One of the most controversial cryptocurrency projects ever, Libra, is now back as a less-threatening version – Diem. Last year, the entire crypto market felt ripples of excitement when the American social media giant, Facebook, Inc announced plans to enter the industry. At that time, the platform sought to make a bold entrance with its permissioned blockchain-based payment system and stablecoin dubbed Libra. The move would have revolutionized money transfer and positioned Facebook and its partners on the ground floor of the blockchain-based digital payments sector.
However, the project turned out to be a little bit more than politicians and lawmakers were ready to accept. Libra saw immediate regulatory push-back for a variety of reasons. Regulators voiced a myriad of concerns regarding the effects of for-profit tech firms issuing currencies. Some lawmakers believed that this maneuver would give them too much power by injecting these platforms into global economics and geopolitics.
Regulators Not Ready at That Time
Soon, lawmakers’ concerns hit a fevered pitch. Notably, the House Financial Service Committee held a hearing last year regarding the matter. In the hearing, members of congress took turns blasting Facebook’s CEO, Mark Zuckerberg. They voiced concerns ranging from election meddling all the way to disinformation campaigns run by foreign governments.
There were also concerns regarding the classification of this new type of currency and what branch of the government would oversee the operation. It was easy to see that Facebook lacked the trust to pull off the launch of Libra as is. Lawmakers even halted all further Libra discussion until they could get a better understanding of the project.
The Original Libra Concept
The original Libra concept was to launch a stablecoin backed by a basket of assets. The stablecoin would be more stable than anyone fiat currency and it could be used worldwide as a means of exchange. The original plan saw Libra designed broadly similar to other cryptocurrencies like Bitcoin but with fundamental differences intended to make it more stable and less of a speculative asset.
When the Libra network was first brought to the attention of the market, it had a dream team of financial firms ready to back the project. Firms such as Mastercard, PayPal, Stripe, and Visa all pledged to put up assets to back the Libra coin. Sadly, these backers left the project early in the year due to all of the regulatory uncertainty and bad press Libra received.
What’s Different About Diem?
Diem is more than just a renaming of the Libra blockchain. The developers behind this concept decided it was best to alter its plans for Libra to speed up the regulatory approval process. The name change is part of these alterations. Developers decided that the Libra name was no longer appropriate because it was tied to an earlier iteration of the project.
One of the main changes that occurred when Libra became Diem was the reduction of Facebook in the equation. Lawmakers want organizational independence from the social media network if the project is ever to gain enough trust to win regulatory approval. The project recently revised its white paper with the goal to reduce Facebook’s role.
Another major alteration that took place in this update was a fundamental shift in the overall goal of the project, Originally, Libra was seen as an alternative to the current economic system. In essence, Libra was in competition with the global fiat market. Now, Diem removes the competition. Diem is designed as a compliment, not a replacement for, domestic currencies such as the USD.
As part of this transition to supporting both existing government-backed currencies, like the US dollar and the euro, Diem will now launch as a single dollar-pegged stable coin. This token is scheduled for a 2021 launch if regulatory approval is reached in a timely manner. Developers then plan to issue other single currency stablecoins over time. Eventually, and only after regulators are ok with the idea, a multi-currency stable coin would enter the picture.
Benefits of Diem
Diem brings some significant advantages to the market and to individual users. The token would have the benefit of instant adoption. The launch of Diem would signal a new era in cryptocurrency usage. Facebook has billions of global users who would all suddenly become cryptocurrency users. The effects of such a fast rollout would help to educate masses of people on the endless advantages of blockchain technology.
This huge network of users would also attract numerous developers to the platform. Dapp developers could leverage Diem to create new and exciting fintech applications that would have instant access to a huge crowd of potential users. Developers could then adjust and alter their application depending on the global feedback they received from the Diem network.
Diem is fast. Both consumers and businesses can conduct instantaneous, low-cost, highly secure transactions using this network. Facebook users could send payments internationally in seconds. This flexibility and freedom could help to cement Diem as a major global currency in only weeks.
How Does Diem Work
Diem combines the transparency and security of blockchain with the participation and global reach of Facebook’s network of platforms. Anyone on this network would gain the ability to conduct secure global transactions across the blockchain.
As part of this advantageous approach, Diem will utilize a custom-built blockchain. This blockchain was built from the ground up to service the needs of billions of network users. Interestingly, Facebook built this blockchain in secrecy for over a year before it announced the Libra concept publicly. The Diem blockchain functions as the technical foundation of the token and the tool for verifying transactions and ownership.
The Novi wallet is another aspect of the Libra concept that has changed significantly. The original Novi wallet went by the name Calibra originaly. This digital wallet was slated for release this summer but was pushed back when developers decided to make alterations to its capabilities and design. The original wallet was designed to only store Libra coins. The new Novi rendition of the platform does much more.
Keeping in line with Diem’s new inclusive approach, Novi wallet holders can store multiple currencies. The wallet will support major fiat and digital currencies. Interestingly, this move is seen as a way to calm regulators down and demonstrates that Diem is all about promoting the entire digitization of the economy and not just a Facebook takeover.
The best thing about the Diem project is its easy integration into the daily lives of users. Developers changed many things about the Calibra wallet to accomplish this task. However, one constant that didn’t change at all was the team’s desire to include Novi in both the Facebook Messenger and WhatsApp networks.
The Diem Association originally launched as the Libra Association in November 2019. This non-profit is based out of Zurich, Switzerland. The goal of the group is to further everything related to Libra’s approval. Specifically, the group consists of 27 other companies and nonprofits who share its goal to promote the technical and financial benefits of the platform.
Interestingly, the latest Novi rendition of the group also removed Facebook as a member. The platform’s subsidiary, Novi still remains a core participant in the group. This move should help lawmakers to better understand that Facebook and Diem are two separate firms operating completely independent of each other.
The Diem dollar takes over the role of the main utility token and cryptocurrency for the network. This unique financial instrument is licensed through the Swiss Financial Market Supervisory Authority (FINMA). As such, the token is compliant with international regulations at the protocol level. Consequently, Diem users gain features like consumer protection.
Possible Effects of Diem
Diem has the potential to alter the cryptocurrency landscape more than any other project so far. Facebook’s network encompasses billions of users. Providing this global community instant access to blockchain services is revolutionary in many aspects. For one, it could alter the way money is sent globally for all users of the network. No more would Facebook users utilize money transfer services or remittance firms to send value internationally.
Additionally, the integration would also push Facebook’s marketplace to new heights. The Facebook market place continues to see growing adoption. Users are able to easily search, sell, and buy items from other local users via this network. As it stands today, the Facebook network directly competes with local-based sales platforms such as Craigslist. The addition of a secure payment method would boost usage to new heights. Users could also purchase items that aren’t locally available with more confidence.
Diem intends to seize the day with its latest version. The removal of Facebook is sure to appease some regulators. However, it’s anyone’s guess if lawmakers are ready to see past the Facebook affiliation and focus on the merits of the project yet. In both cases, Diem has the potential to reshape the crypto and international financial markets simultaneously. For these reasons, Diem will continue to fight an uphill battle until its official launch date.