This year is a disruptive year for the blockchain space. It witnessed the evolution of projects such as non-fungible tokens (NFTs) and decentralized finance (DeFi), becoming the major discourse for the mainstream media. Another crypto that gained media attention is Facebook’s Libra.
However, this global digital currency underwent a rebrand and got a new name. The name changed from Libra to Diem, and the body in charge changed from the Libra Association to Diem Association.
What is Facebook Diem?
Facebook Diem is an about-to-be-launched blockchain technology that doesn’t require any permission for operational purposes. This blockchain system will have a stablecoin known as Diem that runs on its blockchain network. Diem Association—a body constituting leading companies from different economic sectors such as fintech, nonprofits, technology, and venture capital—would run this project.
Libra, the initial coin, was not a decentralized coin. Neither is Diem planning to be decentralized. Despite planning to be decentralized, Diem will operate on a permissioned blockchain. This explains that Diem Association members will be the only member to initiate transactions on the blockchain network.
3 Unique Components of the New Facebook’s Global Currency
In Facebook’s new adventure to revolutionize the digital currency space, three extraordinary parts synchronize with the global financial system to make it more inclusive and safe. These unique components are:
1. The coin
One of the core components of Facebook’s new digital currency is the Diem coin. This coin is backed by the Diem reserves, which have cash assets and cash equivalents. Diem is a stablecoin that has short-term government securities. Based on information from the development team, the coin won’t be minable at its initial stage like Bitcoin.
As such, members of the association are only permissioned to execute transactions. However, Diem will become permissionless while leveraging the proof-of-stake system in its first five years after the launching.
2. Reliable blockchain technological foundation
One of the most crucial components of Facebook’s new digital cryptocurrency is the blockchain system that offers scalability and trusted security. These two features are the important technological foundation for this financial payment service. On GitHub, it is an open-source code, and every individual can access it. This infrastructure capacity will help host several other projects.
3. Novi digital wallet
Novi digital wallet is the official wallet that will issue Diem coin for its users. This wallet was created by Novi Financial, one of Facebook’s companies. It is a sophisticated wallet and very easy to use. It is an app that will operate on its own without being integrated into other platforms.
Values Associated with the Facebook Diem Design
Every cryptocurrency has some intrinsic features that make them unique and guide its use case principles. The same is with Facebook Diem. These inherent values are underlying principles attached to Facebook Diem’s design and function. As such, we listed below some values that propagate the unique design associated with Facebook Diem pending its launch.
- Unprovoked access to financial services worldwide.
- Building trust in varieties of different governance forms.
- Individuals have control right over their legal labor, and they should be able to determine its outcomes.
- Global payment systems should create more economic opportunities and be effective for international commerce. That is, they should be cheaper, very fast, and open to use.
- It is creating opportunities for institutions and people to enhance participation in financial inclusion.
4 Unique Offers of Facebook Diem
For a cryptocurrency created with the support of a company such as Facebook, there are tons of offers it will bring its users. That is due to the capacity and network of companies such as Facebook. These exclusive opportunities make Facebook Diem a different crypto creation in this digital world. Below are offers Facebook will present Diem’s users:
1. Borderless payment
Facebook Diem is helping users to reduce the cost of transferring funds across borders. This is somewhat close to 6.5% at the moment. But Facebook Diem would entirely become digital because it has adequate payments systems in operations.
Transactions are pre-programmed, but operation costs are lesser than those associated with traditional remittance media. This will bring about a low use cost and increase the market share for cryptocurrency users.
One of the opportunities Diem is creating is expanding the economic reach and creating efficient global e-Commerce. With Facebook Diem, it becomes easier for e-Commerce business owners to integrate this payment system on their platforms. An example is Shopify ensuring that every B2C service provider can integrate this coin by implementing the Diem system on their website. This makes Diem unmatchable in the crypto world.
Having good control over the money flow in the financial system is imperative. This also depends on how the features and functionalities of currency can be compromised. As for Diem, it is impossible to compromise those two things. Meanwhile, it is impossible to present Diem’s use against the public interest since Facebook doesn’t have sole control over it.
There should be easier and more seamless expectations for remittances and money transfers. Likewise, transactions will occur at the speed of light, and there will be fewer transactional charges compared to other financial intermediaries.
Risk Associated with Facebook’s Libra
When Facebook announced the launch of Libra, there were several debates because some individuals believed that it would be a rival for the ruling currency. At the same time, some argued that its technology and privacy issues associated with data might pose a big risk to users. However, those arguing it may replace the ruling currency may be wrong, but those differing from the data violation point of view may be right.
At first, Libra currency was proposed to have 1:1 backing with the traditional currencies like Euro, the U.S. dollar, etc. But federal financial agencies question the possibilities of a primary currency being replaced by the secondary currency that depends on it.
Although some experts argued that the involvement of big tech in the digital currency space might have some potential benefits, this might mean less competition in the space. Still, there may be data privacy concerns in this regard. Meanwhile, some personnel calls attention to creating comprehensive financial regulation, competition policy, and regulatory policy to protect data.