Tokenization of Diamonds: The New Age Way to Trade in Diamonds?
By: Quube Exchange
Tags: Cryptocurrency, Quantum Computing, Security Token, Blockchain, Commodities

I would annex the planets if I could; I often think of that.

~Cecil Rhodes

The person who said these words is also the one who was the founder of the world’s largest diamond mining company, De Beers. The company continues to be the strongest in the industry ever since it was established in 1888.

Diamonds have a history of their own. In Ancient India, they were valued as gemstones because they were used as religious icons. Other than that, they have also been used as engraving tools. These gemstones, known for their beauty and brilliance, have been on the rise in popularity ever since the nineteenth century. Today, they are used as gemstones and as industrial abrasives, hence their increased demand.

What is the Diamond Industry Like Today?

Ever since the conception of the nation-state and probably even before that, the production of diamonds and their distribution was concentrated within a few hands — companies like De Beers (40% of annual world diamond production) and Alrosa. As one goes down the supply chain, the World Federation of Diamond Bourses (WIDE) is the medium through which diamonds — both rough and polished — are traded wholesale.

After this, diamonds that are prepared as gemstones are sold to bourses, diamond exchanges — a total of 28 in the world. It is from these bourses that wholesalers and retailers buy a relatively small quantity of diamonds to sell to the customers. There is also a considerably large market for ‘second-hand’ diamonds and these are sold at auctions, second-hand jewelry stores and at pawnbrokers. Until this level in the supply chain, the industry is controlled with an extremely tight grip.

Current State of the Diamond Industry: Challenges and Opportunities

In the present time, the Diamond industry has become both — dynamic and complicated. Technology has, on one hand, made the industry better and on the other more complex.

To begin with, the incoming of lab-grown diamonds has also increased the demand for certification. The reason behind this is a higher demand by the customers for transparency. In fact, the customers today, want a level of transparency that has never been asked for in the past. Recently, Alessandro Bogliolo, the CEO of Tiffany & CoCo, asserted that it is the duty of a company to provide its customers’ information regarding every aspect of manufacturing and trading.

The reaction is natural with the growing awareness among the population as the mining and distribution of diamonds, even today, rouse controversies like blood-diamonds. According to statistics, as of 2016, Angola produced the highest amount of conflict diamonds, amounting to 2.1% of the world’s total diamond production.

Another major issue is the reduction of financing to the sector by the banks in all the three major diamond hubs — India, Israel, and Belgium. In Israel itself, only three banks are supporting the diamond industry. However, on the positive side, the diamond industry has seen a boom online, with people buying more and more diamonds on platforms like Amazon.

Can Tokenizing Resolve Existing Issues?

So far, we have identified some of the major problems of the diamond industry today — transparency and lack of liquidity.

In this case, the digitization of assets can provide, without a shadow of doubt, complete transparency because of the entire process taking place on the blockchain. The complete supply chain of diamonds can be traced with authenticity, making certification easy. This will enhance customer trust and weed out bad actors from exploiting conflicts to mine diamonds. This is specifically useful to resolve the case of blood-diamonds and offers a permanent solution to unethical mining.

Companies that wish to bring more transparency in the diamond business can easily raise funds through digitization of assets (diamonds, in this case) and sell these “digital diamonds” through a security offering. Following this, the investors have access to the details of the issuer, and those of the entire chain through which the asset reaches to them.

Next, for diamonds, which are highly low on liquidity, an STO can be a real game-changer. The offer of fractional ownership of the tokenized assets, in this case, diamonds, would increase the number of investors who will be able to purchase smaller stakes. Thus blockchain would increase the liquidity of these otherwise non-liquid assets.

The gemstone market is a multi-billion dollar market and is attracting many businesses to venture into its lifecycle — mining, polishing, and trading. However, mining operations require substantial capital, something that becomes a major hurdle for a lot of companies. While these companies do have proven resources and technical know-how, funds pose a major issue in starting the mining operations. STOs present an excellent opportunity for such companies to raise funds through the digitization of their assets.

STOs can also act as a special investment vehicle for a business working in a specific field where big, vertically integrated companies can make a public offer to attract money and create a business based exactly on the given field.

Digitize Assets with QUUBE

QUUBE has not only presented to the world a robust quantum computing hack resistant blockchain system, but it has also been a host to an STO Launchpad. Through this launchpad, not only STOs can be launched, but also the legal framework for creating security tokens can be accessed.

The launchpad also offers a great marketing platform to attract more and more investors. QUUBE allows access to more than $4 trillion of private wealth through its expansive network all over the globe.

An STO, once launched can become a part of the QUUBE exchange by getting listed, ensuring high liquidity for digitized assets like diamonds.

To know more about the STO Launchpad of QUUBE, visit us at https://quube.exchange.

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