Facebook Libra – Diem Decentralized or Centralized, and More
The Facebook Libra (renamed Diem) is an expensive system proposed by Facebook. It is based on a licensed blockchain that is expected to power an ecosystem for digital payments and other financial services.
Its coin, called Diem dollars (formerly Libra), resolve to be backing by a basket of stablecoins and will launch in 2021.
What is Facebook Libra?
- Here Libra (renamed Diem) is a blockchain-based payment system proposed by Facebook in 2019.
- Its goal is to offer financial services to people without a bank account.
- Its formation members include Morgan Beller, David Marcus, and Kevin Weil.
- Here the launch was initially planning for 2020 but was delaying for various reasons and is likely to occur in 2021.
- Libra will be ruling by the Libra Association (renamed the Diem Association).
- An independent association organization based in Geneva, Switzerland.
- Followers comprise various companies from the blockchain, technology, payments.
- Telecommunications, venture capitalists, and non-profit sectors.
- Here members of the Libra Association are accountable for governance decisions.
- Oversee the Libra payment system’s operation, schemes built on the Libra blockchain, and award grants.
- Here Facebook aims to have 100 members in this association before its launch.
Is Diem a Cryptocurrency?
- Fine, Libra is based on blockchain and uses crypto technology.
- But, the term cryptocurrency generally implies specific properties Libra does not have.
- However, if you want to read about these properties in more detail, we have discussed them in our detailed cryptocurrency tutorial.
- In short, as far as Libra is anxious, it would be more accurate to call it a digital currency.
How Will Diem Work?
The Libra Blockchain (renamed Diem Blockchain) is a lawful blockchain that forms this payment system’s backbone. So how is it dissimilar from other blockchains?
- We frequently talk about how blockchains like Bitcoin or Ethereum are permissionless.
- However, it means that anyone with an internet connection can freely access them, transact with them, or build on them.
- Here is no one (or anything) regulatory access. But, this is not the situation for a licensed blockchain.
- Here to use it, you will need the permission of whoever owns the network.
- Or, extra specifically, the applications you use will require special access.
- Libra is a permissioned blockchain also income that it won’t use mining or staking to validate transactions like many other blockchains.
- In its place, it will rely on a set of authorized validators (members of the Libra Association) to validate the transactions.
- Giving its creators, Libra can transition to a proof-of-stake (PoS) system after the first five years.
- But, this is a long time in such a fledgling space.
- However, they explain their choice in the Libra white paper. There is currently no permissionless system supporting billions of people transacting on it from his perspective.
Is Diem Decentralized or Centralized?
- According to many in the blockchain space, authorized blockchains cannot be.
- They are decentralized as their permissionless counterparts and are more like a traditional corporate database.
- Here Libra is not resistant to censorship like Bitcoin and other cryptocurrencies in this sense.
- Meanwhile, these validators must be members of the Libra Association, and the network could be relatively centralizing.
- Happening the other hand, regulatory and examining which applications can interact with the distributed ledger can be advantageous.
- E.g., it may be easier to exclude malicious apps and scams.
The Libra Payment System
The Libra payment system (renamed payment system Diem) supports multiple stable currencies to a single currency linked to fiat currencies such as USD, EUR, GBP.
- You may already know this effort is similar to stablecoins, as their value is deriving from the Libra Reserve reserve.
- This reserve comprises cash, cash equivalents, and short-term government securities.
- Here the Libra payment system will also support a multi-currency currency called Diem Dollar (formerly LBR).
- It combines all these other stable coins and is backing by a basket of assets that ensure its value.
- However, you could think of it as a stablecoin of stablecoins (and possibly other assets, like securities).
- However, the idea is that these various forms of collateral could protect you from volatility.
- Here is an essential aspect of something that purports to act as payment.
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