population, which is also equally frightening. I'll get to that one.

Holly G:

Well Hannah, it's been great having you on today and I'm really excited to be able to, you know, start this conversation with our audience and really appreciate your time. So everyone, this is Hannah Rosenberg. You can find her at the blockchain institute and Velas, yes.

Hannah R:

And on Twitter. I'll probably, you know, we'll have some commentary when they'll hearings happen. I'll probably be out and hey, I want you to tell everyone what your handle is. They can follow along on H Michelle Rose, but just type in Hannah Rosenberg, you'll find me.

Holly G:

Awesome. All right guys, and we'll make sure that we include, um, and we, we actually tweeted out and shared, um, Hannah's recap of the paper that you, that you did on medium so you guys can find that on the, the flourish, um, Twitter and I believe that Facebook and linkedin and then, um, and we'll be following along as well. So stay tuned. And again, thanks Hannah. I appreciate your time.

Hannah R:

And then we can do a followup in a year and see what happened.

Holly G:

That would be good. All right guys, write it down. It's happening. Okay, thanks Hannah.

Holly G:

Flourish in a Flash is produced by K+H Connection a branded currency consulting firm. You can learn more about K+H at khconnection.com and you can always find out more about flourish and the Flourish conference at flourishcon.com or follow us on all of our socials on Twitter, Facebook, and Linkedin. It's at flourishcon and on Instagram it's at flourish _con.