With Bitcoin and cryptocurrency in the headlines every day, more and more people are jumping into the cryptocurrency market. The question most asked is how to acquire Bitcoins and altcoins to trade, and the answer to that generally is to buy them off cryptocurrency exchanges. Given the exponentially increasing popularity and demand for cryptocurrencies, a deluge of companies are moving to tokenize their businesses. Blockchain technology is known for being decentralized and distributed, therefore bestowing it with the properties of enhanced transparency and security. Keeping this in mind, it is no surprise that it has entered the diamond industry with a bang, presenting the sector with an opportunity to bring in greater accountability which has been more or less lacking in its operations.
Leading luxury jewelry brands, especially those dealing in diamonds have recognized the benefits of taking its supply chain management to blockchain platforms where provenance tracking of the gemstones becomes much easier. Any transaction executed within a blockchain network is validated and stored by smart contracts (pre programmed computer protocols) in an immutable ledger, which instills trust the authenticity of the diamonds and drives market demand. The distributed ledger technology has found another use for diamonds outside of supply chain management, and that is to tokenize the world's most concentrated form of wealth. This creates a liquid method to exchange diamonds' digital value against other cryptocurrencies on leading cryptocurrency exchange platforms.
Diamond in itself is a strong commodity and has a growing number of investors putting their money behind it as a form of alternative investment. In fact, a combination of financial markets and diamonds is potentially worth $350 billion. However, unlike gold – 20% of which is used for jewellery and the rest is put on the market – barely 1% of diamonds are used for investment. In this situation what has actually stepped ahead in terms of trade are cryptocurrencies that are backed by diamonds. Similar to commodities from any regular financial asset class, diamonds can be traded on these cryptocurrency exchanges. And considering that these exchanges are build using blockchain technology, they come with a plethora of advantages including real-time reconciliation of portfolios, low operational fees, and high liquidity.
Leading luxury jewelry brands, especially those dealing in diamonds have recognized the benefits of taking its supply chain management to blockchain platforms where provenance tracking of the gemstones becomes much easier. Any transaction executed within a blockchain network is validated and stored by smart contracts (pre programmed computer protocols) in an immutable ledger, which instills trust the authenticity of the diamonds and drives market demand. The distributed ledger technology has found another use for diamonds outside of supply chain management, and that is to tokenize the world's most concentrated form of wealth. This creates a liquid method to exchange diamonds' digital value against other cryptocurrencies on leading cryptocurrency exchange platforms.
Diamond in itself is a strong commodity and has a growing number of investors putting their money behind it as a form of alternative investment. In fact, a combination of financial markets and diamonds is potentially worth $350 billion. However, unlike gold – 20% of which is used for jewellery and the rest is put on the market – barely 1% of diamonds are used for investment. In this situation what has actually stepped ahead in terms of trade are cryptocurrencies that are backed by diamonds. Similar to commodities from any regular financial asset class, diamonds can be traded on these cryptocurrency exchanges. And considering that these exchanges are build using blockchain technology, they come with a plethora of advantages including real-time reconciliation of portfolios, low operational fees, and high liquidity.
Blockchain diamond consortia such as Diamante are one of the sources that are actively collaborating with software development companies to create their own native digital assets. For example DIAM (native asset of Diamante) can be used to execute transactions within the consortium’s blockchain network, grant line of credit to members, and trade on cryptocurrency trade exchange platforms. CARAT is another diamond-backed digital currency which has retained its stability owing to the 5-6% average annual appreciation of its associated commodity.
Exchanges are basically websites that allow investors to buy, sell, and trade cryptocurrencies, whether through fiat currency like dollars, euros, or yen, or another cryptocurrency like bitcoin or ether. Not all exchanges are built on the same designs with some created to better suit newbie traders and retail investors, and others which cater to institutions or full-time traders. As of mid-2018, there were over 200 cryptocurrency exchanges active, top ten of which recorded a combined 24-hour trade volume of $6.5 billion.
Although the regulations surrounding cryptocurrency is constantly changing, and the laws governing these exchanges differ from location to location, the future is promising for cryptocurrency exchanges. Malta has already declared itself a blockchain nation by passing three crucial bills into law that has established an ecosystem most conducive to the growth of blockchain and cryptocurrency. There are many countries and cities such as Dubai and Switzerland that are following suit. With the diamond industry steadily venturing out of its traditional mold to adopt sophisticated technology to upgrade its infrastructure, cryptocurrency exchanges are poised to become a permanent source of income for diamond enthusiasts.
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