CaratShares Journal · Market structure
Why coloured gemstones never had a public market
Every major asset class got market infrastructure. Bonds settle in seconds. Art has Masterworks. Collectibles have Courtyard. Coloured gemstones — rubies, sapphires, emeralds, spinels — remain a roughly $50 billion asset class that trades the way it did five centuries ago: in private rooms, priced by reputation, settled by handshake.
This is not because the assets are unworthy. In 2015 the 25.59-carat Sunrise Ruby sold at Sotheby's for over $30 million — more than a million dollars per carat. Fine untreated Burmese rubies, Kashmir sapphires and Colombian emeralds have appreciated for decades and sit near the top of every hard-asset ranking. The problem is not the asset. The problem is that the market around it never formed.
The four failures
Capital is trapped. A stone enters a vault and may sit for fifteen years before it trades again. There is no way to recoup part of your capital without finding a single private buyer for the whole stone — a process measured in months and conducted entirely through intermediaries.
Prices are unobservable. Every transaction is bilateral and confidential. Even seasoned dealers cannot tell you today's mid-market price for a 5-carat Mozambique ruby, because no such number exists anywhere. Auction results arrive twice a year and describe outliers, not the market.
Entry is binary. You either buy a whole stone — six, seven, eight figures — or you don't participate at all. Ninety-nine percent of investors are excluded by the unit size alone. There is no such thing as owning a tenth of a great ruby.
Provenance is paper. Lab certificates and chain-of-custody records live in PDF folders and auction-house archives. Forgery, certificate swaps and lost paperwork are persistent, priced-in risks of the trade.
Liquidity is a phone call. Price discovery is a reputation. Access is an invitation. That is the entire market structure of a $50 billion asset class.
Why the market never formed
Equities needed clearing houses, transfer agents, tickers and regulators — infrastructure built over two hundred years. Gemstones never got that build-out for three reasons. Each stone is unique, so there is no fungible contract to standardise. The trade is fragmented across cutters, dealers and auction houses with no incentive to publish prices. And until recently there was no settlement layer capable of carrying fractional title to a physical object held in custody without a mountain of legal paperwork per trade.
The first two problems are structural but solvable. The third was solved by public blockchains: a shared ledger where fractional ownership can be issued, traded and audited continuously, while the physical asset sits in insured vault custody.
What a real market requires
A public market for unique physical assets needs four standards working together: custody (the stone verifiably in an insured vault, certified by an accredited laboratory — GIA, SSEF, Gübelin, AGL); valuation (a recorded net asset value from sworn appraisers, with a public audit trail of every revision); a unit (a defined fraction of ownership that trades without breaking the asset); and a venue (a continuous, two-sided order book where those units clear at observable prices).
None of this vocabulary existed for gemstones, so at CaratShares we named it and implemented it in smart contracts:
First Light Offering (FLO) — the primary issuance of ownership units on a freshly listed stone, named for the moment a finished gem first catches light after the cutter's bench. Units are issued against the stone's appraised value; when the offering fills, continuous trading opens.
Facet — the carat-level unit of fractional ownership in a single stone. A 5.60-carat emerald lists as 560 facets, divided like the surfaces of a brilliant cut: each tradeable, each whole. One facet, one share of the stone.
Around those two primitives sits the rest of the machinery: an on-chain order book settled on Base, holder governance over custody, appraisals and sale decisions, an NFT certificate minted at listing that carries the stone's custody and appraisal history forever — and, at the end of the line, physical redemption of the stone itself.
What changes when the market exists
For investors: an asset class previously reserved for eight-figure buyers becomes accessible from a single facet, with continuous pricing instead of a twice-yearly auction signal. For the trade: dealers and cutters gain a way to recoup capital without waiting years for a single buyer, and a public price benchmark where none existed. For the asset class itself: transparent prices attract capital, capital attracts supply, and a market that has run on reputation for five centuries gets what every other major asset class already has — infrastructure.
The standards are published openly and free for the trade to adopt. The demo is live — every mechanism described above, working end to end, on Base Sepolia testnet.