Facebook Diem – Should You Seize It?

You don’t have to be a tech guru or an accounting whiz to understand the Facebook cryptocurrency, Diem.

But there has been a series of changes in this cryptocurrency project, making it harder for everyone to follow.

I’ve been following up with this project for quite some time, and I’m going to tell you everything you need to know about Facebook’s updated cryptocurrency.

In fact, it’s one of the most anticipated projects of 2021. So let’s dive straight into it!

What is Facebook Diem (formerly Libra)

In many ways, Diem is similar to fiat-backed stablecoins (cryptocurrencies pegged to fiat currencies like USD or EUR).

Facebook first announced the launch of its digital payment platform, Libra, in June 2019. After much international regulatory scrutiny, the project was revised and rebranded to Diem in December 2020.

Diem is built on a permissioned blockchain that will serve as an efficient medium of exchange for billions of consumers around the world.

Libra vs Diem

Although Facebook’s Libra would have revolutionized the money transfer system, regulators were skeptical of the social media giant issuing new currencies that could make the tech-firm even more powerful.

This is understandable, as Facebook’s network collectively has over 3 billion active users and could influence the global economics.

The Problems with Libra

The original concept of Libra derives from Facebook’s blockchain initiative.

Libra was designed to be a stablecoin that was backed by a basket of fiat currencies. The Libra blockchain and its operations would be maintained and controlled by the Libra association. This consortium included companies like Mastercard, PayPal, Spotify and Coinbase, to name a few.

Libra saw an immediate pushback from many lawmakers in countries including the US, the UK and European Union. While there are many reasons, the underlying concern was that Facebook had failed to address key risks around financial security and anti-money laundering regulations.

What Makes Diem Different

After over a year of negotiations with regulators and governments, Diem is expected to launch in early 2021. The project had to scale back some of their earlier vision to make amends with the regulators.

Here are the key organizational changes underneath the rebranding:

• Facebook’s role in the project is reduced to ensure independence from the social media network.
• Instead of having only the native Diem stablecoin, Diem will now include multiple stablecoins, each backed by a different fiat currency. (ex: Diem EUR, Diem USD and so on.)
• Every individual using the Diem payment system has to provide KYC documentation.
• The composition of currencies in the Diem network will be decided by entities like the World Economic Forum, International Monetary Fund and World Bank.
• The Diem payment network will be controlled by a central organization. This means the project has to abandon its initial goal of becoming a decentralized payment system, where the users have complete control of the network.

Should You Buy Diem?

If there’s one entity that has the potential and resources to bank the unbanked, it is the Facebook network.

Let’s take a look at some of the active elements that make Diem unique.

Diem’s Vision

Diem aims to provide universal access to financial services by making money truly global, stable and secure. In short, a payment system for everyone.

The Diem Association

The Diem Association is an independent membership organisation that manages the Diem payment network. They are also responsible for building the Diem infrastructure.

The Diem Network is a consortium of 27 members, including companies, venture capitalists, and other organizations like PayU, Spotify, Uber, Coinbase and Facebook’s Novi. Each of the founding members was required to pay a $10 million membership fee.

Both the Diem Network and Diem Association are situated in Geneva, Switzerland.

Benefits of Diem

Though Diem is only a stablecoin (it can’t make you rich), it brings some significant advantages to the crypto market.

For one, the adoption of Diem would be instant as the Facebook network has billions of global users who would all join the crypto community. Such a transformation would enlighten millions of people about the advantages of blockchain technology.

Diem is not going to be a store of value like Bitcoin, but it can be the cryptocurrency that can be used for purchasing goods and services or as a payment transfer.

How Diem Works

Diem is both a stablecoin provider and a banker coin blockchain. You can think of it as a blend of USDT and XRP.

The Diem Blockchain

Diem has built a custom blockchain to service the needs of billions of its network users.

Diem Blockchain is a permissioned-blockchain. Unlike other cryptocurrency blockchains, there is no concept of blocks in the Diem blockchain. Instead, they have a single data structure that records the history of transactions and states over time.

The blockchain is also smart contract compatible and uses its own smart contract native language, Move.

Diem Core: Diem’s Consensus Protocol

The Diem Blockchain uses the proof-of-stake (PoS) mechanism to validate transactions.

To validate transactions, Diem Blockchain uses the BFT (Byzantine Fault Tolerance) consensus protocol. A network of distributed validator nodes follows this protocol to collectively agree on the ordering and execution of transactions on the blockchain.

Diem Core is an early prototype of the Diem Blockchain protocol.

Novi: Diem’s Wallet

The front-end infrastructure for accessing Diem is built by Novi, a subsidiary of Facebook.

Novi wallet will support major fiat and digital currencies. If you own a Novi wallet, you can essentially store multiple currencies.

The cool thing about the Novi wallet is its accessibility, as it will be integrated into Facebook Messenger and WhatsApp.

Where Can You Buy Diem

Diem coins haven’t hit the market yet. But you can expect them in the next few months.

Upon launch, you can purchase Diem coins on cryptocurrency exchanges that list them or through the applications that’ll be built on the Diem blockchain.

Official Links