#diamond consortium

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The Changing Landscape of the Diamond Industry with Blockchain

Be it jewelers, manufacturers, or collectors, they are all unified by a common conundrum — How to determine the provenance of a diamond and validate its authenticity? The fact that the infrastructure of supply chain management which is currently relied on is vastly fragmented and opaque does not make this task any easier. The answer to this has recently emerged in the form of distributed ledger technology, also known as blockchain, and it is steadily making an inroad into the diamond industry all over the world.

Several jewelry industry heavyweights have shown initiative to adopt blockchain, which is basically a synchronized database distributed across a number of computers or nodes. The technology has been around since 2009 and was initially used as a system that supported Bitcoin. Its use has now expanded widely and one of the main functions it performs is recording transactions occurring within a blockchain network in an immutable encrypted digital ledger available for future audit and verification this facet of blockchain has presented as a valuable instrument to trace the origin of diamonds and other precious stones, and every stop it makes in between its site of mining and final consumer.

Although still at a comparatively nascent stage, blockchain has found many enthusiastic proponents who are optimistic about the technology’s revolutionary potential as a verification solution. It enables peer-to-peer dealings, eliminating the need to depend on third parties such as a bank to process and validate transactions, thereby increasing trust between a brand and its consumers.

A consumer or a stakeholder participating in a transaction in such an ecosystem is able to verify information on their own without relying on an external actor for the same since the information in the ledger is accessible to anyone with a secure key. The removal of an intermediary also has the additional benefit of lowering operational charges.

2017 saw the establishment of a few notable blockchain platforms to streamline supply chain management and endow transparency in the diamond industry the world over. Take for instance De Beers which in January unveiled Tracr through which it would provide a permanent and tamper-proof digital record of a diamond’s journey from mine to consumer. September saw Chow Tai Fook - the Hong Kong giant - introduce a project similar to the one by De Beers in conjunction with a blockchain provider. IBM is another big player that has brought blockchain into the diamond industry. In Russia, Alrosa – one of the largest diamond producers in the world – too has implemented blockchain in its operations. In spite of the fact that the luxury items sector is generally quite secretive about its dealings, it has become clear that according to industry leaders long-term opportunities have outweighed short-term investment costs.

Another significant and innovative application of blockchain has been its utilization to build diamond blockchain consortia, an example of which would be Diamante. A consortium such as this provides a unified marketplace for different actors in the diamond industry including mining companies, traders, manufacturers, certifiers, and consumers. Since Diamante is powered by blockchain, the underlying tech for cryptocurrency, it has its own native digital asset (DIAM) that can be used for transactions, trading, and taking out loans following the line-of-credit protocol from its blockchain network.  

 Blockchain can almost instantly authenticate the value of any high-end product by providing details of where it was manufactured, what it’s made of, its previous owners, to its location of storage and delivery. These factors and authentication of value are imperative to the diamond industry and the realm of jewelry. Considering this, embracing blockchain creates an opportunity for companies to indicate that establishing a relationship based on trust and transparency with their customers is a priority for them.

 The advantages of removal of information silos, reduction of paperwork related costs, and overall amplification of security and transparency can give the diamond industry a new lease of life. It is no surprise then than blockchain is inching its way towards becoming a mainstay in the luxury items sector.

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Auction Houses In Blockchain Consortia Could Provide More Organized Service

Some of the biggest and most significant sales in diamonds are made at auction houses. Take two of the auction giants, for example, Christie’s and Sotheby’s, both of which aggressively focused on luxury jewelry sales in 2017, resulting in over $1.1 billion in combined sales.  Christie’s contributed $556.7 million and Sotheby’s $551.3 million to this massive sum. The items auctioned off included “The CTF Pink Star,” that sold for more than $71.1 million ($1.19 million per carat) at Sotheby’s Hong Kong. The internally flawless fancy vivid pink diamond weighing 59.60-carat smashed all records of the highest price ever for a jewel.

Auctions by nature draw a lot of attention, and diamond auctions are especially followed by many. When a diamond of special value sells for a record price, the event makes front page news, providing the public full details of the sale results. While this goes to increase awareness and desire for precious stones in the market for investors as well as for collectors, it also brings the most precious concentrated assets one can possess under the radar of the black market.

Supply chain Management with Blockchain

Auction houses have much to benefit from moving its operations to the secure and transparent environment of a blockchain network, and the easiest route to achieve this is by becoming a part of a blockchain consortium specializing in luxury items such as jewelry.  

The process that goes behind auctioning a diamond is a complicated one, involving many steps. The gems (and jewelry pieces containing it) that can run into multi-million dollars price range may or may not be sourced from a trader, depending on which it will possess a lab certification. Generally, when a diamond does not come from a trader, it does not have an accompanying certificate. To prevent confusion, the auction house conducts a firsthand assessment of the concerned diamond, decides if it worth holding an auction for, and subsequently sends it to a gemological laboratory for a grading report. GIA has found a clear preference by Sotheby’s and Christie’s, who often ask the lab to create a Monogram for diamonds of special value. A Monogram is basically a book containing a detailed description of a gem, including extensive background information, and a collection of high-quality photographs. The idea of compiling a monogram is to furnish well-rounded specifications of the diamond before it goes up for sale.  

For an auction house and their potential clientele, being a part of a blockchain jewelry consortium simplifies provenance tracking of every item registered item in the decentralized ledger. The distributed database assigns an encryption hash code to the details of the items registered on the data cache, making it permanent and immutable. Since the blockchain is continually reconciled in real-time, every participant of the blockchain network is assured the same set of information about an item at any given time or place.

Blockchain and Valuation of Diamonds

Auction houses evaluate the diamonds it sells, and they put it a lot of research before determining a starting price. This involves a delicate process that starts with a comprehensive understanding of the tentative cost for such a diamond would sell for in the market, applying its vast knowledge of diamond industry pricing, and of historic and recent prices of similar diamonds. It will look into the market history of the stone – whether it was sold before, and at what price. The fame of a previous owner also adds to the diamond’s value. In a blockchain jewelry consortium, these components would readily be available, and the source infallible.

This sort of easily available details is of interest not only to diamond traders but also private investors and institutional buyers who are concerned with their return on investment. The two categories of consumers gravitate toward different price ranges – traders limit themselves to lower buying prices, whereas investors tend to buy more exclusive diamonds. This happens because traders look to resell quickly, and investors think of long-term profit.  

Blockchain Diamond Consortium for better Marketing

Blockchain diamond consortium and blockchain jewelry consortium are on the rise and are seeing the growing participation from players across the gems and jewelry sector. Diamante Blockchain Consortium, for example, has members who include mining companies, cutters, polishers, traders, certifiers, retailers, and end-customers. For an auction house, marketing operations on a similar blockchain network more target oriented, and make reaching a people thoroughly invested in diamonds more precise. Potential buyers in the common platform would be able to look up diamond-related reports, its irregularities, a price guide pertaining to an auction.

Participating in blockchain jewelry consortia is a win-win situation for auction houses as well as for the diamond community as a whole. For the auction house, it provides a space for precision marketing, scope to assess consumer demands and asset management, and operate on a transparent supply chain. For a buyer, he or she gets a fair to a thorough knowledge of a gem before it goes on sale. The benefits of blockchain are immense in this industry, and the technology is speculated to be adopted by leading institutes even more in the coming years.

Image Source: Dnevni list

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Diamond Jewelry Pricing: Retail versus Wholesale

Being wary of jewelers is second nature to humans, and almost all of us have a story about how someone we know was overcharged for a piece of jewelry. At other times, it is we ourselves who have been outwitted and made to part with a large chunk of our savings. This makes the talk about how diamonds are priced in this industry very important to consumers and their pocket books.  By the end of this discussion, we will also know which sector is more suited to a customer looking to resell their jewelry in future: retail, or wholesale?

Do Discounts Provide a Good Bargain?

Whenever you're out looking for an anniversary present or engagement ring you always wonder if this is a good price. But when you look at some of the discounts offered at retail stores, you also wonder if they are deliberately driving toward bankruptcy. There's always that confusing sale price which is difficult to understand because it seems to not make sense mathematically.

The general idea is that jewelry is marked up by 100%, 200%, 300% - actually the sky could well be the limit. The discounts offered are levied on a price that is well above the stone’s wholesale value. Without a discount, the difference between the price tags at retail outlets and wholesale stores is massive.

A Quick Comparison

For comparison, consider a diamond with the following characteristics: shape- round brilliant cut, weight- 1.10 carat, color- H, clarity- SI1, certificate- GIA, cut grade- excellent. Diamonds fitting these specifications were searched on three different websites - two were retail sellers, and the third, wholesale.

Retailer #1 showed the average price of the stone to be about USD8,100 to USD10,150. Retailer #2 showed the average price for the same diamond specifications to be from USD7,700 dollars up to USD10,000. Much to the contrary, the wholesaler sold the same at USD4,500 to USD5,000. On average the difference seen is 50%.

To ensure an apples-to-apples comparison, it is crucial to keep the certification common to every case while making the evaluation because different certificates have different grading scales.   

Can diamond jewelry be sold at lower prices and still be profitable to the seller? Consider that the normal difference in markup between retail and wholesale is approximately hundred percent. A jeweler, however, sells the jewelry at a price that earns the seller five or six percent, but he makes hundreds of sales. This formula is more profitable than waiting for one or two sales a week with alleged discounts that mislead the customer about the true value of the stone.

Buy Wholesale to Resell Later

Bottomline is, if the brand name is not that big of a concern, top quality diamond jewelry can be procured at a lower price if you keep the following terms in mind – cut, color, clarity, carat, and certification. Often, the markup on a piece of jewelry is decided by the name of the designer or company who sells it. This addition of value is of no use if your intention is to resell the item, because the worth of your possession will ultimately be decided by the jewelry’s weight, precious metal content, diamond content, and the worth of the labor that went into crafting it.

Besides the cost of the centrestone itself, high-end brands put a 20% to 30% markup on the setting of the diamond, and allot several other extra charges that goes into making the finished product. The final price of the jewelry ends up 60% to 70% more than the base price. However, the price hike does not end there because in some cases, designer brands skyrocket the selling price backed by simply the clout behind the name of the company. 

Diamond consortiums help client’s make smart choices according to their requirements

Diamond consortiums such as Diamante provide a unified market for diamond buyers and sellers across sectors. It facilitates networking, browsing the market, assessing ongoing price rates, and compare demand and supply of gems. Transactions can be carried out directly as well between members on its blockchain platform. The blockchain technology itself has provided unparalleled reliability, transparency, and accountability to the business of buying and selling diamonds, which has made making thoughtful decisions on investing in diamonds less risky.