Diem coin Facebook's new project
The idea behind the concept of libra coin, proposed in a report published in June 2019, but also the current diem conception is more or less similar.
The value of the diem coin would not depend on the supply and demand of the market, but would be backed by a reserve of financial assets, for each new currency, issued there would be a set of assets that support it, this backing known as the diem reserve, would have the objective of ensuring the stability of the daily quote.
Such a reserve would be composed of bonds and other relatively stable financial assets, as well as global currencies, such as the dollar, the euro, the yen, among others.
The plans to offer a global currency by the diem project have been modified, as the global libra currency as it was previously known, will no longer be released to the market, as an alternative the diem association, will create a series of stable coins.
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Single Currency coins
On the one hand, it will issue the so-called single currency coins, i.e., single currencies that fix their face value for a given currency, for example, they will most likely establish one for each currency, such as the dollar and the euro.
These stable coins will look a lot like other stable coins like tether or usdc, with the only difference, that there would be more varieties, there would be one diem coin for each major global currency.
Moreover, the diem association will also issue a so-called multi-currency coin, i.e., a composite of the other diem coins, which would make it easier to exchange between different currencies.
Object of the diem project
We must remember that the goal of diem is to achieve a global payment system, the stable coin that would function as a bridge between different currencies worldwide would bear the name of CDM and would be a neutral and low volatility option, for people and companies in countries that do not yet have a stable coin backed in their local monedas in the diem payment network.
That is to say that the most likely is that this currency is used mainly in developing countries, whose currencies are not widely used globally, for example, in most Latin American countries.
To adjust the price the diem reserve, is expanded or reduced according to the supply and demand of each diem coin in the market, i.e., there would be no fixed amount of diem coins in circulation.
Unlike many cryptocurrencies that have a limited supply, or that use mining to generate new coins, the supply of diem, would always be changing as needed.
The diem association would function as a kind of central bank, which would create new currencies whenever necessary, for example, if people demand diem, with a nominal value in euro diem coins would be created, in exchange for every euro used to acquire those currencies.