Diamond Standard, a New York-based startup, is launching a novel way to buy, track, and sell diamonds on the Ethereum blockchain: The company wants to turn diamonds into a liquid commodity, as fungible and easy to trade as any other asset.
To that end, on Monday, it’s holding an “Initial Commodity and Asset Token Offering” that, it hopes, will standardize the price of diamonds by literally pegging the gemstones to a physical token that’s encrypted, trackable, and registered to the blockchain. The company hopes to raise as much as $25 million via the sale of the diamond-studded tokens; each token will be sold for $5,000 during the Offering.
How Diamond Standard works
"If you buy a diamond on 47th Street in New York and try to sell it, you are going to have a hard time getting two-thirds of your money back out of that. Even if you take it to Sotheby's and try to auction it, you're going to pay 18% commission. We've made an efficient commodity just like gold,” the company’s founder, Cormac Kinney explained in an interview last year.
Kinney, a serial entrepreneur who founded, among other things, Flont Inc., a fine jewelry company, launched Diamond Standard in 2018.
So how does it work? After a vendor delivers their diamonds to a global Gemological Institute of America lab to be assayed, the diamonds are inspected and separated into sets. They’re then assembled into a “Diamond Standard Coin,” which is sealed with an embedded, wireless encryption chip. The process is audited by Deloitte and the coin is registered as an ERC-20 token on the Ethereum blockchain. It can then be traded, sold, or even used as collateral for a loan, via a mobile app.
"Diamond Standard is unique—it is both a physical and digital asset containing GIA certified diamonds," Tom Leonard, a Diamond Standard spokesman, told Decrypt.
Diamond Standard's coin offering
According to Diamond Standard Co., each coin that will be offered during Monday’s public offering contains certified natural diamonds with identical geological scarcity and a wholesale market value of $5,000.00 as of the sale date.
The diamonds are tracked via the blockchain through the wireless computer chip. Once the coin is purchased, the diamonds ship to the buyer or to approved custodians BitGo, Gemini, Dillon Gage, or IDS Delaware. Individual buyers can sell their Diamond Standard Coins to another buyer using the Diamond Standard app or website. Know Your Customer compliance is required to buy, trade, or sell Diamond Standard Coins.
"Not only can you trade the commodity, but you can pledge up to 80% of the value of the coin through smart contacts and back any digital transaction. We want to encourage entrepreneurs to innovate digital capabilities," Leonard said.
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.