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Introduction – Facebook Libra
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.
June 18, 2019, was the day Facebook formalized Libra, its cryptocurrency with which the company intended to revolutionize payments worldwide. It designs to be accompanied by a virtual wallet named Calibra at that time, which would be available on Messenger and WhatsApp.
Libra was the name chosen by the popular social network for the launch of a new cryptocurrency that would revolutionize the market. Based on the blockchain, it would have equally secure and transparent transactions in the same way that occurs with Bitcoin or Ethereum.
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.
- Libra will be ruled 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 decentralizing 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 stable coins, 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 stable coin of stable coins (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.