One of the most interesting events of 2021 was Facebook’s rebranding to Meta. It happened in line with the increasing popularity of metaverse. As it seems, Facebook (Meta) is a fan of metaverse and cryptocurrencies. It was one the first giant companies that decided to release its native cryptocurrency. In this article, we will go through Meta’s cryptocurrency called Diem and explain its features and functions. Stay with us.
What is Diem?
Diem is a stablecoin and a blockchain-based payment system. It was developed by Meta (Facebook) and it claims to be going to service millions of people around the world. Diem was at first called Libra. The rebranding happened in December 2020. We have to mention that Diem has not been officially launched yet, and it is under development. According to the predictions, it will be released in late 2022.
Diem introduces itself as a payment system for everyone. According to the official website, it has the following features:
• It is mobile-based: the only tools you need for using Diem are a smart phone and a good internet connection.
• It is stable: Diem is a backed stablecoin and it is backed by fiat currencies and bonds.
• It is fast: sending, receiving, and spending this cryptocurrency is fast and cheap.
• It is scalable: Diem has an open-source protocol and a dynamic community of developers that support it and allow everyone to access it easily.
• It is secure: Diem is blockchain-based and it owes its security to this technology.
A council called “The Diem Association” supervises all activities of Diem. The members of this council were first giant companies like Visa, MasterCard, PayPal, Uber, and Coinbase. Visa, MasterCard, and PayPal later exited the council due to regulatory concerns. By the way, companies like Uber, Coinbase, and Spotify are still members of the council.
The fiat currencies backing Diem are Dollar, Pound, and Euro. Since it is a stablecoin, it’s not a store of value. The Meta company has repeatedly mentioned that Diem is not a new money. It is just a means for transferring national currencies more easily.
How does Diem work?
Diem will run on its own independent blockchain. This blockchain is based on a unique algorithm called LibraBFT that is very similar to proof of stake. To record a transaction, two-third of the participants, or nodes, must confirm it. Users who wish to become a node in the Diem network must first stake 10 million dollars as a collateral. This blockchain has a specific language for coding smart contracts called “Move”. Therefore, Diem is a network that can host different smart contracts and decentralized applications (DAPPs). According to the whitepaper, Diem will be able to process around `1,000 transactions per second. The fee is also significantly low. Another important point about Diem is that it has ensured authorities it will stop illegal transactions. In general, since Diem has a more centralized nature in comparison with other cryptocurrencies like Bitcoin, the regulatory issue is a challenge. In the next section, we will elaborate more on the regulatory concerns.
The regulatory concerns of Diem
Diem was supposed to be launched in 2019, but after introducing the project, its launch was delayed by the US government and the European Union. The regulators worried that this cryptocurrency could threaten the financial stability and also the value of national currencies. These concerns made companies like Visa and PayPal exit the Diem Association. The concerns increased to the extent that the US authorities officially stated they wouldn’t let this project run until all issues were clear. Mark Zuckerberg, Meta’s CEO, ensured the authorities that this project would not threaten national currencies by any means. Meta is still negotiating with the authorities to gain their trust. Diem’s launch and success depends on the result of these negotiations.
The Novi wallet; Diem’s exclusive wallet
Diem has an exclusive wallet called Novi. It was developed by one of Meta’s companies called Novi Financial. This wallet was also called Calibra. After Libra was rebranded to Diem, this wallet was also renamed. Novi wallet is an independent application that is predicted to be integrated with applications like WhatsApp, Instagram, and Facebook Messenger.
Diem is Meta’s interesting project that has been developed to facilitate international payments. This project has not been released yet, but it will launch in the near future. Diem was founded by Meta, but many technology giants cooperate with it. While Diem is based on blockchain, it is not as decentralized as cryptocurrencies like Bitcoin and Ethereum.
Some experts believe Diem will not succeed, while some others consider its future promising. If this project overcomes its regulatory issues, it has the ability to revolutionize the global financial system.