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Diamond-Backed StableCoin CEO Talks Blockchain For Storing Value

Bitcoinist spoke with Jeremy Dahan, founder and CEO of diamDexx, a diamond-backed stablecoin that promises to make cryptocurrencies more practical for everyday use.


In the decade since the 2008 financial crisis, the monetary system has changed tremendously. Once unshakable pillars of the industry no longer exist, and new financial instruments, like digital currencies, have become more accessible.

At its peak, Bitcoin and hundreds of other digital currencies achieved a market cap of nearly $800 billion. But despite a well-publicized price drop, these tokens continue to be popular investment vehicles in the digital age.

Of course, that doesn’t mean that they are fulfilling their purpose. Bitcoin was initially intended to serve as a borderless, decentralized currency that could facilitate commerce in the digital age. However, it’s erratic valuations, and broad speculative interest has made it more akin to digital gold than to usable currency.

Consequently, a cadre of asset-backed stablecoins have emerged that combine the functionality of digitization with the reliability of fiat.

While stablecoins can address many of the shortcomings in today’s cryptocurrency ecosystem, they have had their own share of problems. This is something that diamDEXX is striving to solve by backing their token with diamond assets and offering convertibility with real diamonds.

Jeremy Dahan

Jeremy Dahan is the CEO of diamDEXX, and we had an opportunity to chat with him about the role of blockchain in the future of finance and how asset-backed tokens could make crypto more practical for everyday use.

There is significant debate right now about the role of digital currencies in the economy. To what extent has volatility stifled crypto adoption or made it less likely to be used at checkout? 

Volatility has played an essential role in the usability of crypto. It’s basically the start of a vicious cycle that impacts cryptocurrency on all fronts – from regulations to the ways users interact with it. Companies, on their side, also don’t want to use and transact in unregulated assets that are also terribly volatile and can quickly put them in the red. It’s just not a wise way to do business.

But volatility is actually what’s attracting new users. It’s arguably the biggest use-case at the moment with many transactions being to/from exchanges. Why would investors be interested in a ‘stable’ diamond-backed digital token?

Speculation, as you say, has so far been the main driver of the crypto industry and, just as in today’s financial markets, will always exist. However, if we want to achieve crypto adoption and disrupt the current financial systems, we need to establish cryptocurencies as an everyday solution. For that, we need stability. Investors, can use this kind of currencies to both safeguard their profits and pay for products and services.

The blockchain is quickly catching on as the go-to technology for tracking and conveying financial assets. What makes this technology so beneficial in this regard?

People have always tried to create trusted institutions and to appoint figures of authority to verify that everyone follows the rules of the ‘games’ we play, whether that’s in finance, law, or even actual games.

This has been true digitally as well. With the internet and now the blockchain we’ve managed to create decentralized, incorruptible ledgers that codify and embed our rules into a trustless system, and I think that’s extremely valuable.

At the end of the day, code can’t be bribed and doesn’t make emotional decisions. It just does what it’s supposed to do, and anyone with the necessary knowledge can verify its integrity or point out flaws on it.

For those just becoming familiar with the idea of using digital tokens to store physical value, what’s the most significant benefit of tokenization?

Tokenization is not a new concept. Public companies have been doing it for ages in the form of shares and stocks. However, the blockchain has drastically changed the game by giving everyone the power to access these financial tools without having to go through the hoops imposed by traditional financial institutions.

In many ways, you’re now able to act and profit like a Fortune 500 company from your living room if you have something of value to offer to the world.

There are many so-called stablecoins coming to market that offer similar solutions to crypto’s well-documented volatility. What makes diamDEXX’s diamond-backed solution superior to the efforts of these other platforms?

The very first thing that sets the DIAM ‘Coinsistent’ apart from its competitors is token-to-stone redeemability. Thanks to this feature, DIAM users can obtain physical diamonds from their tokens’ worth of cryptocurrency. They can either receive a shipment or delegate these diamonds’ custody.

Thanks to this, we’re digitalizing, liquidizing, and ultimately creating the ultimate store of value. It’s also important that users take a look at diamonds as asset classes and realize their true value. Basically, we’re talking about the most crisis-resistant, best-performing asset of the last decades.

Saying something is ‘backed’ by an asset is a bit inaccurate. One must trust a third-party to actually deliver the asset if the user wants to claim it just like it used to be with gold-backed paper money.

Since our coin will also be listed on exchanges, it is on our best interest to create as many incentives as possible for people to hold and redeem DIAM. Our partnership with IDEX, a world leader in online diamond trading, has allowed us to create a platform where users can obtain diamonds directly from 8,000 manufacturers, saving them money by avoiding intermediaries’ commissions and cuts. IDEX is also our monthly auditor, which means we have yet another incentive to honor our commitment to transparency.

How can asset-backed tokens overcome the transparency problem that has plagued so many other platforms?

Precisely by providing transparency. Users should be very wary of anyone not wanting to comply with audits, documents, and proof of funds. The Internet, scanners, the blockchain, the cloud, and many more tools are there to make this easier than ever. Those who won’t comply with minimum requirements, I’m afraid, have something to hide. 

IDEX is a fully regulated and reputable company, and it oversees the auditing of our diamond vaults. Every month, our stock reserves’ value is being audited, with reports publicly available on our website.

What implications might that have for the broad crypto ecosystem? And to the economy itself?

The right asset-backed token might be a groundbreaker for the overall economy and for crypto. For the first time, we would be facing something that’s more valuable than fiat currency, both in the fundamental, ideological, and financial way.

What happens if such an asset is created? Only time would tell, but in my mind that can only mean that our competitors (even if those are government themselves) either try to shut us down or try to catch up to the trend. Eventually, great technology always wins.

What’s the point of using a blockchain (if it doesn’t remove trust) when one can simply ‘tokenize’ an asset using a centralized database?

A blockchain, of course, keeps a public track of every transaction, making the issuing, handling and burning of tokens transparent. It’s also reliant on Ethereum, a platform which users trust and know. On a centralized database, this level of transparency can’t exist.

Why is a native token needed? A sidechain like Liquid, for example, can harness the immutability and decentralization of Bitcoin. Why use less secure blockchains that are prone to 51% attacks and other vulnerabilities.

Our project relies on the fact that the dollar value of the diamonds in our vaults perfectly matches the amount of tokens to issue. Without a native token, the smart contract that regulates both the vaults and the amount of tokens cannot perform it’s functions, and we can’t ensure the consistency of our currency.

Having an ERC-20 token, on another hand, protects us from 51% attacks, since the Ethereum blockchain is strong enough to prevent these attacks.

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Why Facebook’s Foray into Crypto Could be Fruitless

Mainstream media was abuzz last week with the news that Facebook has plans to launch its own digital token, ‘GlobalCoin’. This highlights the ignorance that big news outlets have, as Facebook really is ill-suited to have anything close to what we consider cryptocurrency.


Cryptocurrency by nature is a mathematically secure, disruptive peer to peer technology designed to act as a decentralized form of finance. Facebook is a million miles away from these concepts as it is highly centralized, highly censored, highly insecure, and largely untrusted. Any currency the social media monopoly produces of its own are likely to have the same traits.

Wrong Demographics

Recent research suggests that the Facebook user base is shifting demographically. The latest report by research firm Diar implies that Facebook’s foray into crypto could be fruitless. Quoting figures from Pew Research Center Diar added,

Facebook will be facing an uphill battle on multiple fronts, primarily starting from an aging user base whose knowledge of cryptocurrency likely to be near nil.

The platform has lost its dominance in the US teen market as numbers dwindle in favour of alternative social media outlets such as YouTube and Snapchat. Teens the do use it are unlikely to be in the financial position to be loading up on Facebook stablecoins either.

facebook mark zuckerberg

The report adds that the number of retirees that have flocked to Facebook has doubled since 2012. There are very few in that category that even know what cryptocurrency is, let alone tech savvy enough to be able to use it as Diar points out;

Educating 25% of the world’s population about current cryptocurrency infrastructure that requires private-key management and the glaring reminder of the possible ultimate loss of funds is also unlikely as it would result in the project’s near instant failure.

GlobalCoin: Escalating Worries

Some big name news outlets have compared GlobalCoin to Bitcoin claiming that to could possibly be a competitor. The two could not be more different, Bitcoin transactions cannot be stopped as the blockchain is immutable by design. Facebook, like Paypal, will have full and total control over any funds deposited and converted into its new coin.

Considering its reputation with safeguarding personal data it would be pertinent to say that Facebook is not in the position to handle large scale finance. Diar picked up on this also adding;

The ownership of data by corporates using it to profit is just one of the anathemas to the decentralized ideology.

Over the past year or two Facebook has been embroiled in scandals involving major data privacy violations, security breaches, censorship, and fake news dissemination. How many people of sane mind are likely to trust it with their hard earned?

Would you use a crypto coin owned by Facebook? Add your comments below.


Images via Shutterstock

The Rundown

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Říj 04

Gemini Exchange Secures Digital Asset Insurance

The Gemini cryptocurrency exchange announced that customer assets are now covered by insurance. It comes through a consortium of global insurers who were organized by Aon.  


The Gemini digital cryptocurrency has notified customers that insurance for digital assets is now available. A news release said is was arranged by a professional services firm called Aon who organized a collective of leading insurers.

The new virtual asset insurance coverage now stands alongside FDIC insurance for U.S. Dollars.

Head of Risk at Gemini, Yusef Hussain, wrote in an October 3rdMedium post how the company was able to secure coverage “[…] after a series of due diligence roadshows with industry-leading insurers”

Hussain noted how Gemini was able to successfully show investors how it was a secure and safe exchange, and custodian, for users to buy, sell, and store virtual currencies.

Responses on the Medium post were generally positive.

One person noted how the news was great for “people who are on the fence with Crypto-investments in the US.”  Another congratulated Gemini for securing coverage “with a custodial model economically.”

Skepticism About Crypto Industry Insurance

According to Hussain, plenty of insurers have shied away from extending coverage into the cryptocurrency world due to concerns about hacks and perceptions about poor security and internal control standards.

However, Hussain says

Consumers are looking for the same levels of insured protection they’re used to being afforded by traditional financial institutions

Some are speculating Gemini has been working to secure insurance coverage in order to demonstrate to current (and potential) customers how they stand as a safe entity in a cryptocurrency world with many legal grey areas.

The Winklevoss Brothers Push Forward

The insurance announcement looks to be a good start to the month for the Gemini exchange and its co-founders Cameron and Tyler Winklevoss, who received an approval from New York regulators in September for their stablecoin.

Bitcoinist reported in early September how the Gemini dollar, tied to the USD at a 1:1 ratio, would be backed by the firm State Street.

The cryptocurrency has drawn the approval of Bitcoin Foundation founder Charlie Shrem, who remarked how the Winklevoss brothers had built what would come to be the “Golden Gate Bridge, the Verrazzano Bridge” in the field. Shrem also said the stablecoin would span across decades.

Winklevoss

Before tweeting out the Medium post on October 3rd, Gemini made note of how the Gemini dollar is now officially listed on the OEX.com digital exchange.

The exchange looks to be gearing up for major competition with other leading companies like Coinbase and Bithumb in the United Kingdom after reporting by the Financial Times alleged the platform had hired consultants to try and hash out an expansion project in the region.

Currently, Coinbase has secured an e-money license from UK regulators and enjoys a banking partnership with Barclays. Bithumb is currently planning to create an office in the UK by the end of 2018.

What do you think about the new insurance coverage for Gemini customers? Let us know in the comments!


Image courtesy of Bitcoinist archives, Shutterstock, Twitter/@GeminiTrust.

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MakerDAO Founder Claims “Absolutely Zero” Obligation to DAO Investors In Interview

Source: bitcoin

MakerDAO Founder Claims “Absolutely Zero” Obligation to DAO Investors In Interview

We sat down recently with Rune Christensen, the founder of MakerDAO, to discuss The DAO’s collapse and the implications it will have for Ethereum and Cryptocurrency moving forward after the soft fork. He expresses doubts at the notion that the Ethereum community holds any obligation to The DAO and other interesting viewpoints from security to hard-fork consensus.

Also Read: Pound vs Yen: The Battle Over Bitcoin Rages On

Rune Has Faith in Ethereum, Not The DAO

So Rune, Can you give Us a little bit of background on Yourself, On Maker, and the Situation The DAO’s Collapse has put Maker in?

“I’m the founder of Maker, which is an ethereum based DAO that will soon launch a stable cryptocurrency backed by smart contracts with ethereum based collateral. TheDAO’s collapse hasn’t meant much to us, we already anticipated those types of risks and knew it was something that could happen. We are going to be even more careful with security in the future, though, as we were also affected by the bug in one of our alpha stage contracts. luckily nothing was stolen, and not much money was at stake because we had made clear warnings and risk disclaimers.”

Okay,  Rune, given those circumstances, what is your position on the best of the proposed solutions, Soft Fork, hard Fork, and otherwise?

“I think the best solution is to wait for consensus. A clean 100% refund fork is most likely at this point, but also see the potential for a second blockchain to emerge or even possibly the old one being kept alive.”

Can you elaborate on why you think it’s best, and the disadvantages of the other options for Maker, and Ethereum?

“When using blockchains its always the best to go with the consensus, so it’s an easy choice. The biggest question is whether the community will see diverging advantages in the “code is law” governance approach.”

What about long term consequences for the Ethereum ecosystem, and concerns that the soft fork could be easily abused by miners?

“It turns out the people concerned were right on this one.”

Many are blaming Solidity for the issue as much as The DAO’s code, scale of deployment and handling of the attack, and claiming is as much to blame if not moreso. What are your thoughts on this?

“It’s misleading to claim it is Solidity’s fault. However, there are various things with solidity, the EVM, and the entire tech stack basically, that could and are still being improved. Overall I think Ethereum’s technology is in extremely great shape and lightyears ahead of everything else.”

Current DAO Hard Fork Voting Status

How much responsibility does the Ethereum community have to those staked in the DAO?

“Absolutely Zero.”

What is Maker Doing that ensures that it will not become another TheDAO?

Same as we have always been doing, obsessing about security at every step of the design and implementation process. We knew very early that security was going to be the most important factor and have been building our entire stack around that maxim from the start.

Early Voting from ethereum mining pools has shown strong support of a hard fork. What is your recommendation to those that have yet to vote on the matter?

Vote with the majority.

MakerDAO has suffered from security issues similar to the DAO’s over the last few months, the prime difference being their decisive action in fixing them, preventing any theft of their collateral or stablecoin. The DAO has been a massive, market altering failure, but Rune, along with many others believe that the underlying technology is not to blame. What we see in terms of utility from complex Ethereum-based smart contracts will be interesting to see following the hard fork.

Thoughts on the coming hard fork and the future of other Ethereum DAOs? Leave them in the comments!


Images Courtesy CarbonVote.com, MakerDAO, Pando

The post MakerDAO Founder Claims “Absolutely Zero” Obligation to DAO Investors In Interview appeared first on Bitcoinist.net.

MakerDAO Founder Claims “Absolutely Zero” Obligation to DAO Investors In Interview

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