In what seems like one fell swoop, Facebook has signaled its intent to revolutionize finance. The social media giant’s recent announcement to launch their own cryptocurrency has sparked a debate on whether this will disrupt the financial sector.
The company has been working on Diem (formerly Libra) since 2019 and now that it’s finally launching, many are wondering how exactly they plan to do it.
Many are also questioning if Facebook Diem can really solve some of the current problems that plague cryptocurrencies today.
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What makes Facebook Diem unique?
The world of cryptocurrency is a fast-paced and ever-changing industry. Facebook Diem aims to make it more accessible for everyone by focusing on usability and simplicity as their main goals.
Diem is creating an open and distributed global payments network which intends on bringing forth a more inclusive payment system.
The idea is to enable everyone from anywhere in the world – no matter what their culture or socioeconomic status-to easily access financial services through mobile devices, all while providing unprecedented security using blockchain technology. (i.e. without relying solely on any single entity such as banks or governments.)
Diem Core, the open-source protocol of the Diem Blockchain, is designed to be a safe and secure platform for conducting transactions.
The financial intelligence unit will monitor illegal or nefarious activities on this network; if detected they have committed themselves to working with law enforcement as well as internet service providers in order combat these issues.
Facebook Diem has an inbuilt exchange that allows you to trade fiat currency with its own native token, the XDM. The tokens are pegged against USD so they have a stable value that will never fluctuate wildly like other cryptocurrencies do.
There is also no transaction fee when trading BTC or ETH into XDMs, which makes it easy for newcomers who want to get involved without any added costs or complications. Holders can then use their tokens within the ecosystem’s marketplace.
Public response to Diem
People where understandably skeptical when Facebook Diem was announced. The fear was that the large amounts of money involved in this project would threaten monetary stability and lead to a surge in money laundering schemes.
Facebook’s Libra Association was unveiled to the public two years ago and has lost many of its executives since. Visa, Mastercard and Stripe were some of the first companies to withdraw from this association followed by an exodus that included PayPal, eBay and Vodafone.
Meanwhile, the Facebook Diem team has gone through a complete makeover, rebranding from Libra earlier this year and converting big hires like CEO Stuart Levey. Mr. Levey was formerly the head legal officer at HSBC before coming on board to lead the new company.
The cryptocurrency startup (if you could even call it that given its backing) is in talks with Swiss financial regulators to secure a payment license, further paving the way for its digital currency ambitions.
Thanks to its status the de facto social network, the titan brings along the so-called network effect with it, and this association has been bolstered by major companies like Shopify, Uber and Spotify, and partnerships are being struck left right and center.
Cryptocurrencies have been a hot topic recently, especially with the advent of alt coins and stablecoins. The rising popularity has lead to the creation of many new cryptocurrencies such as Tether/USDT and CBDCs, both which are pegged to fiat currency values like USD or EUR (to avoid volatility).
Facebook Diem will similarly be pegged to fiat currency. This is especially important for Diem, as stability is something that many people are looking for. (Diem is also working on a “fiat-to-crypto” exchange.) This guarantees that the price of the cryptocurrency will remain relatively stable for each coin.
The ability for users to trade currencies, and for them to exchange XDM into USD or ETH will be another incentive for newcomers to the ecosystem, bringing the price of the currency down to a more reasonable level.
An innovation that they’ll bring to the table is the ability for people to use crypto assets as a means of payment on its platform. This is where it differentiates itself from other cryptocurrency competitors such as Ripple or Bancor, both of which have the same ability but neither of which have the functionality that Diem has planned.
For those eager crypto enthusiasts out there looking for more information about Diem and how they can help contribute during this exciting time in the company’s development, be sure to visit their website or join the Diem Discord channel.
So what’s next?
The cryptocurrency sector has never been more alive. Even though cryptocurrencies are notoriously volatile, Diem, a token that has been created in cooperation with Facebook, is one of the most promising projects to ever come out of this space.
Social media giants like Facebook have vast influence on the everyday lives of people around the world. There is no denying the fact that Mark Zuckerberg, Sheryl Sandberg and their team are intelligent enough to predict or at least have a substantial role to play in the future of the Internet, and cryptocurrencies are going to be an important part of that development.