Editors Note: This article comes fromChain News ChainNews (ID: chainnewscom), published with permission.
Editors Note: This article comes from
Chain News ChainNews (ID: chainnewscom)
Content overview:
, published with permission.
Written by: Mike Dalton
Translator: Lu Jiangfei
Content overview:
Facebook plans to launch a stablecoin called Diem in 2021.
Diem aims to provide a cryptocurrency pegged to the U.S. dollar and launch a high-throughput blockchain and digital wallet.
If all goes well, Diem will become the worlds first cryptocurrency issued by a major technology company.
The social networking giant Facebooks coin issuance plan seems to have been finalized. If nothing else, they will issue the cryptocurrency Diem in 2021. Since Facebook has already designed the cryptocurrency Libra, does the Diem launched this time have a new design? Or new wine in old bottles? Here is everything you need to know.
What is Diem?
As a modified version of Libra, Diem is more similar to Tether (USDT) or other cryptocurrencies linked to fiat currency. It can be said that Diem is just a stable currency now. Diem will run on its own Diem blockchain, and all tokens will be stored in a digital currency wallet called Novi.
Diem can naturally be used for transaction payments, but unlike other stablecoin blockchains, the Diem blockchain is programmable like Ethereum, which means that developers can create custom apps on Diem, based on A smart contract development language called Move, users can ensure network security according to the logical constraints of static typing.
Similar to Ethereum, the Diem blockchain is powered by validator nodes, currently approved by members of the Diem Association, who are required to confirm transactions and validate blocks. The diagram below shows the validator workflow (source: Diem.com):
Earlier media reports said that the Diem test network can only process 6-24 transactions per second, which is far lower than non-blockchain payment networks such as Visa or MasterCard. But in fact, the Diem blockchain is very concerned about efficiency issues. The actual transaction processing speed is actually very fast. It is estimated that it can process 1,000 transactions per second when it goes online.
More importantly, Diem promises that the transaction fee is close to 0. On the Diem blockchain, the interest income of the reserve assets will be paid to the validators, which means that they do not need to deduct 1 from each transaction like other payment companies. -3% fee.
A brief history of Diem
early history
In May 2018, David Marcus, vice president of Facebooks instant messaging application business, was appointed head of the blockchain department. He had previously served as president of PayPal and a director of the board of directors of cryptocurrency exchange Coinbase. Analysis of this appointment means that Facebook will plan to develop a cryptocurrency-based payment platform.
As Facebook began hiring more and more cryptocurrency developers, the social media giants digital currency plans began to emerge, first reported by The Wall Street Journal, followed by other details related to Facebooks digital currency also began to flow out. At that time, Facebook intended to turn the instant messaging application WhatsApp into a cryptocurrency remittance tool, and was preparing to launch a pilot in the Indian market, but it failed in the end.
official release
In June 2019, Facebook officially announced the launch of the digital currency Libra, and also disclosed in detail the specific structure of the project.
Initially, both Libra and its blockchain were backed by the Libra Association, a consortium of 27 large companies independent of Facebook. According to Facebooks plan, they will build a digital currency wallet called Calibra (now renamed Novi) for Libra, and will support independent governance voting, but this method will allow Facebook to benefit from the digital currency Libra. profit.
But since then, the Libra digital currency plan has not developed as expected. By the end of 2019, some initial members of the Libra Association began to choose to leave, including Visa, Mastercard, PayPal, eBay, Stripe, Mercado Pago, and Booking Holdings. In the end, Facebook had to rebuild the Libra Association, which also attracted some new members.
At the time of the announcement, the Libra project also faced a number of regulatory hurdles, including that the US Senate and some European regulators did not support Facebooks issuance of digital currency. For Libra, 2020 has not been smooth, and it has not been released as planned, and they have basically chosen to remain silent throughout the year.
rebranding
In December 2020, Libra suddenly announced that it would be renamed Diem and confirmed that it would be launched in early 2021. At the same time, the original Libra Association was also renamed Diem Association. Currently, the rebranded Diem project is working with the Swiss Financial Market Supervisory Authority (FINMA) to obtain a payment services license, which, if all goes well, will allow it to operate in certain territories.
In order to obtain regulatory approval, Diem Association has recruited several key figures to lead the project, such as:
Former Microsoft and VMware veteran Dahlia Malkhi as CTO;
Former HSBC executive Christy Clark served as a staff advisor;
Former U.S. Attorney Steve Bunnell serves as chief legal officer.
Other appointments include Kiran Raj as executive vice president of growth and innovation and deputy general counsel, James Emmett as managing director, Sterling Daines as chief compliance officer, Ian Jenkins as chief financial and risk officer, and Saumya Bhavsar as general counsel .
Judging from the work experience and industry background of these new members, they are likely to help the Diem project enter a new phase and address regulatory challenges while ensuring organizational independence.
The organizational structure of the Diem Association has not changed. Except for a group of members who left in 2019, the current members as of December 2020 are shown in the figure below:
Diem token economy
Diem has been confirmed as a stablecoin, and like Tether and other stablecoins, will be backed by traditional assets. If early plans are followed, Diem will be pegged to government securities and fiat currencies of various countries. According to a new report from Fortune, the Diem token will be fully backed and pegged to the U.S. dollar.
If it is pegged to the US dollar, it means that the market value and circulation of Diem may not be fixed, and the Diem Association can mint tokens when the Diem reserve increases, and can also destroy tokens when the reserve decreases. So far, there is no accurate data on the circulation of tokens issued when Diem is launched.
However, if we make a conservative estimate: for example, assuming that 5% of Facebooks 2.7 billion global users have purchased Diem tokens worth $50, then the total market value of Diem will reach $6.7 billion, which is enough to make Diem an The top five cryptocurrencies in the world.
Commercial Support and Exchange Support
So far, we don’t know which cryptocurrency exchanges will support Diem. If more exchanges support Diem transactions in the future, then more users will buy the token, which may further push up its market value. On the other hand, if the Diem Token Smart is used through the Diem App, then it is unlikely to attract the attention of the crypto community.
However, according to the information disclosed in the Diem white paper, the project is working with “a number of fiercely competing cryptocurrency exchanges” in order to allow more users to freely buy and sell Diem tokens. As of December 2020, no cryptocurrency exchange has explicitly endorsed Diem, but as members of the Diem Association, Coinbase and Xapo may offer some support.
In addition, it is unclear what practical applications Diem will have, and no major companies have announced support for Diem transactions. However, it should be noted that some companies in the Diem Association may accept the token, including Shopify, Spotify, and Uber, which are well-known global companies, and they all have the possibility of accepting Diem tokens for payment.
It’s worth noting that Facebook hasn’t announced until now whether Diem will be used on its website, mobile apps, or other affiliated products.
Is Diem a centralized digital currency?
The Diem blockchain is powered by a set of validators who confirm transactions based on Diems LibraBFT consensus protocol, which ensures that no one participant (including Facebook and Novi) can wield too much power over Diem.
But it is undeniable that the Diem blockchain is still controlled by a small group of validators. Although Diem has always promised to achieve global financial inclusion, they must comply with regulations, which means that the Diem Association will likely be able to list some addresses. The blacklist will also prevent token transactions that violate relevant regulations.
If this is the case, Diems design method may run counter to the original intention of blockchain technology, because Satoshi Nakamoto originally designed Bitcoin to provide people with absolute financial freedom and unstoppable transactions.
