What is Diem (Libra)?

What is Diem (Libra)?

What are Diem and Libra?

Before mentioning Diem, Libra must first be studied, along with its eventual transition to the current Diem.

What is Libra?



Before Diem, Libra was what the coin was initially recognized as. Its white paper was released on the 18th of June, 2019, by the large social media platform, Facebook.



Libra was aimed to become a stablecoin with ultimate aspirations of becoming a widely used medium of exchange with blockchain technology as its back-end supporter.



At the time, Libra was well-received as its numerous supporting partners were lined up by some of the largest financial institutions in the world, namely, Mastercard, Visa, eBay, Stripe, and PayPal. Unfortunately, the reality that was present was that, due to the lack of proper regulation in various countries, the partners all eventually withdrew their registration.





The Difference between Diem and Libra



On December 1st, 2020, the Libra Association changed its official title to the Diem Association with the intention of speeding up the process of being legitimately regulated. The name change was itself a plan as the team believed that the public would forget the past that revolved around the name Libra.



However, the decisive strategy of changing its name to Diem still ultimately took regard to abide by legislative advice, which was to separate its association with Facebook to provide the public a higher sense of security and privacy.





What is Diem?



Libra’s name change eventually led the project onto different aspirations. Pre-change, Libra was projected to become a currency capable of being a medium of exchange. This goal raised dissatisfaction from numerous financial and legislative institutions. However, in contemporary times, Diem has ambitiously projected itself to not replace the fiat currency, but rather become a digital asset-backed by governmentally-issued currencies, like the USD or Euro.



Hence, Diem has become a stablecoin with pegging qualities much like Tether (USDT) and functions on the Diem blockchain within its own wallet, Novi.



Though Diem is recognized as a means of payment, its blockchain system is also adept in allowing developers to create programs, applications, and smart contracts, similar to Ethereum.



The Diem blockchain is validated by users (nodes) that are part of the Diem Association, which verifies the correctness of transactions and completeness of blocks.



Diem’s current effectiveness on the testnet is around 6 - 24 transactions per second, which has been recognized to be far less efficient than blockchains found in other payment networks like Visa and Mastercard. However, when it is officially released, Diem is designed to be able to handle approximately 1,000 transactions per second.





Is Diem centralized?



The Diem blockchain is verified by a small committee of individuals selected by the Diem Association. Though Diem has made promises regarding their compliance with regulations issued by financial institutions, their centralized system is still ever-present, which may raise suspicions over any plausible internal rejection of transactions or blacklistings.



Therefore, because of this systematic centralization, Diem has been established to be contrastingly different from the initial goal of the Bitcoin blockchain, which was to provide financial freedom on the basis of decentralization and transparency.





Conclusion

Libra, founded in 2019, was introduced by Facebook as a system utilizing blockchain in the efforts of storing and validating transactions with the ultimate goal of becoming a medium of exchange.



After changing to Diem, the blockchain technology was still found present, however, it functions on a permissioned basis, differentiating from Bitcoin and Ethereum, which do not have a central authority maintaining and controlling transaction verifications. It is because of this that many believe that Diem is a centralized network, rather than a decentralized one.





Reference:



Crypto briefing, Coindesk, The Guardian.com, Business insider, Diem White paper

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