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Diamond tokens: how to value your investment

Being able to evaluate and trade diamonds requires professional expertise. All the more reason why private investors in America, England and worldwide should inform themselves about diamond tokens before investing. We tell you how to evaluate tokenized diamonds and what the risks are when investing in the precious stones.

Diamonds are harder than any other material found in nature. And they are the most concentrated form of all physical valuables. Trading platforms on the Internet are now making diamond tokens available to retail investors in America, England or worldwide. To assess a diamond correctly requires profound expertise. Because the potential of an inconspicuous rough diamond to develop into a brilliant investment depends on a number of factors.

Rate diamonds: 4 factors are important

The weight of the diamond. One carat is equal to 0.2 grams. The price
per carat increases exponentially with the size of the diamond. This is because with diamonds, the larger the rarer. A perfect five carat does not cost five times as much as a perfect one carat. It costs 25 times as much.

A perfect diamond crystal is absolutely colorless. White light passes through it effortlessly. The gradations are fluent. Experts judge the color under special daylight lamps. There are ten “Grades”

Diamonds are a natural product. Their production conditions are not perfect. That is why the carbon has tiny inclusions. To the naked eye, these are often barely visible. However, they do affect the quality. Basically, the higher the purity, the more valuable the diamond

No two diamonds are the same. That is why the cut is crucial. It gives the stone its brilliance and luminosity. Proportion, symmetry and execution are all important. There are six grades of cut: Ideal, Excellent, Very Good, Good, Fair and Poor. Important: Cut is not yet shape. Cut refers only to the reflective properties of the diamond

Diamond or brilliant? A question of shape

Of course, the cut also shapes the diamond. Or rather, into different shapes: The classic round cut turns it into a “brilliant”. Beyond that, there are other shapes of cuts. They are not only a matter of taste. They also depend on what the rough diamond offers. For example, less uniformly shaped stones are not suitable for a round cut. Other cut shapes also have their advantages and disadvantages, which can be seen as follows:

  • The princess cut makes existing inclusions less visible, but emphasizes unwanted color.
  • The “Asscher cut” makes imperfections more visible. The experts at Antwerpdiamonds recommend using it only for diamonds with a clarity grade of at least SI1.
  • Other shapes include ovals, drops, emerald cut, cushion cut, marquise cut.
  • The relatively new radiant cut, like the brilliant, has 70 cut facets – in perfect emerald shape. Diamond manufacturers plan the cut for each stone individually. The goal is to achieve the highest brilliance, have the least possible weight loss during cutting, and thus achieve maximum value.
Two dozen smaller diamonds.
How to buy diamond tokens? Investment in diamond tokens has become possible thanks to tokenization.

Opportunities and risks of diamond tokens

Blockchain technology also makes tokenization and trading of diamonds possible. Those who want to invest in diamond tokens in America, England or worldwide should stick to investments in physical diamonds. In this regard, Heinz-Joerg Jansen, a certified trader at the Antwerp Diamond Exchange, recommends investing as early as possible in the long value chain. Investing via shares, on the other hand, is practically impossible, according to the diamond expert. De Beers, for example, is owned by commodities giant Anglo American Corporation. The diamond exposure – that is, the proportion with which the diamonds contribute to the loss and profit opportunities of the investment – is ultimately tiny here.

Other factors, such as management risks, would outweigh them. The second-largest miner, Russia’s Alrosa Group, does have a higher diamond exposure. “But here there are currency risks and political risks. And those are not conducive to investing in diamonds.” Diamond tokens can therefore be an interesting alternative.

Diamond purity is clearly defined

There are precisely defined gradations for the “Clarity” rating:

Inclusions visible
not at all
very very small inclusions
under 10x loupe
very small inclusions
under 10x loupe
small inclusions
under 10x loupe
with naked eye

Critical view of diamond investment

The The Consumer Protection Forum in Germany takes a critical view of investment in diamonds. Especially if you compare the diamond investment with the investment, for example, in gold. “A kilo of fine gold is a kilo of fine gold, which you can get on every corner for almost the same price if you want to sell that,” writes the forum. In the case of a diamond, the price of a carat can vary significantly depending on the cut and quality of the stone, it said. “These are factors that you can’t even estimate as a layperson.” Gold, silver or platinum is a better tangible investment, he said. “That’s where you go to the nearest bank around the corner and sell the metal at the current daily rate.” The circle of buyers for precious stones is many times smaller, he said.

With stocks, there are currency risks and political risks. And these are not conducive to an investment in diamonds

Heinz-Joerg Jansen, diamond expert and certified trader at the Antwerp Diamond Exchange

FAQ – Frequently Asked Questions

What determines the value of a Diamond token?

The “4 Cs” are the internationally recognized, transparent system for evaluating diamonds: Carat, Color, Clarity and Cut. Thus, weight, color, clarity and cut are decisive for the value of a stone. As an investor without specialist knowledge, however, you must rely on the assessment of an expert.

How do I know my Diamond tokens are real?

Only invest in diamonds with a GIA certificate. It contains all the information about the stone and proves its authenticity. If you want to buy diamond tokens, you should also find out exactly whether the seller has a corresponding official license.

Are diamond shares an alternative to diamond tokens?

The three largest diamond miners in the world are multinational conglomerates. When you invest in their stocks, diamonds make up only a small part of your investment. You also have management risks, currency risks and political risks. With a direct investment in physical diamonds – for example in diamond tokens – you avoid those.

With certificates against blood diamonds

Diamond owners want security. The industry has therefore developed a number of certification systems. They prove the origin of a stone and its path along the entire value chain. And they make it more difficult for dealers to bring blood diamonds into circulation:

  • Kimberly certificate system for rough diamondsThe system has been in place since 2003 to prevent parties in conflict zones from exporting illegally mined gemstones in order to use the profits to finance weapons to overthrow legitimate governments. Each rough diamond must be accompanied by a tamper-proof “Kimberley Process Certificate.”
  • Licensing requirement for traders of rough diamonds and diamonds: Sellers and buyers of rough diamonds, all dealers, agents and courier companies must be officially registered and licensed.
  • GIA certificate for diamonds: The GIA certificate is the “ID card” of the processed diamond. It proves the authenticity of the stone and provides information about its identity, origin and value. The GIA (Gemological Institute of America) has been professionally and independently appraising diamonds since 1931. The institute has introduced the “4C” for the valuation of stones.

Sabine Melichar

Editor | MBA University of Cologne / San Diego State University.
Main focus: Tokenization | Enterprise Digitization | Vocational Education | Society

Sabine Melichar

Redakteurin | MBA Universität Köln / San Diego State University
Schwerpunkte: Tokenisierung | Digitalisierung von Unternehmen | Berufsbildung | Gesellschaft