Facebook’s Libra Faces Regulatory Hurdles: Diem to Emerge in 2021
2021 seems to be an important year for the blockchain world as a number of projects such as unusable tokens (NFTs) and decentralized financial exchanges (CeDeFis) take over the central location. Libra’s Facebook is also right at the top.
Not so long ago, the media reported that the world’s largest social network was developing plans for a global digital currency. Then it looks like Facebook has put its plans on hold. Disputes with regulators around the world have left Facebook’s plans a bit delayed and redirected. Rather than pulling back, Facebook decided to develop and launch a “different” global digital currency by the end of 2021 after the project was renamed for Diem.
Related: New name, old problem? The rebranding of Libra for Diem still faces many challenges
It’s different in that they changed the name and management. However, the leadership of the project will be taken over by the Libra Association, which was later renamed the Diem Association in December 2020.
What is Facebook Diem?
Facebook Diem is an upcoming permissionless payment system based on blockchain technology. The system will have a stablecoin called Diem and run on its blockchain network.
Although Facebook proposed the project, for the sake of transparency, the Diem Association will oversee the entire operation of the project. The Diem Association is an organization of companies from a variety of business sectors including technology, fintech, telecommunications, venture capital, and nonprofits.
The original coin, Libra, is not decentralized, and neither is Diem. While the target is without permission, the current plan is for Diem to run on a licensed blockchain. Therefore, only members of the Diem Association can do business with it.
However, this is because the development team does not yet need to develop a robust solution that can process unauthorized transactions for billions of potential users. Enthusiasts hope this will change as the project grows.
In the long term, Diem’s ultimate goal is to help the world access financial services more easily and faster. US dollars, euros, pounds and other major fiat currencies will support Project Diem. If the project is approved by US regulators, Diem will act as a full-fledged central bank based on blockchain technology. As you probably know, this is not like Bitcoin (BTC) and others.
Related: Metaverse: Mark Zuckerberg’s Brave New World
Components of Facebook’s new global digital currency
Facebook’s new global digital currency is set to revolutionize the global payment system. Hence, the Facebook Diem project consists of three unique parts that work in sync to create a safe and inclusive financial system. These include:
1. Trustworthy blockchain technology platform
One component of the new cryptocurrency Facebook Diem is the scalable blockchain infrastructure and trustworthy security, which serves as the technological basis of the payment system.
Diem’s source code is open source on Github. The source code written in Rust is available to everyone and the journal.
It offers scalability and helps the infrastructure to host multiple projects. Diem is also developing a new programming language called Move to create smart contracts and execute custom transactions.
November 2nd Digital wallet
While it is pretty easy to create a digital wallet after completing reputable hands-on courses, Novi is a complex wallet that requires all of the time and attention you can afford. One of Facebook’s many companies, Novi Financial, is developing a digital wallet for Project Diem. The wallet will be called Calibra until the end of 2020.
Novi is a standalone app that we expect to support integration with WhatsApp, Messenger, Instagram, and possibly several other platforms. The ease of use is impressive.
Related: Novi-FT? Facebook’s NFT support may not result in crypto adoption
The Diem coin is a key component of Facebook’s new global digital currency project. It has solid coverage of Diem’s reserves, which are cash or cash equivalents.
There are also short-term government bonds. Hence, Diem is a stablecoin. According to the development team, the coin will not be producible like Bitcoin and many others. In the initial phase, only the members of the Dim Guild can process transactions. However, Diem plans to switch completely to an impermissible proof-of-stake system within the first five years of its introduction.
The values that drive the design of Facebook Diem. determine
As with other reputable cryptocurrencies, several principles act as guiding principles for the functionality and design of the Facebook Diem. Here are some key values that will underscore its unique design if it all hits the market by the end of 2021:
- Everyone must have the right to control their legal work and its results.
- More people should have access to financial services.
- The global payment network must be open, cheaper and faster. All of this leads to better economic opportunities and more efficient world trade.
- Slowly, but eventually, people will build their trust in many forms of distributed governance.
- In addition to supporting ethical actors and maintaining the integrity of payments, people and organizations have a responsibility to foster the growth of financial inclusion.
- A much wider and open payment network with unparalleled interoperability, coupled with high compliance standards, is subject to design and governance practices.
How will Facebook use it?
There are many ways a cryptocurrency backed by a company with the strength and reach of Facebook can offer users around the world. In addition, the unique opportunities it offers make Facebook Diem a great creation in this crypto age. Here are a few ways Facebook will soon be using Diem:
1. Transfer money
Users should expect money transfers and wire transfers to be easier and less stressful. In addition to simplicity, the project ensures fast transaction speeds and lower costs compared to financial intermediaries.
The lengthy processes involved in sending money, especially across borders, via traditional financial intermediaries could be a thing of the past.
One of Facebook’s main focuses is creating better business opportunities and efficient global e-commerce. It becomes an even easier workable use case when you consider that Diem Association has billions of users and Facebook has at least three billion global users.
As a member of the Diem Association, Shopify will ensure that the e-commerce site owner can integrate the coin easily. Every partner who operates B2C services will provide the Diem system on their platform – it is, in the truest sense of the word, unsurpassedly simple.
3. Cross-border payments
Diem could help reduce cross-border money transfer costs, which are already high enough at 6.5%. As a cryptocurrency with a full payment system, Facebook Diem is almost entirely digital.
The transactions are preprogrammed in its database. Operating costs are expected to be significantly lower than those incurred through traditional remittance channels. As a result, the usage costs are lower and the market share of the crypto users is higher.
Governance is one of the primary use cases of Diem’s cryptocurrency and it comes from Diem’s governance structure. An impairment of the functions and features of Diem is not possible. This in turn ensures that the project can serve as an alternative currency model for financial flows in governance.
What else? Government transactions for various public welfare mandates as well as a detailed overview of public grants and costs ensure the public benefit.
Furthermore, since Facebook does not have sole control of Mr. Diem, it is impossible to misrepresent Diem’s use against the public interest.
This is how Facebook Diem differs from Facebook Connect. In May 2008, Facebook introduced the next version of the Facebook platform with Facebook Connect. It enables users to connect their Facebook friends, identity and privacy to websites on the internet. On the other hand, Facebook Diem is an approved and blockchain-based payment system that contains a native cryptocurrency.
Libra’s Facebook is in jeopardy
The announcement of the launch of Facebook Libra has sparked various debates. Some believe it will compete with national currency while others consider the technology and privacy issues it poses. More specifically, those who believe it will replace national currency may be wrong for a number of obvious reasons, while those who consider this project based on Facebook’s history of data breach and its malicious nature may be right.
First, the Libra coin is said to be backed 1: 1 with traditional currencies such as US dollars, euros, yen, etc. To say that Libra, the supposedly secondary coin, is an alternative to its base currency is wrong. The question arises as to how a secondary currency, the value of which is dependent on a primary currency, will displace it. However, one possible threat is that the user’s data can be tampered with.
For example, Hyun Song Shin, economic advisor and …