Libra digital currency, which is also known as Facebook’s currency, in December 2020 Diem It was renamed and left the crypto world altogether in January 2022. The goal of Facebook (Meta Company) was to provide a global blockchain-based cryptocurrency that could Make it possible to transfer money around the world with the ease of sending an email. Libra was supposed to be like digital money in people’s mobile phones and anyone could use it to pay for their expenses and purchases. In this article from Valx, everything you need to know about Facebook’s digital currency Know that we will pay.
How was the mechanism of digital currency diem (diem)?
The Libra payment system, or diem digital currency, was based on a private blockchain. Now what does this mean? Take Bitcoin, for example. The Bitcoin network is a public blockchain, which means that anyone connected to the Internet can freely access this cryptocurrency, transact with it, code on its network, and no one has any control over it. But there are some blockchains that require permission, and in order to use them, permission must be obtained from whoever controls the network, which was the case with Libra.
The Libra blockchain had three basic features:
1. Libra team from language Programming Move had used Move is a new programming language designed to implement arbitrary transaction logic and smart contracts on the Libra blockchain. This programming language had high security and was very convenient for developers to use.
2. Libra blockchain from the method Consensus based on Byzantine fault tolerance (BFT) was used, which was designed with the aim of facilitating the consensus process between the nodes confirming the transaction. This consensus method works properly until about 67% of validating nodes in the network are valid. Also, this consensus protocol is more scalable compared to the Proof of Work (POW) algorithm, and its energy consumption is much lower.
3. The Libra blockchain was in the form of a single data structure in which the entire history of transactions was recorded, and transactions were not stored in separate blocks. Additionally, the Libra blockchain pseudo-anonymous and allowed users to have several different accounts.
As we said, Diem digital currency used blockchain technology, but since it was not fully decentralized, it was not considered a real blockchain currency and only members of the Libra community could access the ledger of transactions. The Libra Association was a non-profit organization formed by Facebook and its partners. In fact, this association has 28 large and well-known organizations, such as Mastercard, Visa, eBay and so on, and Facebook, like the rest of these organizations, had only one right to vote. This association had two main tasks:
- Managing and monitoring the Libra network
- Managing Libra’s backing reserves to maintain its stability
Of course, this association did not last long and not long after its launch, some of the biggest investors of this project lost their trust in it. Seven of the original 28 members (25 percent of investors) withdrew before the forum’s inaugural meeting in Geneva. The withdrawal of these companies from participating in the Libra project had a lot of losses for this association because the companies that left were specialized in the field of payment and money transfer technologies.
Who could become a member of the Libra community?
According to the white paper of this project, the initial members of the council, who were the founders of the digital currency Libra, acted as initial nodes. In order for an institution to become a council member at the beginning of its work, it had to invest at least ten million dollars in the project through the purchase of the Libra token. In this way, Libra digital currency would be converted to backed Libra at the time of network launch. Every ten million dollars of investment had one voting right, and investors had to act as a node confirming transactions to have voting rights.
Over time and with the arrival of new members, that is, those who made the minimum amount of investment and acted as validating nodes, the network, by going through specific stages of technical and non-technical development, from a licensed public platform to a public platform without The license was converted. Therefore, the Libra protocol was limited in the number of validating nodes and council members for the first few years. The initial goal was that in the fifth year, at least 20% of the voting power in the Council will be allocated to new nodes that have joined the association through the purchase and deposit of Libra and were not among the initial investors.
What was the purpose of Libra digital currency?
Facebook’s digital currency was supposed to be a simple way to exchange currency around the world. Also, with the support provided by the crypto activists for Libra, this cryptocurrency was supposed to become a stable and stable currency (Stable Coin). For example, in the whitepaper of the digital currency Libra, one of the main problems that were supposed to be addressed was the high cost of transferring money for residents of developing countries.
In developing countries, remittance services are very expensive, and as a result, these costs make things very difficult for people who are not in a good financial situation. Collecting money in such countries is not easy at all, and if the property of a person who is not in good financial condition is stolen for any reason, that person loses almost everything.
Many people don’t always have access to traditional banks, but hey, almost everyone has a cell phone! The goal of Libra digital currency was to become a mainstream cryptocurrency that could be used by anyone, anywhere. Libra wanted to provide better, safer, cheaper and more accessible financial services to everyone by charging a much lower fee than other money sending services, through blockchain technology and monetary value stabilization.
How was Dim digital currency different from other cryptocurrencies?
One of the factors that distinguished diem from other cryptocurrencies was that it was backed by real assets. The point is that many digital currencies are not like this, and for that reason, they do not have guaranteed stability and value. So naturally, in terms of stability and guarantee, they could not be compared with Libra digital currency.
Although there are other stablecoins backed by real assets right now, most do not have the power of Libra’s backing group (Visa, MasterCard, eBay, PayPal, etc.).
Diem’s volatility was low due to its low fees and real asset storage, making it a more realistic cryptocurrency compared to many other cryptocurrencies. For example, Bitcoin, which is the world’s first cryptocurrency in terms of market value, was intended to make transactions easier, but instead, it became more of a type of asset that only keeps its value higher and higher.
What problems did Libra digital currency have?
The first and most important problem of the Libra digital currency is the issue Focus It was. As we said, in the Libra blockchain network, the nodes validating transactions and implementing smart contracts were 28 members of the Libra community, where all important decisions were made in this community. Also, the institutions that wanted to be added to this association had to be approved by its current members. In addition, each member’s voting rights were determined based on his investment in the project. As a result, members could easily disapprove transactions that they had problems with for any reason. So it can be said that the Libra blockchain is neither open source nor resistant to censorship.
The next problem of Libra digital currency, support It was that it was kept and managed centrally. so that it was completely at the disposal of the members of the Libra community. Also, the interest from bank deposits was also available to the members of this association to use as they decided. Furthermore, there was no guarantee that the backing reserves would not be used in the interests of the members of the Libra community. (Similar to what happened to Tether before).
The third problem of my Libra currencyTransaction tracking mine Was. According to what was said in the Libra whitepaper, it would be possible for law enforcement authorities to trace transactions for illegal activities, and this would put people’s privacy in question.
Libra digital currency, a dream that did not become reality
Diem digital currency is considered a failed project and the interesting thing is that the reason for its failure was the involvement of Facebook and other big organizations. Because it actually allowed governments (both the United States, foreign organizations, and regulatory bodies) to feel uncertain and concerned about money laundering, risk to user privacy, bypassing capital controls, and other financial risks. and postpone the project many times. Ultimately, the Libra project failed before it could be seriously implemented. Of course, Facebook is currently working on its Metaverse project and we have to see if Mark Zuckerberg’s dream will come true this time.
What is the digital currency Libra or Diem? Familiarity with Facebook’s cryptocurrency for the first time on Wallex blog. appeared.
