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- The Diem Association will cater to 2.8 billion Facebook users across the world
- It will issue stablecoins pegged against the USD and Euro that will act as a safety mechanism
- Global cross border transactions will be enhanced and differences will be ironed out
Post the Cambridge-Analytica saga, Facebook had seen a lot of initial backers to their cryptocurrency taking a step down. Visa, MasterCard, PayPal, eBay and Vodafone withdrew after data of users’ was threatened under the aegis of Mark Zuckerburg. Launched in 2019 as Libra, The Diem Association is currently headquartered in Geneva, Switzerland. It plans to launch a prototype digital currency known as Diem and will peg it to the USD combined with one multi-currency coin.
Pilot program for 2.8 billion Facebook users worldwide.
A new digital currency will be put to test when the pilot program of Diem goes live this year. Transactions between individual consumers will be tested along with options to buy goods and products from various sites under its ambit. It is still backed by Shopify, Uber, Lyft and Spotify to name a few. We can only comprehend the speed at which the coins will be used given the investors and their grandeur.
The network effect will come to play in the distribution channel. Millions will have easy access to a digital currency pegged against the world’s reserve currency, i.e. Dollar. The firm has assured that users’ financial and social data will be stored separately to prevent any theft as the tokenized money is about to grow by leaps and bounds.
The key concepts of Diem that one must know.
Silvergate Bank based in California will maintain the USD stablecoin reserve. The concept here will be as simple as sending photos to a friend. Additionally, people without a bank account will also be a part of the bandwagon as the currency will flow within the Facebook network. With an initiative to help people access digital wallets safely and remotely, Facebook introduced the concept of Calibra, now known as Novi.
The reduction in transaction fee will help the user base of FB to multiply each year. As a result, advertising will touch the roof and so will the expenses related to it. The whole financial ecosystem will stand to gain with the introduction of Diem stablecoins. Facebook will be the de facto monetary authority as it is a part owner of The Diem Association, which plans to shift base to the US soon.
Diem differs from regular cryptocurrencies that we see today.
The stablecoin will initially be managed by the founding members and soon open up as a community for everyone to mine. It will be pegged to real assets unlike cryptocurrencies that are not backed. The Association will keep a pool of USD and Euro and maintain a reserve for every Diem bought/sold.
A robust compliance framework will be in place to safeguard the interests of retail investors. The blockchain network will be flexible such that it will give impetus to innovation in the finance world. The CBDCs currently being built by a number of countries can be integrated in the Diem framework for better usage.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
