Diem: Facebook's Venture into Cryptocurrency

Shalom Solomon

Facebook one of the largest and most popular social media platform is expanding it's horizon and going into Cryptocurrency.
When concerns were raised though, Facebook explained that it did not own direct control over this Cryptocurrency as it was only a part of its founding members.

What is It All About?

The Cryptocurrency in question was formerly called Libra. In November 2020, in a bid for rebranding, the name was changed to "Diem" which means "Day" in Spanish.
From it's inception in 2019, Diem has suffered several setbacks causing the continuous shifting of it's official launching. It has faced serious backlash, scrutiny and litigation from regulatory bodies around the world.
These problems caused seven of it's twenty-eight top founding members in 2019 to take to their heels before it's first inaugural meeting in Geneva. This was a huge blow to the Diem association as these members were big wigs in the fintech industry among them were, PayPal, Visa, MasterCard, Stripe, eBay, Mercado Pago and Priceline, later, Kayak and Open Table followed as well.
These setbacks did not hinder the work on Diem, the association re-strategized and decided to released a stripped version of the original Diem this year.

The Diem Association

The Diem Association has its headquarters in Switzerland and will be the de facto monetary authority for the Cryptocurrency.
It initially had 28 members, some of which dropped out in 2019 after the currency faced scrutiny from regulatory bodies. The Diem association now has 27 members and is hoping to get 100 total members with rights to vote.
The Diem association is the major source of funding for the Cryptocurrency project.
Each member is to pay $10 million as entrance fee, and other members renew their membership from time to time.

Photo Credit: Pixabay

Why is it Different From Other Cryptocurrencies?

Diem is not your regular Cryptocurrency. Although, it uses the same kind of ledger system as Bitcoin and other kind of cryptocurrencies, called block chain. Where every transaction has to be confirmed by the block chain before it takes place. 
Diem is also, meant to be a Permissioned Cryptocurrency.
Now this is where the similarities to regular Cryptocurrency ends.

First of all, it is anchored to stable assets unlike other Cryptocurrencies. At first, it was meant to be anchored to a basket of currencies, but it has been modified and will only be linked to the United States Dollar (USD). 
The founders would buy assets and sell them off based on the amount of Diem spent.
Very much like Tether. These types of digital money are known as stable coins. Their value does not change; which makes them perfect to use for transactions and trans-border transfers.
So, basically 1Diem would be equal to 1USD.

Stable coins are the future of Cryptocurrency, countries like China have already started working on this. Other countries planning to develop their own Cryptocurrency would be using stable coins too.
Also, Diem is not decentralized. It is a Permissioned block chain with the Diem association serving as it's "central bank".

Criticism

Diem has faced a lot of fire since it was first announced in 2019.
Companies have sued for both brand names and logos with claims that the similarities in the names and logos would lead to confusion. Among such companies are: Finco Services which sued for logo, Liyra Network, Libra Internet Bank and Libri GmbH sued for brand names in 2020.
The news of the Cryptocurrency was met by negative concerned remarks and outright criticisms by Regulatory bodies and Central Banks.

The US regulators for instance contacted Diem's top founding members, Visa, Stripe, PayPal and MasterCard in 2019 and asked them to explain how their association with Diem fits into their anti-money-laundering complaince programs. This led to the dropouts by it's top members that same year.
Some users have expressed concerns on their privacy with the currency's association with Facebook. In response to this, Facebook has dissociated itself with the network by the creation of Novi, which would be the wallet for the Cryptocurrency.

Where is Diem at Now?

Last year, Diem announced that it would be officially launching and fully operational hopefully by January 2021 depending on when it gets the required permission from Swiss Regulators. 
We've not heard any news yet, so maybe they haven't been able to get the approval they need. 

We'll be sure to keep you posted on any updates. Till then, Adios...



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