A beauty of natural, or How artificial diamonds differ from their earthborn mates
Last year was somewhat revolutionary for the diamond industry. The world’s biggest diamond company, De Beers, recently announced it would start selling synthetic diamond gemstones for the first time in its 130-year history.
Artificial diamonds have been manufactured since the 1950s but De Beers has long resisted moving into the synthetic market. Official explanation for this move is that the company now believes that technology is efficient enough to produce large quantities of synthetic diamonds with the quality of the best gemstones. De Beers now believes it has reached this point and plans to extend production at its facility in Ascot in the UK and at a new diamond factory in the USA.
In fact, there is much more behind this decision than pure product diversification: De Beers acts ahead of the market to undermine potential rivals threatening to change image of natural stones and their positioning. De Beers moves smartly, differentiating mass product from truly high quality masterpieces.
Not a real threat, rather a tiny distortion
To give you a hint on the numbers, a 1-carat man-made diamond was sold for about $4,000 before De Beers’ Lightbox brand hit the market, and a similar natural diamond fetches roughly $8,000. De Beers new lab diamonds sell for about $800 a carat. That’s a fifth of the price of existing man-made stones and one-tenth of the cost of buying a similar natural gem. That’s exactly the way to differentiate something real from a reproduction. Immediately after entering the synthetic market, the diamond major is planning to let buyers refuse some lower-quality stones, thus, showing clearly that quality matters.
Business wise, laboratory made diamonds weren’t affecting the market in any form. The synthetic category accounts for only about 2% of entire global diamond supply, according to Citi analysts, and last year it was estimated that it could increase to only 10 per cent by 2030, Financial Times notes. Overall diamond production stands at about 142 million carats a year, and that compares with lab production of less than 4.2 million carats, according to Bonas&Co. The market demand is $82bn globally, about half of is coming from the US.
One can always tell the difference
Now, is there any difference between synthetic and natural diamonds? There certainly is. Independent did a very good article explaining those in simple terms:
Natural diamonds are made deep inside the Earth where, very rarely, the right ingredients at the right temperature and pressure are brought together and then transported to the surface over millions of years.
Tiny imperfections in this arrangement, whether an atom that’s in the wrong place, missing or of a different element, can lead to huge changes in the diamond’s colour. For example, replacing one carbon atom in every 10,000 with a nitrogen atom would turn a transparent gemstone brown.
It is possible to make high-quality artificial diamond crystals by growing layers of carbon atoms one at a time using methane. This is done by stripping hydrogen away from methane molecules in super-clean vessels using hot plasmas.
Each natural diamond carries clues about its unique history and it is possible to reveal its origin by inspecting it with the latest instruments. Artificial diamonds (by the way, it takes about 500 hours to produce one) also carry this information and differences in the way they glow in ultraviolet light are regularly used to distinguish natural from synthetic gemstones.
So even if the diamond’s perfection can’t be questioned by the human eye, their tiny imperfections are always there to reveal their hidden histories and their individuality. This perfectly explains the difference between artificial gems (or any other shiny beauty including polished glass and crystal) and noble stones with a story behind them.
De Beers unofficial motto gives it right: “If you are afraid to take you precious jewelry out, use synthetic copies for public events, visual difference won’t be noticed, and actual value will be stored at your home safe box”.
Open market with many players (even Leonardo DiCaprio)
There is a lot of capital allocated to ramp up production of the synthetic replacements. De Beers is investing $94mn over four years to build its US factory that will churn out 500,000 carats of lab-grown gems a year and Chinese producers are stepping up their output of cheap manufactured diamonds.
The industry has attracted investors from Silicon Valley and Hollywood, including Leonardo DiCaprio, who helps promote man-made diamonds as ethical and “low-carbon” (claims that are heavily disputed by the natural diamond sector).
The lab-grown sector can still be profitable with a wider discount to natural gems but with a string of start-ups margins could be threatened as prices will most likely continue to fall, especially for larger gems, analysts and insiders say.
D1 Coin approach
These trends combined create a path for the segment. Artificial gems are more and more used in a relatively cheap and mass jewelry usually presented in blue, yellow and red colour varieties while natural stones tend to get more and more refined, pure, clear and transparent.
When investments are concerned, affordability of one item doesn’t play a big role. It is way more important that the asset (or, in D1 Coin case, the token’s underlying asset) is not too volatile and cannot be affected by aggressive market moves or deteriorating price wars. As we discussed, artificial diamonds are potentially unlimited in their issue and, due to aggressive capital inflow, may face overproduction. That is why D1 Coin fully focuses on real diamonds and creates a tight bond with the industry leadership to provide the best possible quality of its asset base.
We use tokenization to provide investors with access to real diamonds, rare and limited in their amount (both existing and potential) which are not subject to price collapse and, thus, represent a stable base for D1 Coin token.
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About the D1 project
D1 aims to be one of the top asset-backed crypto tokens accessible by everyone, backed by the valuable and rare investment-grade natural polished diamonds.
Investors from the ultra-rich to the retirement-minded can purchase and trade these coins with the peace of mind knowing that each holds the value of 1/1,000th of a carat of hand selected quality polished diamonds.
