# Carats Creation

There are two ways to create Diamond Standard Carats

1. Owners of Diamond Standard Coins or Bars exchange their Coin or Bar tokens for Diamond Standard Carats issued by the Carats Smart Contract.
2. Owners lease Coins or Bars to the Carats Smart Contract, so it can issue Carats on demand. Proceeds from Carat sales are aggregated to purchase new Coins for the reserve.  The lessors compete to earn risk-free interest from the smart contract.

Any user can create Carats by contributing a Diamond Standard commodity (in the custody of an approved vault) to the Carats reserve.  That investor may want partial liquidity, or perhaps there’s an arbitrage opportunity between the price of Carats and the commodities.

To enable the instant creation of large numbers of Carats on demand for platforms such as remittance networks, DSAM LLC leases Diamond Standard commodities from investors and converts them into Carats. Oftentimes DSAM will immediately repurchase those Carats at a small discount, and uses that spread to pay the lease fees.

Diamond Standard commodity owners compete for lease income by offering their commodities at a proposed an interest rate.  DSAM leases them on demand, lowest rates first.  An investor requesting high interest might see their Coin leased for 1 month a year, while an investor demanding less might receive 12 months of income.

Carats can be issued onto any blockchain or payments network supported by the Carats Smart Contract, via a bridge from Hashgraph HTS, the network that tracks the underlying commodity token.  Current integrations include Ethereum ERC-20, with others EVMs pending.

The Carats Smart Contract manages the reserve of Coin and Bar tokens, the issuance of Carats, and the redemption of physical commodity tokens.  At any time, all Carats can be returned to redeem all Diamond Standard Coins and Bars held by the reserve without permission.&#x20;

The Carats Smart Contract is operated by the Carats Foundation and governed by Bitcarbon token holders, via forum discussions, proposals and on-chain voting. The community can adjust economics used to generate funds for the custody of the Diamond Standard commodity reserve, and new integration and initiatives. See BITCARBON or visit [bitcarbon.com](http://bitcarbon.com).

<figure><img src="https://226571977-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FbqSp0kr8L3RcvrHvq66r%2Fuploads%2FO55S6rnY3irD1haEOt6m%2FScreenshot%202024-05-06%20at%209.28.29%20AM.png?alt=media&#x26;token=f2257295-c958-4efa-9a5a-19c038abca2b" alt=""><figcaption></figcaption></figure>
