They may be a girl’s best friend, but diamond dealers and investors are going to love CEDEX, the first certified diamond exchange to be built using blockchain technology.
The diamond market has an estimated turnover of $80 billion per year, yet investor demand accounts for only 5% of that – the rest is consumer demand from the jewelry industry. Historically, diamonds have been a consistent store of value, just like gold and other precious metals, so why aren’t more investors looking at diamonds as an investment vehicle?
Despite their total market value, diamonds are not considered a financial asset class and, as such, there is no established market for their trade, unlike traditional commodities. CEDEX aims to change all of that with the launch of the first certified blockchain-based exchange that will tokenize and transform diamonds into a tradeable asset.
Removing the Barriers to Entry for Diamond Investing
The CEDEX platform removes the three major issues facing the diamond market that have kept it from being a viable alternative investment class – lack of transparency, lack of liquidity, and lack of standardization.
Lack of Transparency
The diamond industry is plagued by obfuscation, both deliberate and unintentional. A lack of clear and transparent pricing, coupled with markups, list prices, and a “closed shop” mentality makes it very difficult for the average investor to understand how a diamond is valued and how to gauge its worth.
CEDEX uses a proprietary machine learning algorithm called DEX that rates a diamond’s asking price by taking into account the stone’s gem composite (GIA), parallel trades, and market trends. The result is an objective market value, that doesn’t require investors to be diamond experts to understand.
Lack of Liquidity
The basis of any commodities market is an asset’s liquidity – that is, the ability to buy an asset and then sell it at some point in the future at a gain. The diamond market is decidedly illiquid. Most diamonds are sold to consumers in one-sided transactions and places anyone wishing to resell their stones at a severe disadvantage. The way the market is currently structured, consumers wishing to resell their diamonds never realize a gain on their initial purchase. They are forced to sell at a loss, often as much as 50%.
CEDEX addresses the liquidity issue through the tokenization of the diamonds on its platform. Diamond dealers and private sellers have more options with regards to selling their stones the barrier to entry for investing is much lower so more people will be able to invest in diamonds than ever before.
Lack of Standardization
When someone invests in gold, they are investing in a standardized, fungible asset. An ounce of gold is an ounce of gold – there is no deviation in composition or value between ounces. Diamonds are a different story – no two stones are alike, making it difficult to establish a standardized valuation.
The CEDEX platform creates a single benchmark for each diamond category so that buyers and sellers can easily see how one diamond rates against other stones in the same category.
CEDEX Token Offering
The CEDEX token offering will take place in two stages – the pre-sale and the main sale. There is a total token supply of 100 million CEDEX Coins, of which 50 million is being offered to the public – up to 10 million tokens during the pre-sale and the remainder during the main sale.
The pre-sale will take place on January 12, 2018, at 19:00 GMT and last for ten days or until all 10 million tokens have been sold, whichever comes first. Any tokens not sold during the pre-sale will be added to the main sale’s token supply.
The start date of the main sale will be determined by the pre-sale’s performance. If the pre-sale is completed within the first 24 hours, that is, if all 10 million tokens are sold during that period, then the main sale will begin on January 13, 2018, at 19:00 GMT. Otherwise, the main sale will begin at 19:00 GMT on February 9, 2018. In either case, the main sale will last for 28 days or until the maximum cap is reached.
Investors will be able to purchase CEDEX Coins using Ether, Bitcoin, or fiat currencies. During the token sale, CEDEX Coins will be sold at a rate of 1 ETH = 500 CEDEX Coins. The token supply will be created during the token sale and distributed upon its completion. Any tokens offered for sale to the public that are not sold will be burned (destroyed).
Participants in the token sale will receive the following special bonuses:
- Pre-sale: Buyers of the first 10% of available tokens will receive 0.3 CEDEX Coins for every CEDEX Coin purchased;
- First day of main sale: Buyers of the first 40% of available tokens will receive 0.15 CEDEX Coins for every CEDEX Coin purchased.
What do you think of CEDEX’s platform? Will it address the challenges that have kept diamonds from becoming a true financial asset class? Let us know in the comments below.
Images courtesy of AdobeStock, CEDEX