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Facebook “Diem” Explained: How does Facebook plan to use this blockchain-based payment system?

“What exactly is Facebook’s Diem and what will it offer its 2 billion potential users?”

Recently, the media began reporting that the world’s largest social network was working on plans for a global digital currency. Facebook’s plans, however, were slowed down and redirected after a dispute with regulators around the world. The social network instead opted to strategize and launch a different global digital currency later in 2021, after rebranding the initiative as “Diem” (previously “Libra”).

Accordingly, the giant social network is set to launch an ambitious crypto-based payment system that is expected to enhance financial inclusion and reduce transaction fees. Although, some experts have questioned whether the technology will really achieve those goals, let’s review what “Diem” has to offer.

The Diem payment system introduction| Source: Diem.com

Its strategy revolves around the creation of a digital wallet called Novi. It will be a standalone app that will also link into Facebook’s products and will be able to convert your local currency into cryptocurrency and vice versa. It is essentially a rebranding of Libra cryptocurrency and Calibra wallet, which the company introduced in June 2019 but had to put on hold following significant opposition from regulators.

What is Facebook planning to do with it?

Having a cryptocurrency backed by a company like Facebook with its reach and power opens a world of opportunities for users around the world. Diem is also impressive because it offers several and unique opportunities in this blockchain era. Below are some ways Facebook plans to use Diem:

1. For E-commerce

Facebook’s primary goals are to provide better economic opportunities and globally effective e-commerce. Considering both Diem Association and Facebook have at least three billion global users, it becomes even more feasible.

Since Shopify is also part of the Diem Association, it will help ensure easy coin integration for e-commerce sites. Diem will be implemented by every company that runs B2C services — that’s ease beyond compare.

2. Money Transfer / Remittance

Transferring money and remitting money should be easy and stress-free for users. This project not only facilitates easy transactions but offers a faster speed of transactions and lower fees than those charged by financial intermediaries.

Money transfers through traditional financial intermediaries, especially overseas, could soon be a thing of the past.

3. The cross-border payment system

With a 6.5% cross-border fee, Diem can help to lower the cost of sending funds. The fact that Facebook Diem is a cryptocurrency with a full set of payment systems means it is almost completely digital. Its database will pre-program transactions. It is expected that operating costs will be dramatically less than those incurred through traditional remittance channels. As a result, cryptocurrency users will have a lower cost of use and a larger market share.

4. Governance

One of the reasons for Diem’s popularity is its governance structure, which enables the cryptocurrency to be used in governance. In this way, the project can serve as a model monetary alternative for the passage of financial flows within governance.

In addition to a detailed overview of grants and expenses in the public domain, it will guarantee benefits for the public. Besides, Facebook does not have sole control over Diem, so it is impossible to misrepresent Diem against the public interest.

Conclusion

The cryptocurrency initiative by Facebook is an impressive one. It is in fact, a bold attempt. The influence Diem has on the Internet industry makes me believe that Diem will create a new area for cryptocurrency and we will see great changes later on. No doubt, Diem will help revolutionize the current payment system.

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