However easy they say the diamond purchase online is, not every person is sold on diamonds as a form of investment. This is to say, while some support the notion of investing in the stones, others do not back it. On paper, diamonds seem right for an investment option because these are pricey, sought-after, long-lasting, and rare products. However, these do not have some important things to be considered as an investible form of asset. The most vital one out of all those things is the fact that reselling a diamond is not easy.
You may buy diamonds online easily, but what about selling these to someone else profitably? It is not as easy as it sounds. Diamonds are similar to artworks in that context; the more one knows their provenance, the easier will reselling these be. A different issue in reselling diamonds is that there exists no fungibility for the gemstones because these are different from one another. Like snowflakes, no two diamonds are alike, so the stones are not exchangeable. For your information, the term ‘fungibility’ refers to the interchange of one asset with another, identical asset.
Diamonds are scarce and are not fungible, so the subjective take of their appraisers on these stones greatly influence their prices. This is where the blockchain technology sets foot. Pioneers of the technology feel that tokenization is likely to provide a much better solution between ‘conventionally trading’ and ‘for-investment’ diamonds individually.
Entrepreneurs have this idea to make digital tokens which signify a particular diamond’s ownership. According to them, this move will allow trading diamonds through open cryptocurrency marketplaces and earning a profit on every single transaction. Those who hold the tokens are entitled to redeem these for the original diamond whenever they want to do so. Anyhow, like diamond investment before cryptocurrency’s arrival, the most significant questions that will arise in the aforesaid types of business models are as follows.
- Will diamonds be worth the amounts these sell for? Or, do these stones have an intrinsic value?
Some people have said that there is no intrinsic value for diamonds and that the lofty rates of these depend fully on their impression of scarcity. Big-name jewelers have run advertisement campaigns that made diamonds seem like scarce and everlasting products. In actuality, these are not as long-lasting and scarce as you might think.
Anyhow, those who support the idea expect that tokenization would work out in the event it can lure enough investors. Now, will their expectation become a reality? Only time will tell.