The Diem Dollar is a new cryptocurrency from the Diem Association. If you associate the term cryptocurrency with Bitcoin, you’ll be surprised to find out that the Diem Dollar and Bitcoin don’t actually have a lot in common.
Here are some key facts about Diem and how it works.
Diem is a Stablecoin
Stablecoins are digital currencies with value directly tied to a stable real-world asset. In the case of Diem, the Diem Dollar is pegged to the US Dollar 1:1.
As a result, Diem is a lot more stable than many other forms of cryptocurrencies and the value of a Diem Dollar won’t fluctuate wildly based on coin investment and investor speculation. The price of a single Diem Dollar will only change based on the price of the US Dollar.
Diem is a Centralized Payment System
Unlike other cryptocurrencies, Diem is a centralized payment system. That means it isn't controlled by a network of independent users, rather all Diem transactions are reviewed and approved by a centralized entity. This makes it a lot more similar to fiat currencies like the Dollar or Euro which are overseen by organized financial institutions.
Diems are overseen by the Diem Association –– a consortium of 27 big tech companies which make up its founding members. Its most notable members include Facebook, Spotify, Coinbase, PayU, and Checkout.com. One of the most important roles of the Diem Association is to oversee the Diem Reserve which protects users’ funds by ensuring they are backed 1:1 to the US Dollar with cash equivalents.
Diem Uses Blockchain Technology
Like all other cryptocurrencies, Diem is built on the blockchain. Blockchain technology allows users to make financial transactions which are far more secure and transparent than traditional banking methods. The blockchain allows for simplified financial exchange without the need for the middleman, making exchanging diems will be a lot faster compared to exchanging government-issued currency.
While blockchain technology has many benefits, its primary advantages are that it allows for much safer, quicker, and easier financial transactions. For example, when you make a bank transfer both the sender and the receiver have to agree on the transaction which can take up to a week with traditional banking services. Using the blockchain, Virtual Asset Providers can communicate with one another instantaneously to approve transactions, cutting down transfer time significantly. Here's our site for Diem Blockchain transactions.
Diems Are Stored Using a Digital Wallet
A digital wallet, or cryptocurrency wallet is a service that is used to digitally store your account’s private keys. These keys can be used to access your digital funds and approve transactions. A digital wallet interacts with the blockchain on your behalf to make and approve requests for financial transactions.
A digital wallet like Facebook’s Novi allows you to safely send and receive digital currencies while ensuring access to your digital funds are tightly safeguarded. Novi promises instant transactions and “no hidden fees” for cross-border money transfers and local payments. Anyone can send and receive Diems using the Novi wallet, but to become a Novi customer you’ll need to show a verified, government-issued ID.
To learn more about Diem, including what it is and how it works check out more articles from the First blog.