The year 2021 seems to be a big year for the blockchain world as several projects, such as non-fungible tokens (NFT) and centralized decentralized financial exchanges (CeDeFis), take center stage. Facebook’s Libra is also in the foreground.
Not so long ago, there were plenty of media outlets reporting that the world’s largest social media network was making plans for a global digital currency. Then, after a while, it seemed like Facebook had put its plans on the back burner. Disputes with regulators around the world have helped delay and reorient Facebook’s plans a bit. Instead of backing down, Facebook decided to strategize and launch a “different” global digital currency later in 2021, after renaming the project to Diem.
Related: New name, old problems? Rebranding from Libra to Diem still faces challenges
It’s different in the sense that they changed their name and administration. However, the Libra Association, later renamed Diem Association in December 2020, will manage the project.
What is Facebook Diem?
Facebook Diem is a soon to be launched authorization-free payment system based on blockchain technology. The system will have a stablecoin called Diem and will run on its blockchain network.
Although Facebook proposed the project, Diem Association will oversee the entire operation of the project for the sake of transparency. The Diem Association is a group of companies from different sectors of the economy, including technology, fintech, telecommunications, venture capital and non-profit organizations.
The initial room, Libra, was not decentralized, and neither was Diem. While the goal is to be unlicensed, the current plan is for Diem to run on an authorized blockchain. Therefore, only members of the Diem Association can carry out transactions there.
However, this is so because the development team has yet to develop a robust solution capable of handling unauthorized transactions for its billions of potential users. Enthusiasts hope that will change as soon as the project moves into the pipeline.
In the long term, Diem’s ultimate goal is to help the world gain easier and faster access to financial services. The US dollar, euro, pound sterling and other major fiat currencies will support the Diem project. If the project gets approval from US regulators, Diem will function as a large-scale central bank that will run on blockchain technology. As you probably know, this is nothing like Bitcoin (BTC) and the like.
Related: The Metaverse: Mark Zuckerberg’s Brave New World
Components of Facebook’s new global digital currency
Facebook’s new global digital currency aims to revolutionize the global payment system. As such, the Facebook Diem project consists of three unique parts that work in sync to create an inclusive and secure financial system. They understand:
1. A reliable blockchain technology base
One of the components of the new Facebook Diem cryptocurrency is a blockchain infrastructure with trustworthy scalability and security that serves as the technological basis for the payment system.
Diem’s source code is open source on Github. The source code, written in Rust, is accessible to everyone.
It offers scalability and would help the infrastructure accommodate multiple projects. Diem is also developing a new programming language called Move to create smart contracts and execute custom transactions.
2. Novi digital wallet
While it is quite easy to create a digital wallet after taking renowned hands-on lessons, Novi is a sophisticated wallet that requires all the time and attention you can afford. One of Facebook’s many companies, Novi Financial, is developing the digital wallet for the Diem project. The wallet was called Calibra until the end of 2020.
Novi is a standalone app that should support integration into WhatsApp, Messenger, Instagram, and possibly several other platforms. Its ease of use is already breathtaking.
Related: Novi-FT? Facebook’s NFT Support May Not Lead to Crypto Adoption
3. The room
The Diem coin is a crucial part of Facebook’s new global digital currency project. It enjoys strong support from Diem’s reserves, which include cash assets or cash equivalents.
There are also short-term government securities. As such, Diem is a stablecoin. According to the development team, the coin will not be mineable like it is with Bitcoin and a host of others. In its initial stages, only members of the Diem Association can process transactions. However, Diem plans to completely switch to an unauthorized proof-of-stake system within the first five years of launch.
The values that guide the design of Facebook Diem
As with other well-known cryptocurrencies, there are certain principles that serve as guiding principles for the function and design of Facebook Diem. So here are some key values for its unique design, as all hands are on deck for its launch later in 2021:
- People should have the right to control their legal work and its results.
- More people should have access to financial services.
- Global payment networks should be open, cheaper to use, and have better speed. All of this translates into better economic opportunities and more efficient global trade.
- Slowly but eventually people will build their confidence in a variety of distributed forms of governance.
- In addition to supporting ethical agents and systematically maintaining the integrity of payments, people and institutions are responsible for the growth of financial inclusion.
- An open and much larger payments network, with unparalleled levels of interoperability, as well as high compliance standards, should follow governance and design practices.
How does Facebook plan to use it?
There are tons of opportunities that a company backed cryptocurrency with the power and reach of Facebook can offer users around the world. On top of that, the unique opportunities it offers make Facebook Diem a great creation in the crypto age. Here are some ways Facebook will soon be using Diem:
Users should expect remittances and money transfers to be easier and stress-free. In addition to ease, the project ensures rapid transaction speed and lower fees than those of financial intermediaries.
Long processes of sending money, especially cross-border, through traditional financial intermediaries may well be a thing of the past.
2. Electronic commerce
One of the goals of Facebook is to create better economic opportunities and efficient global e-commerce. This becomes an even easier use case to achieve when you consider that the Diem Association has billions of users and Facebook has at least three billion users worldwide.
Being one of the members of the Diem Association, Shopify will ensure that eCommerce site owners can easily integrate the coin. Every member company that runs B2C services will implement the Diem system on their platform – it’s unparalleled ease in every sense of the word.
3. Cross-border payments
Diem can help reduce the cost of sending money across borders, which is already high enough at 6.5%. Being a cryptocurrency with adequate payment systems in place means that Facebook Diem is almost entirely digital.
The transactions will be pre-programmed in its database. Expect operating costs to be significantly lower than those incurred by traditional transfer channels. The result will be lower cost of use and higher market share from cryptocurrency users.
Governance is one of the crucial use cases for the Diem cryptocurrency, and it flows from the governance structure of Diem. It is impossible to compromise the functionality and features of Diem. In turn, this ensures that the project can help serve as a model of a monetary alternative for the passage of financial flows into governance.
What else? Transactions of government agencies for various public welfare tasks, in addition to a detailed overview of subsidies and public domain spending, will secure benefits for the public.
Also, since Facebook does not have exclusive control over Diem, it is not possible to distort the use of Diem against the public interest.
Here’s how Facebook Diem differs from Facebook Connect. Facebook launched Facebook Connect in May 2008 as the next iteration of the Facebook platform. It allows users to connect their Facebook friends, identity and privacy to sites on the Internet. On the other hand, Facebook Diem is an authorized, blockchain-based payment system that includes private cryptocurrency.
Facebook’s Libra comes with a risk
Facebook’s Libra launch announcement sparked various debates. Some thought it would compete with sovereign currency while others looked at the technological and data privacy issues it posed. To be more precise, those who thought it would replace sovereign currencies may have been wrong for several obvious reasons, while those who viewed the project in light of the historical data breach and the monopoly nature of Facebook might be right.
First, the Libra currency would be backed at 1: 1 against traditional currencies, such as US dollar, euro, yen, etc. To say that Libra, the supposed secondary currency, will be an alternative to its base currency is incorrect. . This raises the question of how a secondary currency relying on a primary currency for value will replace it. That being said, the possible threat is that it could manipulate user data.
For example, Hyun Song Shin, economic advisor and head of research at BIS, recognized that the involvement of big tech in digital currencies has potential benefits, although it could reduce competition and create privacy concerns. data. Shin reiterated: “The objective should be to respond to the entry of major technologies in financial services to benefit from the gains while limiting the risks. He added:
“Public policy needs to be based on a more holistic approach that relies on financial regulation, competition policy and data privacy regulations. “
Today, anyone can create a cryptocurrency payment system from home. However, the determining factor is that reputable organizations with verifiable track records are backing up Diem from Facebook.
The views, thoughts and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Michael J. Garbade is the co-founder and CEO of Education Ecosystem. He is a serial tech entrepreneur who previously worked at Amazon, General Electric, Rebate Networks, Photobucket, and Unicredit Group. Garbade has work experience in the United States, Europe, Asia, and South America.