Under the background of weak global diamond sales growth, the blockchain “black technology†is expected to bring vitality to the industry.
On January 14, Hong Kong Science and Technology Park-developed startup Zhixin Chain Financial Technology launched the first diamond physical trading platform EverCarat in Hong Kong using blockchain technology and exchange system.
The platform uses blockchain technology to comprehensively track information such as diamond source, certification data, transaction records, transaction flow, etc., and supports various transaction accounting and verification transactions, and the content is difficult to tamper with. Buyers and sellers can trade physical diamonds easily and safely on their mobile phones anytime, anywhere.
“The global bare diamond market has reached a volume of US$25 billion per year, and Greater China, including Hong Kong, is the second largest diamond market in the world, with a 16% share of demand, second only to the US. 70% of global diamond cutting With offices in Hong Kong to meet the market needs of Greater China and the entire Asia Pacific region, Hong Kong has an innate advantage in developing a diamond trading market,†said Deng Dazhi, founder and chief executive officer of Zhixin Chain Financial Technology Co., Ltd.
At the same time, compared to other parts of Asia, Hong Kong has a simple tax system and no sales tax. Investors do not have to pay any taxes on trading diamonds. “In the past three weeks, we have already had two investors investing in diamonds through the EverCarat platform, with a transaction amount of several million Hong Kong dollars. Most of these investors have a high level of education and are high net worth individuals who want to invest in some high collections. Value, low volatility assets." Deng Dazhi revealed to the 21st Century Business Herald.
Huang Xianmin, head of investment at Hong Kong Science and Technology Parks, said: “Hong Kong, as one of the major financial centers in the world, has the potential to develop into a global diamond trading hub. The success of the EverCarat platform can turn a less liquid product such as diamonds into a new asset. Category, this is a good start. The Science Park helped them introduce different strategic partners and financial investors during the company's development process."
Improve diamond price transparency
For a long time, the diamond industry has been covered with a mysterious veil, and the diamonds that the general public has come into contact with are mostly glamorous and expensive luxury items in the window.
“In the past, the price of diamonds has been lacking in transparency, and consumers often encounter liquidity problems in the process of reselling diamonds. The auction house has to pay a high fee. We hope to use blockchain technology. Electronic trading platform can turn diamonds into asset-like asset classes like other commodities such as gold." Deng Dazhi said frankly.
Lai Deqing, chief technology officer of Zhixin Chain Financial Technology, said that the front end of the EverCarat platform adopts the exchange model. Investors can obtain market quotes and place orders on the platform in a timely manner, while the backstage uses the decentralized book record technology of blockchain. (DLT), including a private blockchain in all aspects including suppliers, certification bodies, and warehouses. It uses the underlying technology of R3 to make the supply chain transparent, and investors can track suppliers, verifications, and vaults. Hosted to the entire process of delivery.
According to the 21st Century Business Herald reporter, the platform will become a platform between suppliers and investors, eliminating many intermediate links, which can save a lot of costs. Deng Dazhi revealed: "At present, the retail price of diamonds is about 250% lower than the wholesale price, while the difference between some well-known brands can reach about 400%, mainly due to the numerous sales and marketing links involved."
Take the example of two diamonds on the platform with a weight of 2.1 cards and a color of F and a clarity of VS2. The current price is about 120,000 Hong Kong dollars. In order to provide a standardized investment product, the platform only provides investment grade diamonds that have been GIA-approved and instant packaged, ie the top five colors and clarity diamonds. All diamonds are supplied by approved suppliers, including the Sightholder of De Beers, the world's largest diamond manufacturer.
Blockchain or will change the diamond industry
In fact, the gold and diamond industry has always been at the forefront of blockchain technology applications. Industry insiders point out that gold and diamonds have a very complex ecosystem, and the industry is highly dependent on the supply chain, and that goods often need to travel through dozens of geographic locations before reaching their destination. Blockchain technology tracks value assets from every mine to retailer, avoiding security issues or flaws.
“The application of blockchain technology in the diamond industry is already the trend of the industry. Some of the world's major diamond miners have begun to join the blockchain platform, which makes the whole industry more transparent, and the innovative technology will drive the entire industry. Change.†Zulu Ghevriya, a founding member of the Hong Kong Indian Diamond Chamber of Commerce, told the 21st Century Business Herald.
At the same time, he said that compared to other diamond platforms on the market that use blockchain technology, EverCarat is mainly for individual investors. “Investors can buy diamonds directly at the best price on this platform without going through any intermediates. In the future, this platform can also introduce other rare gemstones such as pink diamonds and yellow diamonds."
In May of this year, the diamond industry giant De Beers Group, which specializes in diamond exploration, collection and retail, used blockchain to track the tracking of 100 high-value diamonds from mines to retailers. At the same time, De Beers announced the launch of a blockchain platform pilot program called Tracer, which is open to the entire diamond industry.
It is reported that there are currently five major diamond manufacturers including: Diacore, Diarough, KGK Group, Rosy Blue NV and Venus Jewel have joined the platform. The world's largest diamond miner, Russia's Alrosa, also officially joined the Tracr platform at the end of October.
Tracr's pilot program creates digital certificates by recording key attributes and flow status for diamonds. The data is stored in a blockchain in a non-tamperable manner, allowing buyers to verify that the diamonds they purchase are natural and are “blood diamondsâ€. Uncut diamonds mined in the war zone and illegally traded).
At its peak, De Beers once operated 19 diamond mines worldwide, controlling more than 80% of global diamond production. However, this feast may be gradually coming to an end. The company's latest financial data shows that in the seventh sales cycle of the year ended September 10, its global diamond raw embryo sales decreased by 5.5% from the previous cycle, down 0.4% from the previous year's $507 million. This is the worst performing cycle since the release of relevant sales data in 2016. De Beers recently announced a 10% price reduction for low-quality rough diamonds.
In fact, in recent years, the global diamond industry has faced competition from artificial diamonds. The rise of e-commerce platforms has also eroded the market share of traditional offline retail channels. The transparency of the diamond industry's supply chain has continued to increase, so the diamond giants are trying to control supply. Controlling market prices has also become more difficult and market share has been shrinking.
In addition, on October 19 this year, the London Bullion Market Association (LBMA) also officially announced plans to use blockchain technology to help promote industry modernization and transparency.
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