# Ecosystem Overview

Carats are issued by Diamond Standard Coins and Bars held in custody by approved custodians.  The owner of the physical commodity token elects to convert it into Carats by staking the whole-commodity token to the Carats Smart Contract.

That Diamond Standard Coin or Bar becomes part of the Carats reserve, and can be redeemed by any Carats holder who returns enough Carats to the Carats Smart Contract.

In order to create Carats on demand for users, DSAM LLC (Diamond Standard Asset Management) leases commodities from investors in real time, converts them into Carats and sells them. If those Carats are not returned within 30 days, DSAM uses the proceeds to purchase additional commodities for the reserve.

The Carats Smart Contract manages the commodity reserve and generates fees, by slowly increasing the number of Carats per commodity held in the reserve.  The fees do not diminish the users' balance.

Bitcarbon tokens govern the Carats Foundation and the Decentralized Autonomous Organization (DAO) behind the Carats protocol.

<figure><img src="https://226571977-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FbqSp0kr8L3RcvrHvq66r%2Fuploads%2FNUGFJ6Tf1ooLuClZrfjY%2FScreenshot%202024-05-06%20at%2010.14.15%20AM.png?alt=media&#x26;token=77ceb8f3-37da-49f6-9cf6-b677cf4a59c1" alt=""><figcaption></figcaption></figure>


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