Facebook’s Diem: All You Need To Know About The New Digital Coin
In recent years more and more big tech companies have shown an interest in blockchain technology. Some of them went even further and invested money and efforts in cryptocurrencies (Tesla’s purchase of more than a billion’s worth of bitcoin, as well as Facebook’s Diem – formerly known as Libra – are both cases in point).
The Initial Diem Concept
The initial concept of the project, when it was still Libra, was to create a stablecoin which will be backed by a worldwide variety of assets. Thus, the coin would be more stable than any single fiat currency and would be used as a means of exchange all around the globe. With that in mind, it was designed to be much more stable than bitcoin, and much less prone to speculation.
But the big scope and the huge potential of the projected coin made some regulators nervous, so Facebook decided to change track, and the DIEM was born.
What Exactly Is Diem?
Diem is – literally – a permissioned blockchain-based payment system. Payments will be possible to execute also through platforms like firstdag.com. Diem, on one hand, is a digital currency based on the blockchain protocol, with its DLT (Distributed Ledger Technology) system; on the other, it is designed to “sidestep” some cryptocurrency drawbacks, by being “permissioned”, i.e. by giving control to the Diem Association, and by being “pegged” to the US dollar (and later to other fiat currencies).
Another important feature of the Diem is that it does not pretend to offer an alternative to fiat money; it is designed for complementing existing currencies. This is why it is pegged to the dollar at a 1:1 rate.
What is different about Diem?
Diem has gone through several iterations since its initial announcement back in June 2019. It has changed more than just its name (Libra); the adjustments made by the Diem Association reveal the vision of its governing body, from its intended use to dealing with regulatory obstacles..
Diem’s new iteration has adopted a “Hybrid” approach in order to implement traditional best practices into the digital assets world. This approach, of the intention to be a bridge between traditional banking and digital assets, has interesting repercussions on the regulatory process. For example, the regulator – the Swiss Financial Market Supervisory Authority – is treating it basically as a new bank with its payment license application.
In other words, Diem’s dollar credit risks are narrower because reserve assets are backed by the US government (though it is not without some market risks). On the other hand, the regulator’s own approach to Diem is innovative in itself when bringing some best practices into the digital assets space.
Advantages Of Diem
- Diem’s tokens will have the benefit of instant adoption, either by corporate or individual users, due to the Issuer’s (Facebook) huge user base. It could bring on an immediate global financial shift by connecting billions of users (many of whom are still presently unbanked), to cryptocurrency and blockchain technology.
- The Diem Blockchain does not use mining in order to validate new coins; like many other modern cryptocoins it is based on the proof-of-stake method. This makes it easier to create, as well as being more sustainable and environment-friendly.
- Fast & efficient transactions – Diem will offer almost instantaneous, cheap, very secure transactions across its Diem Blockchain, worldwide. This is due to the blockchain transparency and security on one hand, and the global reach of Facebook’s – and its’ associates’ – network.
Novi – the Diem Wallet
Owning digital currency is one thing; storing it for use is another. For that, we have digital wallets. Diem is no exception. But the range of options of its digital wallet – Novi – is larger than most.
The Novi is scheduled to be released in 2021, along with the Diem launch.
Presenting a similar inclusive approach to Diem’s, the Novi will let users store multiple currencies and not just Diem. It will also support fiat currencies – which is a substantial benefit. By using the Novi it will be possible to transfer, move and pay money all around the world, easily and cheaply, to anyone with a smartphone and a data connection. In the future, Novi will be included in both Facebook Messenger and WhatsApp networks; this will greatly facilitate access and payments.