Diem Coin: What You Need To Know
The Diem saga started in 2019 when Facebook announced a new digital currency called Libra. The mission was simple yet ambitious. Facebook wanted to create a simple global payment system and empower billions of people who don’t have access to traditional financial systems.
Following a time of significant growth in the cryptocurrency sector, new coins were hot and highly anticipated. However, the project’s backer, Facebook, was already facing calls for regulation and antitrust measures, and the new technology purported to make significant changes to the banking system worldwide. So, naturally, there was early resistance to the project from regulatory authorities and traditional financial institutions. All of that resistance led to the project fizzling out.
In December 2020, the Libra Association announced a new name and committed to organizational independence from Facebook. Diem was born. The mission is “building a safe, secure and compliant payment system that empowers people and businesses around the world.”
This article explores the new cryptocurrency and whether you should invest in the project.
What Is Diem?
Diem is a new cryptocurrency project originally founded by Facebook but now under independent control by the Diem Association. The project’s objective is to enable universal access to financial services.
Developed on blockchain technology, Diem is secure, scalable and reliable. It’s open technology that anyone can build on and serve billions of people. Blockchain technology is a decentralized, secure and transparent database ledger system for tracking transactions. Diem built an open-source prototype called Diem Core to foster a global collaborative effort to advance the technology.
Good To Know
One key feature of Diem is that Diem Coins are backed by reserves, including cash and short-term government securities. These reserves make Diem a “stablecoin,” a type of cryptocurrency that attempts to maintain a stable price by linking its value to that pool of assets. That means stablecoins like Diem won’t experience the same volatility that other cryptocurrencies have seen.
The Diem Association boasts members from businesses and nonprofit organizations. Some notable members include Andreessen Horowitz, Shopify, Coinbase and Spotify.
Novi Financial, a Facebook subsidiary, is working on the first digital wallet for Diem. It’s unclear when the wallet technology will be publicly available.
What Is Diem Worth?
Because the cryptocurrency hasn’t officially launched, the coin isn’t on the market yet, so it has no market cap or price. It’s not clear what Diem will be worth when it hits the market.
For reference, here are some other stablecoins.
USD Coin, another new stablecoin, is also tied 1:1 to the U.S. dollar. This coin has a market cap of over $33 billion.
Binance USD is a Binance-native stablecoin also tied 1:1 to the U.S. dollar. Binance USD has a market cap of over $13 billion.
Should You Invest In Diem?
All investments come with inherent risks, and cryptocurrencies are no exception. Cryptocurrencies can even come with more risk than some traditional investments. The technology is in its infancy, and crypto prices are highly volatile.
That said, cryptocurrencies like Bitcoin have see all-time-high prices in 2021. PayPal now supports buying and selling cryptocurrencies. Apple may be considering cryptocurrency support. Cryptocurrencies have created millionaires and billionaires.
There are many good reasons for investors to consider investing in cryptocurrencies, but what about Diem, specifically?
Here are some reasons you may want to consider investing in Diem.
Diem Coins are backed by assets including cash, cash equivalents and very short-term government securities. Some analysts believe that stablecoins will be the future of cryptocurrencies, at least that which will drive mainstream adoption and utilization. Because tangible assets back them, individuals, businesses and investors can have the confidence that they can easily exchange Diem coins for local currency without difficulty. That means Diem will likely have greater liquidity and lower volatility than coins like Bitcoin.
The Diem Blockchain is the foundation of this digital currency. This technology boasts the latest advancements in security, privacy and transparency. Blockchain technology is decentralized, which means there isn’t a single owner or controller of the network. Validation techniques check each transaction to prevent fraud. All records on the ledger are accurate.
There’s an independent membership organization behind the project. The Diem Association is responsible for the governance of the network and the development of the project. A council comprised of one representative per association member governs the association.
This association oversees the operation of the payment system and makes sure that everything is safe and compliant. The members run the validator nodes that operate the blockchain and ensure the security and accuracy of the network.
Strategic Shift to the United States
Earlier this year, the Diem Association announced a partnership between Diem Networks US and Silvergate Capital Corp. Silvergate Bank will be the exclusive issuer of the Diem USD stablecoin. The association is undertaking a strategic shift to the United States.
Alan Lane, chief executive officer of Silvergate, said in a press release, “We believe in the future of U.S. dollar-backed stablecoins and their potential to transform existing payment systems.”
This move will simplify the plans for the Diem USD stablecoin because it no longer needs a payment system license from the Swiss Financial Market Supervisory Authority. Silvergate is already a California state-chartered bank and a member of the Federal Reserve.
Diem is a cryptocurrency designed to facilitate global financial access. Its mission to enable open, instant and low-cost movement of money seeks to empower people worldwide, including those who don’t have access to traditional banking.
The exact timing of the highly anticipated project is unclear, but the recent partnership announcement with Silvergate means that progress is being made. Many people expect a 2021 launch.
Here are some key takeaways:
- Diem is founded on open-source blockchain technology.
- Diem is a stablecoin fully backed by a reserve of assets.
- Diem Coins will support single-currency stablecoins (USD, EUR and GBP).
- An independent organization, the Diem Association, is responsible for governance, implementation and long-term strategy for the project.
Daria Uhlig contributed to the reporting for this article.
Data is accurate as of Oct. 10, 2021, and subject to change.
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- Diem Association. 2020. "Announcing the name Diem. Executive leadership in place in preparation for launch."
- CoinMarketCap. "Tether."
- CoinMarketCap. "USD Coin."
- CoinMarketCap. "Binance USD."
- Bloomberg. 2019. "Facebook Token Runs Into Instant Political Opposition in Europe."
- CNET. 2019. "Facebook's Libra cryptocurrency faces pushback from US lawmakers."