The year 2021 is shaping up to be a significant year in the blockchain industry. Many projects such as nonfungible tokens and central decentralized finance exchanges are making waves. Facebook’s Libra is also a prominent player.
The news that the largest social media network in the world was working on a global digital currency was the talk of the media not too long ago. After a while, Facebook decided to abandon its plans. Facebook’s plans were delayed and redirected slightly due to disputes with regulators across the globe. Facebook refused to back down and instead decided to plan and launch a new global digital currency in 2021.
Similar: Old problems, new name? The rebranding of Libra to Diem faces many challenges
They had to change their name and administration. This makes it different. The project will be managed by the Libra Association, which was renamed in December 2020 to Diem Association.
What is Facebook Diem?
Facebook Diem, a permissionless payment system that uses blockchain technology, will soon be launched. It will be based on a stablecoin called Diem, and run on its blockchain network.
The project was proposed by Facebook, but the Diem Association will manage the project’s operation for transparency’s sake. The Diem Association is an association of companies representing different economic sectors, such as technology, fintech and telecoms.
Libra, the initial coin, was not distributed decentralized. Diem is also not. Although the goal is to make the blockchain permissionless, Diem is currently running on a permissioned one. Only members of the Diem Association are allowed to make transactions on it.
It is because the team has yet to develop a robust solution that allows permissionless transactions for billions of users. Enthusiasts hope this will change once the project is in the pipeline.
Diem’s ultimate goal is to make financial services more accessible and easier for everyone. Diem Project will be supported by the United States dollar, the Euro, the British Pound, and other major fiat currencies. Diem can function as a fully-functioning central bank, based on blockchain technology, if it is approved by U.S. regulators. This is not Bitcoin (BTC), as you may know.
Related: Mark Zuckerberg’s Brave New World
Facebook’s new global digital currency, components
Facebook’s global digital currency is aiming to revolutionize the global payment system. The Facebook Diem project has three distinct parts. Together, they work together to create a safe and inclusive financial system. These are:
1. 1. A trusted blockchain technology foundation
A blockchain infrastructure that is trustworthy and secure serves as the technological basis of the payment system, which is one component of the Facebook Diem cryptocurrency.
Github makes Diem’s source code open-source. You can access the source code written in Rust.
It allows for scalability and will allow infrastructure to host multiple projects. Diem is also working on a new programming language called Move, which allows for the creation of smart contracts and execution of custom transactions.
2. Novi digital wallet
Although it is relatively easy to create a digital wallet, Novi requires all of your attention and time. Novi Financial is one of Facebook’s many companies that developed the digital wallet for Diem Project. Up until 2020, the wallet was known as Calibra.
Novi is a standalone application that will support integration with WhatsApp Messenger, Instagram, Messenger, and possibly other platforms. Its simplicity of use is amazing.
Related: NoviFT? Facebook’s NFT support might not be enough to encourage crypto adoption
One of the most important components of Facebook’s global digital currency project is the Diem coin. It is backed by the Diem reserves which include cash assets and cash equivalents.
Short-term government securities are also available. Diem, as such, is a stablecoin. The development team states that the coin will not allow miners to mine it like Bitcoin or a variety of other coins. Transactions can only be processed by Diem Association members in the initial stages. Diem intends to transition to a permissionless proof of-stake system in the five years following its launch.
Design of Facebook Diem: Values
Facebook Diem, like other trusted cryptocurrencies has some principles that guide its function and design. These are the key values that will drive its unique design, as everyone is working together to launch it later in 2021.
People should have the ability to control their legal labor and its outcome. Global payment networks should be more open, easier to use, and faster. These factors lead to greater economic opportunities and better global commerce.
What does Facebook intend to do with it?
A cryptocurrency that is backed by a company like Facebook has many opportunities for users around the world. Facebook Diem is a wonderful creation in the crypto age because of its unique opportunities. These are just a few of the ways Facebook will soon use Diem:
Remittances and money transfer should be easy and painless for users. The project promises ease and faster transactions than financial intermediaries.
It is possible that the long and tedious processes of sending money across borders via traditional financial intermediaries are now a distant memory.
2. 2. E-commerce
Facebook is focused on improving economic opportunities and global e-commerce. This is made even more possible when you consider the Diem Association’s billions of users, and Facebook’s three billion global users.
Shopify is a member of the Diem Association and will make it easy for e-commerce website owners to integrate the coin. Each member company offering B2C services will integrate the Diem system onto their platform. This is an unmatched ease.
3. Cross-border payments
Diem can be used to lower the cost of cross-border funds. This is an already high price at 6.5%. Facebook Diem, a cryptocurrency that has a system for payment, is almost completely digital.
It will pre-programme transactions into its database. Expect operating costs to be substantially lower than traditional remittance channels. This will result in a lower cost-of-use and higher market share for cryptocurrency users.
Governance is one of Diem’s most important use cases. It stems from Diem’s governance structure. It is impossible to compromise the functions and features of Diem. This allows the project to be a model monetary alternative to the passage of financial flows in governance.
Plus, Benefits for the public will be guaranteed by government agency transactions for various public welfare functions, as well as a detailed overview grant and expense information in the public domain.
Aside from that, Facebook doesn’t have complete control over Diem so it is impossible to misrepresent Diem’s use against the public interest.
Here’s how Facebook Diem differs to Facebook Connect. Facebook Connect was launched in May 2008 by the company as the next version of its platform. It allows users to connect with their Facebook friends, privacy and identity to websites on the internet. Facebook Diem, on the other hand is a blockchain-based and permissioned system of payment that also includes a private cryptocurrency.
Facebook Libra comes with risk
There were many debates over the Facebook Libra launch announcement. While some believed it would be a rival to sovereign currency, others saw the privacy and technological issues that it presented. It is possible that those who thought it would replace sovereign currency may be wrong. However, those who looked at the project in light monopolistic and data violations history of Facebook could be correct.
First, the Libra currency would be backbacked 1:1 with other currencies such as the U.S. Dollar, the euro, and the yen. It is wrong to say Libra, the supposed secondary currency will replace its base currency. This raises the question of whether a secondary currency that relies on a primary currency to provide value will replace it. However, it is possible that users’ data could be manipulated.
Hyun Song Shin, an economic advisor and head of research at BIS acknowledged that digital currencies could have some benefits, despite the fact that it could lead to decreased competition and data privacy concerns. Shin reiterated that the goal should be to respond effectively to the entry of big techs into financial services in order to reap the benefits and limit the risks.
“Public policy must be based on a more comprehensive approach that includes financial regulation, competition regulation, and data privacy regulation.”
Anyone can create a cryptocurrency payment system online. The key is to make sure that Facebook only uses reputable organizations with proven track records.
These views, thoughts, and opinions are solely the author’s and do not necessarily reflect the views or opinions of Cointelegraph.
Michael J. Garbade, the CEO and co-founder of Education Ecosystem, is Michael J. Garbade. A serial entrepreneur in tech, Garbade has worked previously at Amazon, General Electric and Rebate Networks. Garbade has worked in South America, Europe, Asia, and Europe.