# Discounting and Reserves in Valuation

To ensure the system’s stability, Diamore incorporates conservative assumptions into its financial model. **Asset value discounting** serves as a buffer against market price fluctuations and potential liquidation costs. For example, high-quality white diamonds are relatively liquid, but in the case of rapid wholesale sales, they may be sold at a 10–20% discount from retail prices. Prices for rare colored stones are even more volatile, with lower demand. Therefore, when calculating NAV, a markdown coefficient may be applied (e.g., valuing white diamonds at 90% of their average market price, and rare colored diamonds at 70–80%). This conservative approach ensures that the portfolio’s asset value exceeds liabilities—so even in a stress scenario where all diamonds are sold, proceeds would be sufficient to cover all tokenholders and creditors.

Additionally, Diamore plans to maintain **overcollateralization for issued stablecoins**: when minting stablecoins backed by diamonds, the protocol reserves part of the asset value. Similar to MakerDAO’s principles (which issues DAI), diamond collateral will be assessed with a **haircut** — only a certain percentage of the diamond’s appraised value will be used for issuing stablecoins (LTV, Loan-to-Value). This protects the system from price drops: even if diamond prices fall slightly, the stablecoins backed by them (e.g., gUSD) will remain fully collateralized by valuable assets.

**Revenue reserving** is another protective mechanism. A portion of the income generated from DeFi strategies may be withheld from immediate distribution and accumulated in the DAO treasury as a reserve fund. This reserve can be used to buy back underperforming assets, cover protocol expenses, or support token liquidity on the market (via buybacks), adding further resilience to the financial model.


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