Blockchain technology has not received the plaudits it deserves for helping disrupt the fiat currencies market. Instead, all the hype has gone to the cryptocurrency market, led by the likes of Bitcoin, Ethereum, and Ripple. And most startups continue to capitalize on the disruptive force of the blockchain technology to launch their own versions of cryptocurrencies, while several others are also lined up for ICOs (initial coin offerings). Every player in the cryptocurrency market tries to describe their coin as the best in the market by citing one or two distinct reasons.
Some, such as SALT Lending, are trying to disrupt the credit market, which gives them a different approach to it, while others like GoldMint are backed by real gold assets. And speaking of real assets, the market is highly anticipating Venezuela’s launch of an oil-backed cryptocurrency, while Switzerland-based Tiberius Group has planned to launch a metals-backed coin dubbed “T-Coin”. Thus, it is fair to say that the cryptocurrency market is getting overcrowded with hundreds of cryptos now already very popular in the market. The question is whether there is room for more. And interestingly, investors think there is – and so do developers.
Diamonds Are Forever
The diamond market is the latest target in this regard, with a few players already launching diamond-backed cryptocurrencies to follow the trend mapped by its counterparts that have the backing of gold reserves. However, unlike diamonds, gold is one of the most liquid instruments to trade in the market. It can be traded as a currency on several forex trading platforms, as well as physical gold reserves. Crypto market players are aiming to make the latter version a lot more accessible to retail investors through tokenization and that’s pretty much what the creators of diamond-backed cryptocurrencies are trying to achieve.
Investing in diamonds is not simple. The market is highly inaccessible and illiquid, which, according to industry insiders, makes it tricky for anyone looking to invest in diamonds. Unless one is buying a stock of a company that deals in diamonds, like Signet Jewelers (SIG), one is more likely to find searching for investment opportunities in diamonds difficult. Most people that buy diamonds do so for luxury purposes and special occasions like engagement rings and so on. However, with blockchain technology and a flurry of companies willing to take the risk by linking their cryptocurrencies to diamonds, things could soon change.
So far, a few diamond-backed cryptocurrencies have been launched. Some that stand out include SparkleCoin, which according to its creators has $5 worth of GIA certified diamonds backing every coin issued. The other one is PinkCoin, and it too is backed by certified diamonds from selected certified diamond wholesalers. These coins allow individual investors to invest in the diamonds market without having to buy a stock of a publicly traded company or some diamond rings.
And to make things even simpler, they can invest portions of their capital in different diamond types and sizes to come up with a uniquely balanced portfolio of investments in the precious stones market. Investors do not have to pay for the whole stone of a given diamond when investing, and this makes it cheaper to invest in different diamond types using a diamond-backed cryptocurrency. Blockchain technology has helped tokenize the stone, thereby increasing its liquidity and accessibility.
In summary, investing in diamonds can be tricky for individual investors. As industry insiders point out, determining the price of a given diamond is a huge task. The first principle is to price the stone based on the famous 4 Cs (Cut, Clarity, Carat weight, Colour), and then after that there is the small issue of determining whether they are certified.
Some of the business in the diamonds market is conducted in the black market, which makes it tricky to authenticate certification. With blockchain, which keeps a record of all transactions in securely encrypted ledgers, it might become a lot simpler to participate in the diamond market as investors—rather than just customers—looking for the perfect engagement ring.
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