The cryptocurrency market may be going through one of its roughest patches in history, but that does not mean that the disruptive power of the underlying technology, the blockchain, will follow the same path.
In fact, while crypto prices continue to fall, disruptive startups continue to explore ways to use the distributed ledger technology to disrupt different markets. We have already seen the various ways that blockchain is disrupting real estate, the precious metals market, and B2B transactions.
So, it certainly looks like there are no limits to what startups can do with blockchain technology. The wind of disruption has now spread to the luxurious products market. Startups are disrupting the diamonds industry by developing platforms that can monitor the supply chain and help improve liquidity in the market.
Addressing The Supply Chain Challenges
Investing in the diamonds market has been one of the trickiest forms of investments over the years. And just like the cryptocurrency market, the industry is clouded with some level of controversy. In some areas, diamonds have been linked to civil wars, while others have continued to point out how the black market plays a role. This, to some extent, affects the goodwill of the industry.
And from an investing perspective, diamonds have always posed the challenge of lack of liquidity in the market. This adds to the supply chain problems that continue to plague the industry. The market has also reportedly been flooded with uncertified diamonds. In fact, according to reports, non-certified “loose” diamonds dominate transactions in the industry. This calls for more caution when investing in the gems market.
While there are legal organizations tasked with certifying diamonds, some investors still find themselves investing in these risky non-certified gems. This has continued to create an imbalance in the market prompting industry experts to caution diamond investors against investing in diamonds that are not GIA certified.
However, with recent innovations in blockchain technology, a lot of these problems could be minimized or wiped out entirely. Companies have been trying to fix the perennial supply chain problem in the diamonds market. Some of the top players in this ‘exclusive market’ have developed blockchain-based platforms that will help to track diamonds from mine to the store.
The world’s largest diamonds producer De Beer’s is leading a group of fellow diamonds market players towards implementing a system that will help track high-end diamonds. In May last year, reports indicated that the company had already managed to track more than 100 high-value diamonds from mine to jeweler using its Blockchain-based platform Tracr.
Venus Jewel, Rosy Blue NV, KGK Group, Diacore, and Diarough who joined De Beer’s in this project are helping to create a new paradigm shift in the diamonds market that could help revolutionize the entire supply chain.
Earlier in the year, technology giant IBM (NYSE:IBM) also announced the launch of a blockchain platform, TrustChain. IBM has teamed up with a consortium of companies involved in the diamonds market supply chain and wants to help jewelers to verify and track the originality of their gems before they sell them to their customers.
These platforms could help reduce the challenge of non-certified diamonds in the market while at the same time putting diamonds in a system that could improve digitization of the industry.
Putting Diamonds In The Blockchain
In order to improve liquidity in the diamonds market, the first step will involve putting as many diamonds as possible in a distributed ledger. From here, it becomes easier to tokenize diamonds thereby bringing more players in the market.
Diamonds are generally expensive stones and making it possible to invest just buying tokens, then it becomes easier for more retail investors to get involved. Some companies in the market have already shown that this can be done by launching cryptocurrencies that are backed by GIA certified diamonds.
A good example, in this case, is Sparkle Coin (SPRK), which is diamond-backed crypto that has allocated a $5.00 worth of GIA certified diamonds against each coin on offer. These diamonds are stored with some of the leading diamonds wholesalers thereby ensuring security. The company’s blockchain platform tries to bridge the gap between “blockchain technologies, mainstream business, and general consumers by enabling secure B2B and B2C transactions through a powerful currency exchange.”
When investors invest in this diamonds backed crypto, they do not invest in the diamonds market. However, they are actually investing in its disruptive tech that tries to bring about a seamless relationship between blockchain technologies, businesses, and consumers by securing B2B and B2C transactions through its crypto exchange.
Nonetheless, now with platforms like De Beer’s Tracr and IBM’s TrustChain helping to put diamonds in the blockchain, investors can leverage the same concept being employed by Sparkle Coin to launch certified diamonds tokens that are secured using the blockchain.
How Tokenized Diamonds Will Improve The Industry
The diamonds market is composed of a few giant manufacturers and several retail jewelers. The biggest of the giants is De Beer’s and this gives it a certain level of monopoly, which is never good for business.
De Beer’s chooses when to hike and lower diamonds prices thereby affecting the players in the supply chain. For instance, this past November, shares of Signet Jewelers (NYSE:SIG) and those of Tiffany & Co. (NYSE:TIF) fell following news that De Beer’s has cut prices for low-end diamonds by 10%.
Even more perplexing is the fact that it was not clear when the giant diamonds producer actually cut the prices. The company usually controls diamonds prices by restricting supply and not reducing prices, so when news of a price reduction pop up, it is usually unexpected by diamonds investors.
If diamonds can be put in the blockchain right from the mine, that gives investors access to the distributed ledger network, which will make prices more decentralized and harder for one player to dictate movements.
Conclusion
In summary, the cryptocurrency market might be going through a difficult patch with prices of most currencies tumbling to 2-year lows. Bitcoin appears to be locked below the $4,000 mark while Ethereum has been the most affected by the market-wide plunge to go along with its own troubles.
However, the disruptive force of the blockchain technology is nowhere close to following in the footsteps of the pioneer crypto that made it popular, bitcoin. In fact, the popularity of the blockchain technology continues to grow enormously and as we have seen, more markets are up for the disruption.
The diamonds market could be one of the biggest beneficiaries of the continued success of blockchain technology. Tokenizing diamonds could bring more players into the market through decentralization while at the same time ensuring the security of the supply chain. IBM’s TrustChain and De Beer’s Tracr have made the first steps to putting diamonds in the blockchain.
Author disclosure: Trading cryptocurrencies or investing in ICOs involves huge risk. This is not an endorsement to invest in or trade any of the cryptocurrencies or stocks mentioned in this article. I have no positions in currencies and stocks mentioned.