While most cryptocurrencies are shrouded in a veil of technical terminology and blockchain know-how – the Diem Coin, also known as the Diem Dollar is a cryptocurrency that’s fairly straightforward to understand.
Simply put, Diem is a centralized digital currency that can be exchanged online with friends and family. It can also be used to make purchases from online merchants using just a mobile phone and an internet connection.
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In this beginner’s guide we’ll learn everything you need to know about what Diem coin is, how it works, and why you should start using it today.
What is Diem?
Diem is a cryptocurrency. Cryptocurrencies are a form of digital money with no physical equivalent. Diem works similarly – it is a kind of currency that can be exchanged digitally. Like any currency, Diem Coins can be sent to friends and family or be used to pay for goods and services online.
As Diem grows in popularity, more and more online stores will begin accepting Diem as a payment method. Very soon you’ll even be able to pay for your morning cup of coffee in a physical store using Diem.
The original idea behind Diem came from Facebook but today the Diem Dollar is overseen by the Diem Association, a consortium of 27 member organizations that run the day-to-day operations of the Diem Network.
The main mission of the Diem Association is to make Diem a free, transparent and secure way for people to exchange money that is accessible to anyone, anywhere.
How Does Diem Work?
Now that you have a better idea of what Diem is conceptually, let’s take a closer look at how Diem works on a technical level.
The Diem Dollar is:
- A stablecoin
- Backed by the US Dollar 1:1
- Exchanged on a permissioned blockchain
Although Diem isn’t a government-issued currency, it still holds real-world worth. You may be wondering how, so let’s take a minute to break down the technical and monetary structure of the Diem Dollars in fairly simple terms.
Diem is a Stablecoin
To begin with it’s important to understand that unlike Bitcoin or Ethereum, Diem is a stablecoin. A stablecoin is a type of cryptocurrency whose value is tied to an outside asset that stabilizes its price. The asset can be gold, precious metals, or in the case of Diem, a government-issued fiat currency.
As a stablecoin Diem’s value is pegged directly to the US Dollar. That means that the value of a Diem Dollar is determined by the value of a US Dollar. Very simply, 1 Diem Dollar is equal to 1 USD. Since Diem is a stablecoin, its value doesn’t fluctuate wildly like many other types of cryptocurrencies. While the value of currencies like the dollar can fluctuate gradually over time, day-to-day it remains relatively stable making it a reliable stable asset.
Most importantly, Diem Dollars maintain their value because they’re backed by funds in the Diem Association’s Reserve. Every Diem Dollar in circulation is protected by cash and cash equivalents secured by the Diem Association. In other words, you can redeem Diem whenever you’d like without having to worry about them losing value.
Diem Runs on the Blockchain
Like many other cryptocurrencies, Diem transactions take place on the blockchain. For non-techies, the blockchain can seem like a daunting topic. Without getting into the technicalities of blockchain’s internal structure, it’s important simply to understand that a blockchain is essentially an algorithmic network. This network works like a public ledger that maintains records of every transaction made.
The blockchain ensures transactions are safe and secure by encrypting each block and assigning it an ID. This ensures that transaction data remains consistent and transparent for all. While there are many ways to use the blockchain for transactions, including open and closed blockchain networks, Diem’s blockchain runs on a permissioned blockchain.
This means that the Diem Network allows access only to authorized participants such as wallets, exchanges, and PSPs that have been vetted by the Association. The Diem Network was built this way by the Diem Association in order to maintain oversight of transactions that take place on the network. This helps to not only prevent fraud but also ensure regulatory compliance with local governments and localities.
How to Start Using Diem Coin:
As soon as Diem launches you can start using it with just a few simple steps.
- Create a Diem Account
In order to make an exchange on the Diem Network, users must first undergo a verification process by presenting a valid government-issued ID. Once approved, you’ll be able to start exchanging Diem Coins with friends and family, or make online purchases from merchants that accept Diem payments on their website. A Diem account can be created using a digital wallet such as Novi.
2. Get a Digital Wallet
A digital wallet is an essential tool for easily using and exchanging cryptocurrencies. It not only stores your wallet’s private keys but also protects your cryptocurrencies from fraud and theft. While there are several digital wallets that can be compatible with Diem, the easiest way to send and receive Diem Dollars right now is to use the Novi wallet. Novi is a digital wallet that comes in the form of a mobile app that’s currently offered in selected countries.
3. Buy Diem Coins
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With a digital wallet like Facebook’s Novi, you can buy Diem Dollars, send them to friends and family, receive money, and make online payments. Through the Novi app, you’ll also be able to redeem your Diem Dollars into your local currency and transfer them to your bank account.
Why Use Diem Coin?
1. Diem Makes Money Transfers More Effective
The primary goal of Diem is to make monetary transfers faster, cheaper, and more accessible. Traditionally, when sending money to friends and family the transaction would be processed through a number of middlemen including your bank. Through this process, you decide how much money to transfer, the bank charges a transfer fee, and the money reaches the receiver only after 1-10 business days – depending whether the transfer is local or international.
The reason why it takes so long for the transfer to process is that your bank and the bank of the receiver have to agree on the details of the transaction. As for the transfer fee, this is one of the key pain points globally, as banks tend to charge high fees particularly for international transfers. But when sending money digitally in the form of a Diem, there is no bank involved. The money you transfer goes straight from your wallet to the receiver’s wallet with no intermediary. For you, this translates into:
- Faster Transfers
- Cheaper Financial Transactions
- More Financial Transparency
Transferring money through the Novi wallet is free for the most part. If there is a fee, it may be miniscule and it will always be disclosed before the transaction is approved. Money transfers using Diem are also instant. The money that you send to someone can arrive in their Novi wallet in a matter of seconds.
2. Diem Is Safe and Secure
The founders of Diem know that many people are wary of using cryptocurrencies for many reasons including security concerns. But with all the security practices built into the Diem payment system, that’s not something you need to worry about.
The Novi wallet has built-in fraud protection that ensures your financial details stay safe and secure. There is also a dedicated protocol for reporting fraud and customer service that’s on call around the clock to handle any concerns.
3. Diem is Easy to Use
Compared to other cryptocurrencies like Bitcoin or Ethereum, Diem coin is a lot easier to understand. Its value doesn’t fluctuate wildly, there is no mining involved, and it’s not a currency that you can invest in. It’s just a simple stablecoin backed by USD.
Using Diem is also a lot easier. Although you can buy Diem Dollars on major crypto exchange sites, you can also simply get them through the Novi wallet. Novi is a very straightforward app that makes it easy to get Diem Dollars, send money, receive money, and redeem your Diem dollars.
Check Also: Why Diem is Better Than Bitcoin
Using Diem is free, quick, and easy. Since the Diem Coin can also be integrated into social apps like Facebook’s WhatsApp and Facebook’s Messenger, sending Diem can be just as easy as sending someone a text message. And as long as it is available in your country, registering for a Novi wallet takes just a few quick minutes.
To learn more about Diem and how it works, check out First’s extensive Knowledge Base library which has more lessons on how to use Diem for techies and non-techies alike.