Billion-Dollar Returns: The Upside of Facebook's Libra Cryptocurrency

Kirk Phillips is an entrepreneur, certified public accountant and author of "The Ultimate Bitcoin Business Guide: For Entrepreneurs & Business Advisors." Adam B. Levine is the creator of the long-running Let's Talk Bitcoin! podcast and founder of Tokenly Inc. At first glance, Facebook's Libra cryptocurrency doesn't make sense.

The former will be backed by a basket of fiat currencies and cash equivalents, which means that for every dollar of Libra in existence, there will be a "Dollar" worth of real-world assets which that token may be exchanged for under certain conditions.

As a normal user, you'd get $100 worth of Libra by spending $100. Your Libra can be used across a variety of platforms or sent to an approved friend.

The Libra Association puts your $100 into a variety of low-risk, short-term investments like U.S. Treasury bills.

According to the white paper, funds are used first to fund the operation of the network with the remainder being divided among the Libra Investment Token holders according to their holdings, with policies determined by the association.

The association itself is made up of holders of the Libra investment token who invested a minimum of $10 million, as well as "Special impact groups" selected by the association to have a vote but who don't have to buy the investment token.

Assume that after a couple of years Libra has achieved adoption equal to 10 percent of M1. We'll also assume that by this time Libra has sold $1 billion worth of the investment token and that it costs $1 billion a year.

Libra would be generating almost $7 billion of interest per year, with a yearly return on investment of 688.51 percent.

The craziness here becomes even more apparent looking at our "Middle of the road" scenario, where we assume that Libra would see adoption equivalent to 15 percent of the more inclusive money supply figure M2. Yearly returns spike to 4,478 percent with $44.7 billion in net gain to investors.

If Libra grabs a 25 percent market share of the U.S. M2 money supply, it would be the world's "No. 1 bank." It could achieve the same thing with a much lower percentage than that of the global money supply.