The Diem association comprises companies from various economy divisions comprising Telecommunication, Financial Technology, and Nonprofit organizations.
The initially proposed product, as well as the new Diem, is not decentralized.
The actual aim is to create a permissionless system, but the currency is proposed to operate on a centralized blockchain.
As a result, only members of the Diem Association can carry out transactions on the network.
This centralization is because of the inability of the network’s current system to deal with numerous permissionless transactions that will be carried out by a high number of its expected users.
There are hopes that Facebook will develop the project as soon as possible.
The long-term aim of the virtual coin is to enable people to gain access to monetary services rapidly and more easily. Pounds, dollars, and euros are expected to support the project.
The virtual currency will operate as a full-scale central bank based on blockchain technology, provided it gets authorized by US lawmakers.
The Social network plan is to revolutionize the world payment scheme. The project has three main parts that work together to establish an inclusive and secured monetary system. They are:
1. A credible blockchain technology basis
An important part of the proposed cryptocurrency is the blockchain technology with high scalability and is highly secured. It works as the technology basis of the proposed system.
The cryptocurrency’s source code is available and accessible for anyone on Github; its language is Rust.
It brings about scalability and will enable the technology to host many projects. Diem is also planning the development of a new programming language known as Move, which the social network will use to establish smart contracts and execute custom transactions.
2. Novi crypto wallet
Novi is a complicated wallet that needs time and attention. Novi Financial, one of Facebook organizations, is responsible for creating the digital wallet that the organization will use for the proposed digital coin. The former name of the wallet is Calibra, and they changed it in 2020.
The wallet is expected to be incorporated into WhatsApp, Facebook, Instagram, and other important platforms managed by the Social network. It is very easy to operate.
3. The Digital Coin
Another important component of facebook’s virtual currency is the Diem coin. It has strong support from the Diem reserves, which comprises cash assets.
Government short time securities also exist, and this makes the proposed virtual coin a stable coin.
The developers made it known that users will not mine the coin like other popular cryptocurrencies like bitcoin and other altcoins.
At the beginning of the project, only members of the coin’s association will run transactions.
But there is a plan to eventually metamorphose into a decentralized system in the project’s first five years.
Value stimulating the Development of Diem
Many successful cryptos today have a particular motivation behind them; it is the same with Diem, too, as some factors facilitate the development of the virtual currency. As works are ongoing to introduce the currency later this year finally, below are some of the factors stimulating the designing of the coin :
- There is a need for people to have power over their lawful works and its result.
- Financial services should be accessible to more people.
- The world’s payment systems should be affordable and easier to use. This will help in enhancing more financial opportunities and boost the global economy.
- An accessible and wider payment system with a rare level of interoperability coupled with a high level of adherence principles should obey the governance and design practices.
How will it be used?
There are varieties of benefits from a cryptocurrency supported by a prominent and well-known organization like Facebook. In addition to that, the numerous benefits that cryptocurrency offers is another thing that makes it one of the greatest innovations in this age. Here are some of the intended usage of Diem:
Money transfer
The introduction of Diem will enable easy and affordable remittance and money transfer. Another good thing about this is that the project will enable a faster money transfer than many current intermediaries.
The project’s success will help solve the problem of the slow money transfer process across borders.
E-commerce
One of the main aims of Facebook is the creation of better financial opportunities for people and building a productive worldwide E-Commerce. This is feasible considering the number of users that the Diem association has and billions of Facebook users.
Shopify is one of the Diem Association, and it will surely ensure that e-commerce business owners incorporate the proposed virtual currency into their system. All Companies that employ B2C services will incorporate Diem into their system too.
International payment
The current cost of sending money across borders is 6.5% which is a very high amount and poses challenges. There is an expectation that Diem will help in solving this problem, and Diem will be nearly completely digital as it is a coin that has enough payment systems.
The system will have transactions already programmed in its database. The transaction charges are expected to be very reduced and very much lesser than the common remittance methods.
Governance
Another important usage of Diem is governance, as the currency emanates from Diem’s governance system. It is not possible to Jeopardize the functionalities and features of the cryptocurrency. Consequently, this ensures that the project can help work as an alternative financial model to transfer financial flow in government.
The lack of an entire control over the coin will make it impossible to think that Facebook will use the coin in opposing the public interest.
Facebook’s Libra will come with some threats
Libra was visited with much speculation when Facebook publicized it. Some people argued that the coin is a competitor for primary currencies, while many pointed at technical and privacy exposure problems associated with the technology.
Considering the history of previous data violations by Facebook, those who fear it may pose a threat to people's privacy may be right. Still, those seeing the currency as a rival to the primary currencies are wrong considering some reasons.
Firstly, it is announced that many primary currencies support Libra, like the Dollar and Euro.
The Libra is just a secondary currency that will rely on the primary currencies to function; saying a secondary currency will replace the one It depends on is completely wrong.
The threat that it may pose to users’ privacy is just that it can falsify their data.
For example, Hyun Song Shin, the head of research at BIS, confirmed that prominent Tech organizations venturing into cryptocurrency would serve as a source of numerous advantages.
However, it may reduce competition and threaten the privacy of people’s names and data.
He reiterated that the objective should be responding to prominent Tech organizations entering the cryptocurrency sphere while minimizing the risks.
Anyone can create a virtual currency payment system in the comfort of their home today.
But the main distinction is that a renowned organization with a good record like Facebook supports the Diem.
Do you think this Facebook Diem will rival other cryptocurrencies when eventually created?
