Earlier this month, Meta (formerly Facebook) sold its Diem cryptocurrency project to Silvergate Capital, a bank holding company. Here at Pontem, we are still big believers in the Move programming langugage and the broader vision of an open financial ecosystem. We are still working hard to create underlying infrastructure to help integrate the Move technology pioneered by Diem with the rest of DeFi and foster a global, inclusive financial system for the future. Let’s take a look at some recent updates to Diem.
While much of the public associated the Diem project exclusively with Meta, the project was actually run by The Diem Association. This consortium was backed by Meta, but also included other major technology companies like Uber and Shopify and powerhouse venture capital firms like a16z. Their focus was on integrating the world’s unbanked population (people who lack access to bank accounts and other financial tools). The Diem Association pioneered the Diem stablecoin, which was initially known as Libra, as a borderless cryptocurrency, value-backed by a basket of global currencies. However, due to regulatory concerns in the United States and elsewhere, Diem pivoted. In May 2021, the Diem Association partnered with Silvergate to issue a stablecoin backed by the US dollar. Silvergate is the same bank that recently acquired the assets related to Diem from the Diem Association for nearly $200 million.
The sale of Diem was driven chiefly by regulatory concerns in the United States. Diem CEO Stuart Levey wrote that it “became clear from our dialogue with federal regulators that the project could not move ahead. As a result, the best path forward was to sell the Diem Group’s assets.” In the statement, Levey struck a positive tone, noting that “a senior regulator informed [them] that Diem was the best-designed stablecoin project the US Government had seen.” He also added that the Report on Stablecoins issued by the President’s Working Group on Financial Markets had validated many of Diem’s design choices related to stablecoin issuance, illicit usage, and risk. The statement concludes by saying that while the Diem Association will wind itself down, Silvergate is poised to continue the project in-line with its original vision of using “blockchain technology to design a better and more inclusive payment system.”
Silvergate echoed these sentiments, emphasizing that the sale represents a new beginning for Diem. Silvergate noted in a press release that their bank “has gained deep familiarity with the network and developed strong appreciation for its potential to enable a Silvergate-issued stablecoin that will power the future of global payments.” They explained that they acquired Diem’s infrastructure, tools, and proprietary software. CEO Alan Lane clarified that they intend to use it to launch a stablecoin in 2022, as part of the company mission to create a regulated, scalable, dollar-backed stablecoin for international commerce and remittances.
In an interview with CNBC’s Jim Cramer, Lane emphasized that Silvergate would use Diem to expand the usefulness of stablecoins. “We think the potential worth is off the charts when we think about using the blockchain technology for payments and remittance,” Lane said. He also emphasized the quality of the engineering team that designed the Diem infrastructure Silvergate will use.
Silvergate has already established itself as the premier financial player in the crypto space, even being called the “go-to banker of the cryptocurrency world.” Start-ups and smaller projects have sought them out for years as a key investor and capital provider. They have also established themself as a leader in digital payments through their Silvergate Exchange Network (SEN). Unlike other banks which only process payments during typical weekday business hours, the SEN allows Silvergate clients to transmit money 24/7/365 using cryptocurrencies. Through software, the SEN powers payments on a number of other major exchanges, such as Coinbase, Gemini, Paxos, Circle, and Binance.
Silvergate has said that they intend to integrate Diem with the Silvergate Exchange Network to launch “a next-generation global payment system that is faster, easier to use and more cost-effective than existing solutions.” This suggests that there is a bright future for Diem. We are very excited to see how Silvergate uses the existing Diem platform to create a world-class dollar-backed stablecoin.
And that’s not the only exciting news from around the world of Diem. At almost the same time the Diem sale was announced, Meta announced that it was joining the Crypto Open Patent Alliance (COPA). This group, founded by Square, is dedicated to eliminating patent restrictions on crypto technology to encourage collaborative innovation. Members contribute their patents to a shared open-source vault, allowing other projects to build on their work. Meta joining suggests that they have continued ambitions in crypto and we are excited to see what they build.
Engineers who developed Diem and Novi (a crypto wallet) at Meta are also launching a number of exciting projects based on their previous work. Mysten Labs is headed up by Evan Cheng, former director of research and development at Facebook’s Novi financial products unit, along with three other former colleagues. Mysten is developing scalable Web3 infrastructure based on the Move programming language, which was also created by Meta for Diem. Mysten’s core innovations are Narwhal, a transaction processing method, and Tusk, a consensus protocol, which together can achieve 160,000 transactions per second.
Another new project from former Diem creators is Aptos. They are picking up where Diem left off, designing a new Layer 1 blockchain which is also based on Move. The project has similar ambitions to Diem, emphasizing “absolute safety, extensible scalability, and credible neutrality.” In this way, they seek to solve the blockchain trilemma, by creating a new chain which is completely decentralized, secure from hacks and exploits, and truly scalable.
Additionally, Chainlink Labs hired Diem co-creator Christian Cattalini as a technical advisor. In his new role, Cattalini will focus on building “inter-blockchain messaging, data and token movements.” This could potentially introduce new use cases for existing Diem technology.
Pontem Network is building infrastructure for the Move ecosystem and future of Web3. Our Move-compatible Ethereum Virtual Machine, Move Virtual Machine, and experimentation and development tooling make it possible to start building for Move.