What is Diem (Facebook Libra)?

What is Diem (Facebook Libra)?

Facebook Libra (renamed Diem) is a payment system proposed by Facebook that is based on a permissioned block chain and will fuel an ecosystem for digital payments and other financial services.

Its currency, called the Diem dollar (formerly the Pound), will be tied to a “basket” of stable currencies and is scheduled to launch in 2021. But what else do you need to know about Facebook's digital currency? Let's understand a little more about her.

The digital payments industry has many opportunities. As more and more people gain access to the Internet through more affordable smartphones, much of the economic activity is taking place online.

What is Diem (Facebook Libra)?

Companies like Paypal, Visa and MasterCard are already meeting much of this demand. In addition, many projects in the Encryption are also developing products for this sector.

Unlike other projects, however, FB already has a large number of users. Well, “big” can be considered an understatement. During the third quarter of 2020, Facebook had about 2,8 billion monthly active users. This could make the payment system a success quickly.

What is Facebook Libra (Diem)?

Libra (Diem) is a payment system based on the technology of block chain (Blockchain) proposed by Facebook in 2019. The project's objective is to provide access to financial services for people who do not have a bank account. Some of its founding members are Morgan Beller, Kevin Weil & David Marcus.

The launch was originally scheduled for 2020, but has been delayed for several reasons and is likely to take place in 2021.

The Libra project will be governed by the Libra Association (renamed to the Diem Association), which is an independent organization based in Geneva, Switzerland. Members include a variety of Blockchain, technology, payments, telecommunications, venture capital and non-profit organizations.

The members of Associação Libra are responsible for governance, overseeing the functioning of the Libra payments system, the projects developed in the block chain and the provision of subsidies. Facebook aims to have 100 members in this association by the launch date.

Is Facebook Pound a Digital Currency?

Well, Libra is based on a block chain and uses technology from Encryption. However, the term crypto currency it usually implies some properties that Libra does not own.

In summary, as far as the Pound is concerned, it would be more correct to call it digital currency.

How Will Facebook Libra Work?

The Pound Blockchain (renamed to Diem Blockchain) is an authorized block chain that represents the core of this payment system. And what is the difference from other blockchains?

We often talk about blockchains like Bitcoin or Ethereum there is no need for permission. This means that anyone with an Internet connection can freely access them, transact with them. There is no one person or organization controlling access.

However, this is not the case with a permissioned block chain, where you need the permission of whoever controls the network to use it. Or even more specifically, the applications you use will need special access.

Also, as Libra is a permissioned block chain, it will not have mining or staking functions to validate transactions, as in many other block chains. Instead, it will rely on a set of authorized validators (members of the Libra Association) to validate transactions.

According to its creators, Libra may transition to the Proof of Stake (PoS) system after the first five years. However, this is a long time for a growing industry with constant innovation.

So why not use the proof of participation system from the start? They explain their choice in the Libra whitepaper. In his view, there is currently no system without a permit capable of supporting billions of transactions.

Is Facebook's Libra Project Centralized or Decentralized?

According to many in the Blockchain field, permissioned blockchains are not able to be as decentralized as permissionless ones, as they more closely resemble a traditional corporate database.

In that sense, the Pound is not resistant to censorship like Bitcoin and other crypto currencies. Since validators need to be part of the Libra Association, the network may end up being relatively centralized.

On the other hand, controlling and vetoing which applications can interact with the distributed ledger can have some advantages. For example, it may be easier to exclude potentially malicious applications or scams.

The Pound Payment System

The Pound Payment System (renamed to Diem Payment System) supports several single currency stablecoins linked to fiat currencies such as the Dollar, Euro and Pound Sterling.

They work similarly to the stable currencies you are familiar with. Its value is derived from a reserve called the Pound Reserve, made up of cash, cash equivalents and short-term government bonds.

In addition, the Pound payment system will also support a multi-currency currency called Diem Dollar (formerly LBR). It is a kind of composite of all these other stable currencies and is tied to a “basket” of assets that guarantee its value.

You can think of it as a stablecoin from stablecoins (and possibly other assets such as bonds). The idea is that these various forms of collateral can protect them from volatility — a very important aspect for something that is intended to act as a form of payment.

Pound crypto currency will be stored in the Novi wallet (formerly the Calibra wallet). As you might expect, this digital wallet can be integrated with other social networking products such as Facebook Messenger and WhatsApp.

Under the plans, users will be able to easily convert between US dollars (or other fiat currencies) and Facebook currency.

Libra's source code, called Diem Core, is open source and written in Rust — you can check it out yourself on the Diem GitHub. According to the project, Libra will also have support for smart contracts through a programming language called Move.

Will Facebook Pound Able to Replace Bitcoin?

So far, it's clear that Libra and Bitcoin (BTC) are fundamentally different and could coexist very well in the future. While both are known digital payment systems, they aim to cater for different use cases.

Bitcoin is a decentralized, censorship-resistant crypto currency that often acts as a reserve asset or store of value. Libra, on the other hand, is a proposal that relies on a permissioned network that suggests a more centralized model.

What is the Future of Libra (Diem)?

Facebook received criticism after the first announcements about the Pound, especially from central banks, lawmakers and regulators. It remains to be seen if they will be able to put together all the “building blocks” necessary for Libra to be a success.

Conclusion

The Libra project is a payment system proposed by Facebook, based on an authorized block chain. The aim is to offer financial services to people without a bank account through Facebook applications.

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