[UPDATED] Facebook Has Announced Its L̶i̶b̶r̶a̶ (now Diem) Cryptocurrency: Why This Is Important To You

Bitcoin and Venmo have been navigating their way through the waters of financial transactions, but now here comes Facebook’s L̶i̶b̶r̶a̶ (now Diem) cryptocurrency — and it’s being seen more as an attempt to introduce a new, Internet-age U.S. dollar than just another digital fad.

Now scheduled to launch in 2021, the social media behemoth has confirmed it has been working on its own cryptocurrency to be called Diem. Facebook has released its white paper that explains Diem and discusses the developer testing site, which will work out the technical issues with Diem’s blockchain system prior to the cryptocurrency’s public launch in 2021.

With Diem, Facebook users will be able to conduct financial transactions such as making online purchases or sending money to friends and family. The fee per transaction is virtually zero, and you have the choice of cashing out your Diem cryptocurrency either by going online or via a local exchange such as a grocery store. Buying Diem is just as simple, and you can use third party wallet apps to spend it.

The ways Diem differs from the existing cryptocurrencies like Bitcoin can be summed up as follows:

· It is a less decentralized currency.

· It is backed by fiat currency.

· It has already partnered with major brands such as VISA, MasterCard, Uber, Lyft, Spotify, eBay, and PayPal, companies the earliest cryptocurrencies hoped to replace over the long term.


In terms of marketability, Diem connected with the Facebook brand, leads the pack in having a broader global market appeal. Projections are that by the end of 2021 there will be literally hundreds of millions of global users performing financial transactions as easily as sending an email. Its future is predicted to spur more interest in the cryptocurrency concept, prompting more development of the technology that will result in improved applications.

Facebook’s Diem announcement highlights an inevitable certainty — the big banks are in trouble. What banks have done for generations — serving as repositories for our hard-earned cash, making loans available to the general public, acting as the middleman in foreign currency exchanges, and processing the payments and transfers of money — holds an implicit trust from its customers. This is a trust that has been repeatedly abused, and there is clearly a shift towards moving away from banks to companies that will perform the same functions cheaper, faster, and easier.

The evidence is that there currently are a number of peer-to-peer (P2P) websites where borrowers and lenders can both negotiate the terms and conditions of their loans. PayPal and Google Wallet are just two examples where people can send money and make payments, replacing the need for the traditional bank. Diem is positioned to take the next, and perhaps final, step towards the dismantling of the big bank centralization model. By being able to hold customer’s deposits, Diem eliminates the need for a bank account altogether.

Photo by Johannes Plenio on Unsplash

This is more of an evolution than a revolution. Consider how the landline home phone has been largely replaced by the mobile phone. Younger generations have already begun to move away from bank accounts in favor of their crypto wallets. A decade ago this shift was barely a possibility, and with banks offering a pathetic .01% interest on savings and checking accounts, it is no wonder why the shift is gaining momentum. No one likes someone else to have control of their money, and banks have had a virtual monopoly on it for hundreds of years.

Why is this important to you?

As a matter of financial history, banks fail from time to time. Should Diem find its footing in the financial marketplace and be even a moderate success, your local bank potentially could find itself in the midst of a run — where people line up at the door of the bank to withdraw all of their money. Unfortunately, banks have very little cash on hand to pay even a small percentage of their customers in cash, meaning most people will have to wait to get their hard-earned money. How long that could take is anybody’s guess.

Forget about the assurances given by the banks that you have complete access to your deposited funds. During a run you will have to take what they give you — if anything. The Federal Deposit Insurance Corporation (FDIC), the organization that is supposed to be backing your money simply does not have enough money to pay out every customer deposit because much of it has already been lent out as home or business loans. You will get your money — eventually. The question is, what do you do until the FDIC catches up with the demand?

The truth is, any type of money or currency has some degree of risk connected to it. One type of currency that has historically held up during times of economic crisis is precious metals. We are talking about gold and silver — the REAL money.

If you are new to investing in precious metals, you may not completely understand the disadvantages paper money has when compared to gold and silver. What you need to know are the major reasons gold and silver consistently outperform cash as an asset.

· YOUR cash can be used by the bank for its own purposes. Amazingly, once you choose to deposit your cash into a bank account you lose your property right over it.

· Accumulating cash at home or in a safe deposit box is not a wealth building strategy. The reason is that once the government prints more money, which it can do at any time, you can see the real value of your money drop literally overnight.

· The paper-based economy of the United States has only been around for less than 50 years. Compare that to the international community that has accepted gold and silver as currency for more than 5,000 years.

· Gold and silver retain their value during stressful economic times because it is not a fiat currency. A fiat currency is one whose value is determined by the overall economic health of a country.

You can put your money in a place that reduces the risk in times of economic chaos, and one that preserves the value of your currency while providing opportunities for growth and income. Or you can hold on to your cash and hope for the best. The decision is yours… choose wisely.

Investment Strategist | Building Wealth With Silver — www.westhillscapital.com

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