Facebook’s Libra: to be or not to be?

Mar 24, 2022
6 min read

This blog post will cover:

  • What is Libra?
  • What are the advantages of Libra?
  • What are the disadvantages of Facebook’s Libra?
  • The launch did not go as was planned
  • New name, new life
  • Why does Facebook need cryptocurrency?
  • How to use Diem?
  • How to buy Diem?

What is Libra?

Libra is a stablecoin, which is a part of the Libra payment system created by Facebook. Facebook has noticed that a sufficient percentage of people do not use banking services. According to Libra’s white paper, there are around 1.7 billion adults around the world who are not participating in the financial system. Since they are active internet users, cryptocurrency gives an opportunity to cooperate with them even though they do not use banks for different reasons. So the general plan of Facebook is to create an alternative financial network. This is how the idea of Facebook’s Libra appeared.

What are the advantages of Libra?

Developers of this new payment system highlighted several problems of the Crypto World today. In the white paper it is said that one of the things that prevent mass adoption of crypto is high volatility and low scalability. In contrast to the existing system, Libra will bring solutions to these problems. Moreover, the new system is promised to be extremely easy to use and thus available to everyone. 

The new coin will have several features:

  • Availability
    Everyone who has a smartphone and internet connection will have an opportunity to use this payment system.
  • Stability
    Unlike other digital assets, this coin is backed by government currency, which makes Libra a stablecoin. This also means that this system will have digital equivalents of the U.S. dollar, Euro, and other currencies.
  • Speed
    The speed of transactions is expected to be very high no matter if assets are sent or received.
  • Scalability
    It is planned to form a helping community around the payment system.
  • Security
    This payment system is built on a blockchain, that provides a high level of security.
  • Open blockchain
    Libra has a global purpose, so the open blockchain is absolutely necessary here.

Libra is governed by the Independent Libra Association.

What are the disadvantages of Facebook’s Libra?

Even though the project looks fresh and interesting, there are some aspects that raise questions.

  • Decentralization
    Liba is not going to be decentralized. Unlike Bitcoin, for example, it will have a central authority.
  • Pegged to fiat
    Some people may see this feature as a disadvantage, others will argue that it is an advantage. In spite of that, it is important to understand that not all digital currencies are the same. This type will not provide users with anonymity, which is available with crypto.

The main ideological line of Libra is built on the people’s right to use the results of their work uncontrollably as they wish. Creators show a strong belief in a decentralized financial system, and that they can be the people who contribute to the development of something new. 

The launch did not go as was planned

The project should be launched at the end of 2019. However, Facebook met unexpected resistance from lawmakers. It turned out that Facebook was too influential and thus such initiatives were seen as a kind of direct threat to the state financial system. A number of government representatives from different countries expressed their concern that Libra could seriously disrupt the global financial sector. They also reminded that Facebook had been involved in a scandal concerning users’ data privacy before. There were no guarantees that it would not happen again.

New name, new life

On December 1, 2020 it turned out that the decision was made to rename Libra to Diem, which means a day in Latin. It is also known that earlier Facebook had changed the name of its digital wallet from Calibra to Novi. Novi will enable people to send assets using Facebook messenger and WhatsApp.
It is considered that rebranding was absolutely necessary to divide Facebook and its new creation. However, after the announcement about Libra becoming Diem, Facebook faced another lawsuit from the company with the same name.

 Facebook lawsuit
© tingeyinjurylawfirm / Unsplash

Why does Facebook need cryptocurrency?

The blockchain brings a lot of new opportunities for such a cyber giant as Facebook. It has lots of functioning apps and there are more to come. For example, Facebook owns a digital wallet. In the future it is expected to build more financial services and apps.
Undoubtedly, besides business interests, Facebook also follows its main concept to connect people around the globe. Pursuing this mission from the very beginning Facebook showed its desire to work together with the existing financial system in order to improve it. So basically Libra is based on the things that exist already, and does not compete with government currency.

How to use Diem?

In general Diem is a payment method. It is meant to become an easier to use alternative to the expensive banking system that exists now. Lower transaction fees will make it more attractive. The only thing needed for payments is a smartphone with the internet connection. If a user has a wallet, he/she will be able to exchange fiat money to Diem within a wallet. It will be possible to use Diem in a store or to pay for a cab. To pay with Diem should be as simple as scan a QR code or add a recipient to a list of friends.

How to buy Diem?

It will be very simple to buy Diem. Here is what should be done:

  • Sign-up on a wallet that will be available for purchase in the App Store and Google Play.
  • Go through the verification process that will ask for your ID and photo.
  • Purchase Diem right in the wallet using fiat money.

It is also possible that Diem will be listed on some exchange services, but this is unknown yet. The price of Diem will also be clear after the final announcement.

The idea of the new currency and payment platform rises very divergent feelings among Twitter users:

Now the release of Diem is scheduled for January 2021. However, it is still unknown when it is eventually coming out. This project seems to have the ability to change something in the financial world.

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