The one year-old start-up Diamond Standard, recently announced their tangible solution to making diamonds a liquid commodity for the purpose of being used as a universal asset to back digital transactions. Diamond Standard has put a blockchain spin on the issue around the standardisation of diamonds as a form of trade, making it usable for trade on the blockchain network as an asset with physically-backed value.
Their aim is to standardise diamonds in a similar way to gold, in the form of ‘coins’ and ‘bars’ each with an associated market value ($10,000 and $100,000 respectively) and can be sold in the same way as gold bars at a global standardised price. Each coin or bar will hold the same value of diamonds within it as a physical token but also as a BitCarbon token to be stored on the blockchain. The BitCarbon token concept provides the owner with a form of proof of the asset held and a deliverable source of value. Their coined term BitCarbon is the tokenised version of the product which can be used for transactions on the blockchain that are secured, instant and compatible with other platforms.
A focal point of innovation in this case is the movement away from cryptocurrencies in the blockchain sphere, leaning more towards physically backed tokens for digital transactions. This will create an element of trust between parties in a transaction but can also act as collateral for borrowing money and as an asset to back smart contracts. It is a way of providing proof of asset and also a deliverable store of value. The blockchain angle in this case makes the product feasible in that it provides the means for permanent public records for the provenance of the diamond coins, and also enables remote auditing and transactions without the exchange of the diamonds in any physical capacity. Registering and monitoring the providence of the diamonds in the collective ‘coins’ or ‘bars’ has created a means to commerce diamonds in the same way as cryptocurrency.
The physical coins and bars created by Diamond Standard can be given to a custodian to safeguard the value but the owner maintains possession of the digital key to the value associated with the coins they have left with the custodian. The coins will be held by a custodian in storage hardware supplied by the company, so that the owners have a means to back their digital transactions without running the risk of carrying such a high value commodity physically. The benefits of this system also include that it will lead to the creation of a decentralised reserve of value, on the back of which developers can build asset-backed services.
The overall benefit of a start-up such as this is the movement towards physically backing transactions rather than creating further reliance on cryptocurrency for transactions on the blockchain. BitCarbon doesn’t have to be perceived as a cryptocurrency itself but merely a means to back transactions with physical asset. It provides proof that the asset and value of the transaction is actually held. Not just building trust in digital currencies but building trust in the fact that digital transactions can now be validated and supported by a physical commodity with real tangible value.
[Images: Diamond Standard 2019]