How Diem(by Facebook) Actually Becomes a Threat To The Current Financial System
Facebook, along with its so-called founder Mark Zuckerberg, has been plagued in recent years by numerous lawsuits, accused of unfair competition, poor management and even the sale of personal digital information of its users, both inside and outside the US. However, the social media giant stays almost intact and it seems that it is not giving up on launching its own digital currency, based on a blockchain network... they say.
Diem would operate as a digital currency, providing an alternative to the US dollar and other currencies managed by foreign governments. It was originally meant to be backed by a wide mix of currencies and government debt. But it's now meant to launch as a single coin backed by the dollar.
However, Diem will play a much more important role for Facebook than being an alternative to the US dollar and will try to make one of Facebook's most unprofitable applications profitable. Probably many of you are already using whatsapp and have noticed that when opening the application, the welcoming message that pops only for a second or so has the whatsapp by facebook logo. What many of you probably don't know though is that in 2014 Facebook paid no less than $ 19 billion to buy whatsapp.
At the time, as far as I can remember, whatsapp was going to charge its customers $1 a year to allow them to use the app, after the first year of grace in which they paid nothing, but after Facebook purchased the popular messaging app this small fee was removed, and the application became free, as Facebook and Instagram are. In reality, nothing is free in the online environment, this being just an illusion.
After six years in which Facebook has not produced anything, financially speaking, with whatsapp, an application that in India alone has over 400 million unique users annually, it seems like a business model a few years old, which was intended for the popular messaging app will be brought back to life, and Diem, Facebook's alleged future cryptocurrency, could be the "piece de resistance" from this equation. Not many years ago, the idea of paid messages on whatsapp circulated within the Facebook leadership, but it was abandoned, and recently it seems that Will Cathcart, head of Whatsapp-Facebook, is looking to put it into practice.
99% of the business revenues of Facebook come from advertising and it is clear that the whatsapp type of paid messages won't be love or Christmas messages, those ones you can send for free. What the leaders of the social media giant are following to make a reality are actually the advertising messages that advertisers would send to Facebook's customers, the ones actually paying for such messages being of course the advertisers.
Whatsapp, without a doubt is a database and not long ago, as far as I remember although I am not a facebook, instagram or whatsapp user, there was talk of linking the three apps between each other, owned by the same company, which now makes a lot more sense than just being able to send content between the apps. By connecting all these three applications, faceboook will be able to manage its database and its users much easier, and targeted adds will be even easier to achieve, being at the same time much more efficient, but where does Diem (which in Latin means “Day”) falls into place?
The way I see it, Diem will be the currency of purchase and exchange of the gigantic social network. For example, advertisers would have to first purchase Diem via US dollars/or other currency from Facebook, just to be able to afterwards get their hands on whatsapp paid advertising messaging packages, and in turn it is likely that future buyers of their products will have the opportunity to buy those products using Diem as well, if they do not want to go through countless and tedious online shopping processes using a Visa or Mastercard.
All they will have to do is buy these digital coins, store them in the virtual wallet provided by Facebook and use them for shopping. Diem, in my opinion, will not only play the role of competitor of the US dollar for online shopping, and as a currency, but will make profitable, four years after its acquisition, one of the most popular messaging app, owned by Facebook. It is not surprising that Germany, as well as America, are not happy with Diem and threaten with regulatory measures, considering the potential that this so-called cryptocurrency has.
Maybe Diem will not be a cryptocurrency in the true sense of the word, but it could disrupt the financial system as we know it, if it plays its game well in the crypto world. A rather plausible scenario that predicts that cryptocurrencies together with Diem could transform the financial system of almost any country into an almost totally useless one is the following, and that it can be easily applied to poor countries. Let's say we have person X who is online content creator, paid in cryptocurrencies, who also has a facebook account and a whatsapp one, being able to exchange his / her earned cryptos to Diem and pay for clothing, groceries and all sort of other services, to what extent would that person still be in need of fiat money/national currencies?
I would say that the needs to use the native national currency will become more and more limited in the case of such people. It will probably be impossible to pay for electricity or the internet at first using Diem, but at some point, there will definitely be companies that will make these payments on behalf of those people in exchange for commissions. This scenario highlights both the reason why governments and world banks are not in a hurry to embrace cryptocurrencies, but also why they are trying to prevent the launch of Diem, but moreover, they seem to be in a race against the clock in launching their own CBDCs.
Thanks for attention,