Facebook Digital Currency - Diem ( known as Libra). Offering single-currency stablecoins in addition to the multi-currency coin
The Diem Association’s mission is to enable a simple global payment system and financial infrastructure that empowers billions of people. The Association’s first step toward creating a more inclusive and innovative financial system began in June 2019 with the announcement of the project. Our goal was to establish a collaborative dialogue early in the journey.
We have worked with regulators, central bankers, elected officials, and various stakeholders around the world to determine the best way to marry blockchain technology with accepted regulatory frameworks. Our objective is for the Libra payment system to integrate smoothly with local monetary and macroprudential policies and complement existing currencies by enabling new functionality, drastically reducing costs, and fostering financial inclusion.
Blockchains have a number of unique properties that can potentially address some of the problems of accessibility and trustworthiness. These include distributed governance, which ensures that no single entity controls the network; open access, which allows anybody with an internet connection to participate; and security through cryptography, which protects the integrity of funds.
But existing blockchain systems have yet to reach mainstream adoption. Mass-market usage of existing blockchain-based currencies has been hindered by their volatility and lack of scalability, which have, so far, made them poor mediums of exchange.
What Is Diem?
Diem is a stablecoin similar to Tether (USDT) and other price-pegged cryptocurrencies. It runs on the Diem project’s own Diem blockchain, and the coin is held in a wallet, called Novi.
Naturally, Diem will be used for payments. However, the Diem blockchain will also be programmable, much like Ethereum, so that developers can create custom apps. Diem uses a custom smart contract language called Move that uses a logical constraint called “static typing” to guarantee its security.
The Diem blockchain is powered by validator nodes, which are run by members of the Diem Association. These nodes confirm transactions and validate blocks. This diagram outlines the process:
Image Source: https://cryptobriefing.com/diem-introduction-facebooks-stablecoin/
Efficiency is an important part of the Diem blockchain. Diem’s testnet has been criticized for handling between 6 and 24 transactions per second, far less than non-blockchain payment networks like Visa and Mastercard. But in practice, Diem’s blockchain may be faster, as it aims to support 1000 transactions per second.
On top of this, Diem is promising near-zero transaction fees. On Diem, interest is paid to validators that comes from reserve assets. That means Diem does not need to take a 1%-3% cut of each transaction to make money, as payment companies currently do.
History of Diem
Diem has been under development for nearly two years in various forms. These are the most important milestones in its history.
Early History
In May 2018, Facebook messaging Vice President David Marcus was appointed to a new blockchain division within the company. Marcus previously was president of PayPal and a director on the board of Coinbase. These facts led many commentators to predict that Facebook was planning a crypto-based payments platform.
Further clues emerged as Facebook hired more crypto developers, who eventually leaked details to the press. The Wall Street Journal was one of the first to report on the company’s plans.
At that time, Facebook’s crypto product was supposedly intended for use via WhatsApp in India as a remittances tool. That plan has apparently been abandoned in favor of broader goals.
Official Announcement
In June 2019, the Facebook-backed Libra Association officially announced Libra and revealed the structure of the project in detail.
The Libra Association announced that the blockchain would be powered by a consortium of 27 major companies operating independently of Facebook. Meanwhile, Facebook would profit from those plans by building the Calibra wallet for the cryptocurrency (now called Novi) and by having a single governance vote.
Though the Association remains active, not all of its original members remain involved. By the end of 2019, several members of the Libra Association left the project, including Visa, Mastercard, PayPal, eBay, and Stripe, as well as Mercado Pago and Booking Holdings. That forced the project to rebuild its Libra Association with the remaining members and new additions.
The project also faced numerous regulatory roadblocks at the time of its announcement, including pushback from the U.S. Senate and several European regulators. Libra’s 2020 launch date came and went, and the project remained mostly silent throughout 2020.
The Diem Rebrand
In December 2020, Libra returned with a new name, Diem, and announced plans to go live in early 2021.
What’s the Difference Between Diem and Bitcoin?
If you were introduced to cryptocurrencies through Bitcoin like most people, then forget everything you know. The Diem Dollar is very different from Bitcoin, both in the way that it works and the way it’s controlled.
For starters, the Diem Dollar is a stable coin built on a permissioned blockchain network. Unlike Bitcoin, it’s not designed as an open network which anyone can participate in. Another difference is that Diem is directly connected to the US Dollar. This distinguishes it from Bitcoin, which isn’t connected to any specific stable asset making its value volatile and unstable. This means that a Bitcoin’s value changes a lot more unpredictably, whereas Diem’s value won’t fluctuate any more or less than the price of a US Dollar.
Another crucial difference between the two is that Diem is a centralized currency. It’s centralized by the Diem Association which oversees its development and the ways in which it can be used. That’s worlds apart from Bitcoin, a decentralized cryptocurrency that isn’t overseen by any one person, group or company.
Finally, since the Diem Dollar is pegged to a fiat currency, it isn’t connected to any finite resource. The US Dollar is a currency whose value is in direct correlation to the number of Dollars in circulation and is no longer connected to the amount of gold that the US owns. This makes the number of Dollars that can be printed virtually unlimited. By contrast, the number of Bitcoin in circulation is very much finite, with a cap of 21 million in existence.
By introducing Diem, Facebook and the Diem Association are changing the way we imagine cryptocurrencies. Unlike Bitcoin, Diem isn't introducing a new method of digital payment. It’s simply a new way of exchanging money digitally. This should make it a lot easier for non-tech savvy individuals to start using cryptocurrencies to make digital payments for everyday things like groceries and taxi rides.
Conclusion
Cryptocurrencies have been around for a long time, but the Diem Association could be the group that makes them available to billions globally. By creating a stable coin backed by the US Dollar, the Diem Association has created a new type of cryptocurrency –– one that’s accessible, easy to understand, and easy to use in everyday life. Combine that with Uber, PayU, and Shopify’s user base, and Diem is well on its way to becoming the dominant cryptocurrency over the next few years.
Sources / References Content From:
https://www.theguardian.com/technology/2019/jun/18/what-is-libra-facebook-new-cryptocurrency
https://en.wikipedia.org/wiki/Diem_(digital_currency)
https://www.firstdag.com/blog/why-diem-is-better-than-bitcoin/
Nice post. Thank you, for sharing.IDO Development Company
ReplyDelete