Diamond Standard Unlocks Barriers to Diamond Investment

Diamonds. Everyone knows they are precious gems, highly valued by practically every single person in the world they have proven to be enduring investments. They are in limited supply while demand for them never ceases, so they are a great store of value. And unlike many other types of assets, diamonds hold their value during periods of market instability. Meaning that investing in diamonds can provide a great hedge against inflation and other economic risks. However, despite their proven potential, investing in diamonds is overlooked and grossly under-allocated. Currently, only 1% of a $1.2 trillion global supply of diamonds is used for investment – 1%!

But why? Traditionally, investing in diamonds has required a high level of expertise and knowledge. Unlike investing in precious metals where there is a level of standardization, meaning a specific weight of the metal has an accepted price, diamonds can have wildly different values depending on their quality, size, clarity, and a myriad of other factors and characteristics. They are often very expensive to buy, and, as they are tangible assets, once you’ve purchased an amount, having a secure way of storing them can also be complicated and expensive. The diamond market itself has also historically been characterized by a lack of transparency, which has made it difficult for investors to evaluate diamond investments and assess their potential risks and rewards. Finally, diamonds can be illiquid investments, meaning that it may be difficult to sell them quickly if needed.

The team at Diamond Standard recognized this as a huge, missed opportunity and has worked diligently to remove these barriers, enabling much broader participation in diamond investment.

Diamond Standard on Hedera: Building Investor Confidence with Security, Trust, and Transparency

Diamond Standard developed a highly sophisticated, regulator reviewed, and fully autonomous process for taking the physical diamonds from source to tokenization with complete transparency at every stage using a variety of Hedera network services in the latter stages.

Diamond Standard initially obtains diamonds from a worldwide network of vendors, including smaller vendors that may not have the same access to the larger diamond market, giving them an equal opportunity to participate. Next, an AI system and machine learning algorithms are utilized to evaluate the cut, color, clarity, and weight (carats) of the diamonds to determine which ones will continue through the process. The selected diamonds are then sent to the International Gemological Institute (IGI) for final inspection and certification before they are organized into one of two standardized collection types and securely packaged in individual tamper-proof containers. These containers are either referred to as Diamond Standard Coins or Diamond Standard Bars, where all “Coins” have the exact same value and all “Bars” have the exact same value, meaning they can each trade at the same price, which is critical for investor confidence. Each of these containers has an embedded computer chip that stores what is called a “Commodity Token” which supplies the information needed to tokenize them on a distributed ledger.

To tokenize on the Hedera network, Diamond Standard uses the Hedera Token Service (HTS), which ensures that each Diamond Commodity Token truly represents either a Diamond Standard Coin or Diamond Standard Bar and that the ownership of the Diamond Commodity Token is directly linked to the ownership of the physical diamonds. Once this is done, investors can then buy and sell Diamond Commodity Tokens on digital asset exchanges, allowing others to invest in diamonds without having to physically own and manage the diamonds themselves.

Not only does the HTS enable the creation and management of these Tokens on the Hedera network, but HTS is also designed to be interoperable with other blockchain networks and protocols, which means that these Diamond Commodity Tokens can be easily transferred and exchanged between different platforms, including Ethereum.

Additionally, Diamond Standard utilizes the Hedera Consensus Service (HCS) to create a completely secure record of all transactions involving Diamond Commodity Tokens, ensuring transparency and immutability of any activity of the Tokens.

Diamond Standard chose the Hedera network for this process not only thanks to the flexibility and security of the token and consensus services, but because the Hedera network is faster than any other decentralized network, capable of confirming more than 10,000 transactions per second, meaning that Hedera can easily scale to support this growing market. Hedera also has very low transaction fees of less than $.01 USD per transaction, which is appealing to anyone that wants to trade these Diamond Commodity Tokens without incurring outsized costs.

One final reason that the Hedera network was chosen is that Diamond Standard has a very strong environmental, social, and governance (ESG) ethos, which very closely aligns with Hedera’s dedication to being a carbon negative distributed ledger. These aligned values made Hedera a natural choice for Diamond Standard.

How does it work?

Here is an overview of the token architecture on the Hedera network where you have a visual representation of the different components of the system and how they work with each other.

What’s next for Diamond Standard?

After seeing the success of the tokenization of their commodity offerings on the Hedera network, the team at Diamond Standard are very excited about the launch of their latest diamond investment option Bitcarbon. Bitcarbon is a fungible token based on Diamond Standard’s physical Coins and Bars. The Bitcarbon token is backed by a dynamic pool of the commodity and enables fractional investment opportunities. For example, a single Diamond Standard physical Coin will be worth 5,000 Bitcarbon and a physical Bar will be worth 50,000 Bitcarbon. Bitcarbon is intended to be an alternative to traditional stablecoins which are subject to seemingly continuous regulatory pressure, but with some critical differences. Bitcarbon, the Diamond Standard commodities, and the associated blockchain-based digital assets are offered, issued, and administered by Diamond Standard Ltd. under a Digital Asset Business Act License (“DABA License”) granted by the Bermuda Monetary Authority. As part of their regulatory required oversight, Diamond Standard Ltd. is internally audited by Deloitte.

Diamond Standard is currently engaging with the Hedera ecosystem including wallet providers and digital exchanges in order to ensure the most expedient, convenient, and secure way to make Bitcarbon available on the Hedera network. This will help capture the interest of an even larger number of buyers and sellers of Bitcarbon, and bring the opportunity of investing in diamonds to the broader market. Diamond Standard have truly unlocked the investment potential of diamonds and are well positioned to continue their growth.