Over-Collateralization By Diamonds Product Line
Last updated
Last updated
Diamonds are considered one of the most precious and valuable natural resources in the world. They have been used as a store of value for centuries and are often viewed as a safe haven asset. The unique properties of diamonds, such as their rarity and durability, make them an ideal candidate for use as collateral for a stablecoin.
The over-collateralization feature of GUSD is backed by diamonds that are securely stored in a Swiss vault. The diamonds are screened daily to avoid volatile market risks, providing an added layer of security for GUSD holders.
One of the key advantages of using diamonds as collateral is their performance as an asset class. Historically, diamonds have outperformed many other asset classes, including stocks, bonds, and gold. According to the Knight Frank Luxury Investment Index, which tracks the performance of various luxury assets, including diamonds, the average annual price increase for diamonds from 2005 to 2020 was 4.4%. This outperformed the average annual price increase for gold, which was 4%, and the average annual price increase for stocks, which was 3.5%.
Moreover, diamonds are a rare and finite resource, making them an ideal candidate for use as collateral. The concept of rarity is an important factor in determining the value of a diamond. The rarer a diamond is, the more valuable it is likely to be. This is because the supply of diamonds is limited, and the demand for diamonds is expected to increase over time, particularly as emerging markets, such as China and India, continue to grow.
The use of diamonds as collateral for a stablecoin provides several benefits. First, it ensures that the stablecoin is backed by a tangible asset that has intrinsic value. This provides an added layer of security for users, particularly during times of market volatility. Second, it provides an opportunity for investors to invest in a stablecoin that is backed by an asset class that has historically outperformed many other asset classes.
Overall, the use of diamonds as collateral for GUSD is a unique feature that sets it apart from other stablecoins in the market. By providing an added layer of security and a tangible asset that has intrinsic value, GUSD is well-positioned to become a reliable and trusted form of digital currency.
