Bitcoin vs Libra: Here are the key differences between the two cryptocurrencies

  • Libra and bitcoin are different in a lot of ways, from the technology behind them to the way they’re used.
  • CNBC runs through the key differences between the two.
A visual representation of a cryptocurrency coin on display in front of the logos for Facebook and Libra.

Facebook has made headlines of late with its plans to create a cryptocurrency.

The social media company has been forced to defend the project on Capitol Hill, amid regulatory concerns around data privacy and potential illegal usage, while the G-7 has warned it poses “serious” legal risks.

It’s an experiment in monetary systems for the digital age, and has inevitably been compared to popular cryptocurrencies like bitcoin. However, many experts question whether Libra can even be called a cryptocurrency.

Other than the fact that they both come with a white paper and are referred to as cryptocurrencies, Libra and bitcoin are actually very different. Here’s a rundown of the key differences between the two.

Different technology

One of the biggest differences lies in the underlying technology behind both currencies.

With bitcoin, transactions are recorded anonymously on a public ledger known as the blockchain. It’s essentially a database maintained by a network of computers, on which transactions are secured in such a way that makes it virtually impossible to tamper with.

Libra also uses a form of blockchain, or distributed ledger technology. But unlike bitcoin, Libra’s blockchain is permissioned — at least for now — meaning that transactions can only be added to it by a group of trusted parties.

That’s where the Libra Association, a Switzerland-based consortium of companies including Visa and Uber, comes in. Each of the nonprofit organization’s members have invested a minimum of $10 million into the project.

“Libra will create a centralized structure governed by an unelected ‘association’ composed exclusively of large institutions who have purchased their voting rights,” said Ido Sadeh Man, founder and president of the Saga Foundation, a cryptocurrency firm that counts J.P. Morgan Chairman Jacob Frenkel as an advisor.

It’s different to bitcoin’s network, which can be accessed and maintained by anyone with decent enough hardware and access to the internet.

“Cryptocurrencies are defined by their lack of reliance on trusted intermediaries,” Peter Van Valkenburgh, director of research at the cryptocurrency policy think-tank Coin Center, said in a recent blog post.

“We believe that Libra is not a cryptocurrency because of its use of a permissioned ledger and its reliance on a trusted issuer to hold and manage a fund of assets that back the currency.”

Different use cases

Bitcoin’s white paper describes the virtual currency as a peer-to-peer payment system, allowing people to exchange money without going through a bank.

It’s commonly used today as a form of investment, with the term “HODL” being a common slang phrase in the industry to describe buying and staying invested in the cryptocurrency for the long term. It’s frequently been referred to as “digital gold.”

Libra’s primary purpose is to be used in cross-border payments and money transfers. The currency is tied to a basket of government-backed currencies and other assets, to avoid the volatile swings often seen in cryptocurrencies like bitcoin and ether.

Referred to by many in the industry as a “stablecoin,” Libra is aimed at maintaining a stable value. David Marcus, the Facebook executive leading the blockchain initiative, has previously said it will work “more like a traditional currency” than a cryptocurrency.

“Bitcoin and Facebook’s Libra both represent stages in the evolution of currency but in starkly different ways,” Charles Hayter, co-founder and CEO of digital currency comparison platform CryptoCompare, told CNBC.