• Diem, Facebook’s digital currency, aims to be the world’s most powerful currency

  • Everyone is wondering what Facebook’s Diem is and what it will offer its potential 2 billion users.

    The year 2021 appears to be a big year for the blockchain world, with several projects taking center stage, such as nonfungible tokens (NFTs) and centralized decentralized finance exchanges (CeDeFis). Facebook’s Libra is also prominent.

    Not long ago, the news circulated that the world’s largest social media network was working on plans for a global digital currency. After a while, it appeared that Facebook had abandoned its plans for it. Disputes with regulators all over the world played a role in delaying and redirecting Facebook’s plans. Rather than abandoning the project, Facebook decided to strategize and launch a “different” global digital currency later in 2021, after rebranding it as Diem.

    It differs in that the name and administration have been changed. The project, however, will be managed by the Libra Association, which will be renamed Diem Association in December 2020.

    What exactly is Facebook Diem?

    Facebook Diem is a permissionless payment system based on blockchain technology that will be launched soon. Diem will be the system’s stablecoin, and it will run on its blockchain network.

    Despite the fact that Facebook proposed the project, Diem Association will oversee its entire operation for the sake of transparency. The Diem Association is a group of businesses from various industries, including technology, fintech, telecommunications, venture capital, and nonprofits.

    Libra, the first coin, was not decentralized, and neither is Diem. While the ultimate goal is to be permissionless, Diem will initially run on a permissioned blockchain. As a result, only Diem Association members can conduct transactions on it.

    However, this is due to the development team’s failure to create a robust solution capable of handling permissionless transactions for its billions of potential users. Enthusiasts are hopeful that this will change as the project progresses in the pipeline.

    Diem’s ultimate goal in the long run is to help the world gain easier and faster access to financial services. The Diem Project will be supported by the US dollar, the euro, the British pound, and other major fiat currencies. If the project is approved by US regulators, Diem will function as a full-fledged central bank based on blockchain technology. As you are probably aware, this is not the same as Bitcoin (BTC) or other cryptocurrencies.

    Facebook’s new global digital currency’s components

    The goal of Facebook’s new global digital currency is to revolutionize the global payment system. As a result, the Facebook Diem project includes three distinct components that work in tandem to create an inclusive and secure financial system. They are as follows:

    1. A strong blockchain technological foundation

    One component of the new Facebook Diem cryptocurrency is a blockchain infrastructure with scalability and trustworthy security that serves as the payment system’s technological foundation.

    Diem’s source code is available on Github. The source code, written in Rust, is open to the public.

    It allows for scalability and allows the infrastructure to host multiple projects. Diem is also working on a new programming language called Move that will be used to build smart contracts and execute custom transactions.

    2. Novi electronic wallet

    While it is relatively simple to create a digital wallet after attending renowned practical classes, Novi is a sophisticated wallet that necessitates all of the time and attention you can spare. Novi Financial, one of Facebook’s many subsidiaries, is creating the digital wallet for the Diem Project. Until late 2020, the wallet was known as Calibra.

    Novi is a standalone app that will most likely be integrated into WhatsApp, Messenger, Instagram, and possibly a few other platforms. Its simplicity is already mind-boggling.

    3. a coin

    Diem is a key component of Facebook’s new global digital currency project. It is backed up by Diem reserves, which include cash assets or cash equivalents.

    There are also government securities that are only valid for a short period of time. Diem is thus a stablecoin. According to the development team, the coin will not be mineable in the same way that Bitcoin and other cryptocurrencies are. Initially, only Diem Association members will be able to process transactions. Diem, on the other hand, intends to fully transition to a permissionless proof-of-stake system within the first five years of its existence.

    Diem’s design is influenced by values.

    Some tenets serve as guiding principles for Facebook Diem’s function and design, just as they do for other reputable cryptocurrencies. So, as all hands are on deck for its launch later in 2021, here are some key values driving its distinct design: People should have the right to control their legal labor and its outcomes. Financial services should be available to a larger number of people. Global payment networks should be more open, less expensive, and faster. All of this translates to increased economic opportunities and more efficient global trade. People will gradually but steadily gain trust in a variety of distributed forms of governance.People and institutions are responsible for driving the growth of financial inclusion, in addition to supporting ethical agents and consistently upholding payment integrity. The governance and design practices should be followed by an open and much broader payment network with unrivaled levels of interoperability and high compliance standards.

    What does Facebook intend to do with it?

    There are numerous opportunities that a cryptocurrency backed by a company with the power and reach of Facebook can provide to users all over the world. Furthermore, the unique opportunities that it provides make Facebook Diem a fantastic creation in this crypto age. Diem will be used in the following ways by Facebook in the near future:

    1. Transfer of funds

    Users can expect remittances and money transfers to be simpler and less stressful. In addition to convenience, the project guarantees a quick transaction speed and lower fees than financial intermediaries.

    The lengthy processes involved in sending money, particularly across borders, through traditional financial intermediaries may soon be obsolete.

    2. Electronic commerce

    One of Facebook’s primary goals is to improve economic opportunities and global e-commerce. When you consider that the Diem Association has billions of users and Facebook has at least three billion global users, it becomes an even more feasible use case.

    Shopify, as a member of the Diem Association, will ensure that e-commerce site owners can easily integrate the coin. Every member company that provides B2C services will integrate the Diem system into their platform — that is unrivaled ease in every sense.

    3. Cross-border payments

    Diem can help to reduce the cost of sending money across borders, which is already high at 6.5 percent. Because Facebook Diem is a cryptocurrency with adequate payment systems in place, it is almost entirely digital.

    Transactions will be pre-programmed into the system’s database. Operating costs are expected to be significantly lower than those incurred via traditional remittance channels. As a result, cryptocurrency users will have a lower cost of use and a larger market share.

    4. Administration

    Governance is one of the most important use cases for the Diem cryptocurrency, and it stems from the governance structure of Diem. It is impossible to compromise Diem’s functionalities and features. As a result, the project will be able to serve as a model monetary alternative for the passage of financial flow in governance.

    And there’s more. Government agency transactions for various public welfare tasks, as well as a detailed overview of grants and expenses in the public domain, will ensure public benefits.

    Furthermore, because Facebook does not have sole control over Diem, it is not possible to misrepresent Diem’s use in the public interest.

    Here are some key differences between Facebook Diem and Facebook Connect. Facebook Connect, the next iteration of the Facebook platform, was launched in May 2008. It enables users to link their Facebook friends, identity, and privacy to websites on the internet. Facebook Diem, on the other hand, is a permissioned and blockchain-based payment system that includes a private cryptocurrency.

    Facebook’s Libra is fraught with danger.

    The announcement of the launch of Facebook’s Libra sparked a number of debates. Some thought it would compete with sovereign currency, while others were concerned about the technological and data privacy issues it would raise. To be more specific, those who believed it would replace sovereign currencies may have been mistaken for a variety of obvious reasons, whereas those who considered the project in light of Facebook’s history of data violations and monopolistic nature may have been correct.

    To begin, the Libra currency is said to be backed 1:1 by traditional currencies such as the US dollar, euro, yen, and so on. It is incorrect to assert that Libra, the ostensible secondary currency, will serve as an alternative to the base currency. It begs the question of how a secondary currency that relies on a primary currency for value will be able to replace it. Having said that, it is possible that it will manipulate user data.

    For example, Hyun Song Shin, BIS’s economic adviser and head of research, acknowledged that big tech’s involvement in digital currencies has some potential benefits, despite the fact that it may reduce competition and create data privacy issues. “The goal should be to respond to big techs’ entry into financial services to benefit from the gains while limiting the risks,” Shin reiterated. He continued, saying:

    “Public policy must be founded on a more comprehensive approach that incorporates financial regulation, competition policy, and data privacy regulation.”

    Anyone can now create a cryptocurrency payment system from the comfort of their own home. The defining factor, however, is that reputable organizations with verifiable track records support Facebook’s Diem.

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