Understanding Facebook Diem

Photo by Glen Carrie on Unsplash

Facebook “Libra” Rebranded to “Diem”

The Diem dollar is expected to be released in 2021 and will be backed by a basket of stable coins. But what else do you have to know about the digital currency of Facebook?

A Digital Payment Platform

However, Facebook is joining the radar with an exponential number of 2.7 billion ACTIVE users as recorded this third quarter of 2020. Theoretically, Facebook could very well reach crypto success far quicker than most.

Built on Blockchain

Similar to cryptocurrency, Diem is based on blockchain and uses cryptographic technology. However, Diem termed as a Cryptocurrency remains debatable as we are not sure of its full features. Just for now, let’s call it a digital currency.

But a Permissioned One

Facebook Diem being on a permissioned blockchain suggests that it will not be mining or staking to validate transactions, instead relying on permissioned validators — the Diem (Libra) Association members.

The Diem is Centralized

Diem is not censorship-resistant in this context, like Bitcoin and other cryptocurrencies. The network could be relatively centralized because these validators need to be members of the Diem Association.

Being centralized is not inherently bad. The management will have total control over the type of applications interacting with the distributed ledger, preventing malicious applications and scams.

Managed by Diversed Members

The Diem Association members are responsible for governance decisions, overseeing the payment system’s operation for Diem, constructing projects on top of the blockchain of Diem, and offering grants. In this association, Facebook aims to have 100 members by its launch.

Pegged to a Basket of Fiat

Also, a multi-currency coin called Diem will be supported by the Diem payment system. The Diem Dollar is a composite of its pegged stable coins and backed by a basket of assets to ensure its value — Protecting it from volatility, a crucial aspect in rendering it a payment method.

The Diem is to be held in a wallet called Novi. As you would imagine, this digital wallet could be incorporated into other Facebook products such as Facebook Messenger and WhatsApp. This way, users should easily convert between US dollars (or other fiat currencies) and the D​iem dollar.

The source code of Diem is called the Diem Core, according to the Diem GitHub. Further, Diem will also support smart contract capabilities through Move, a programming language.

Closing

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