Re: 1:1 inequivalence
The 1:1 backing means that each Libra token is underpinned by a basket of currencies in fixed proportions held in reserve by the association, each stored in an appropriately denominated custody account. For example, the basket underpinning one Libra might be $0.90 and £0.10. The intrinsic value of the currency comes from a promise to redeem tokens on request for the current value of the basket. The use of custody accounts means this should (in theory) work even if the association goes bust.
This means that from the point of view of any particular currency, the value of Libra (as seen from the perspective of a given currency) will vary over time. If the dollar is at par with the pound (to keep the maths simple) and with the above basket, it would cost £1 or $1 to buy a Libra token - *excluding trading costs*. If the pound subsequently drops to $0.80, then the value of Libra in pounds rises to 0.90/0.80+0.10=£1.225, but in dollars drops to $0.90 + 0.10*0.80 = $0.98.
It’s basically an ETF with improved visibility of tokens in issue. The real world collateral management and auditing still relies on trusted third parties and has to be very robust.
Whether this makes sense for unsophisticated retail customers, let alone the unbanked, is a whole other question. It replaces very liquid markets for fiat money - whose intrinsic value is underpinned by government guarantees that it can be used to extinguish tax liabilities - with a token underpinned by a reserve held by a private organisation is a whole other question. It also exposes holders to currency fluctuations, which is probably highly undesirable.
Regarding maintaining 1:1 backing, this is solvable. When the bulk resellers buy x tokens, the association will purchase currencies in the correct quantities - e.g. with the above basket purchased using USD, and dollar at par with the pound, they’ll buy £0.10*x in USD on the FX market. They might have to pay say $0.1002*x to do this, depending on transaction costs, the (moving) exchange rate, market depth and bid-offer spread. They charge the reseller ($0.9+$0.1002)*x, put $0.90*x into a dollar reserve account, put £0.10*x into a GBP reserve account, and mint x tokens. Everything balances.
The reseller takes on trading costs and an unhedgable market risk during the issuance (or burn) transaction, acting as a market maker. They continue to be exposed to market risk for as long as they hold the tokens, and may choose to hedge this risk or not. When buying and selling on exchanges, they will buy and sell to consumers (or other intermediaries) with a wider spread to compensate for all these costs.
There is a problem if you have a basket of three currencies and can only get one of the necessary FX trades done. In practice that’s vanishingly unlikely give the depth of liquidity in the Common FX currency pairs.
What is interesting is that their white paper mentions rebalancing the basket, e.g. changing the ratio of currencies, but not how it will work. It’s valuable in some circumstances but hard. Firstly because when the association does it, they will incur large trading costs to buy and sell currencies to bring the collateral into balance, and this will break the 1:1 collateralisation without an external capital injection.