Is blockchain the future of diamond and gemstones transparency?

Abraham Dayan

In little more than a year, blockchain technology appears to have stormed into the consciousness of the diamond trade. It was in November 2016 that the concept was first raised at a global diamond industry meeting – at the Plenary meeting of the Kimberley Process in Dubai. Although a lengthy explanation was provided, the response from participants was fairly lukewarm.

Recent developments, however, have put the technology which aims to provide complete transactional transparency, firmly on the map. The Antwerp World Diamond Centre (AWDC) and De Beers have announced they are discussing a potential collaboration in De Beers’ recently announced blockchain platform.

The ball was given a strong kick forward in December 2017 when De Beers said it would be adopting blockchain-based technology to facilitate greater tracking of its diamonds.In a world of fleeting connections and disposable luxury, diamonds must stand for enduring value that is grounded in confidence,” explained De Beers CEO Bruce Cleaver. “Confidence that a diamond has been responsibly sourced, confidence in its value and confidence that it is the real thing. But expectations about the meaning of confidence are evolving, and our future as an industry depends on our ability to understand this shift, embrace it, and meet the challenges it presents.”

Explaining that today consumers expect to know more about their luxury goods, the route they have travelled, their authenticity, and whether they have been a force for good in the world. Commercial players in the industry expect a modernized trading environment where goods can be bought, sold and shipped with increased trust and decreased cost. Retailers expect to have the tools and information necessary to trace the unique journey of a diamond. And lenders to the industry expect increased transparency from those to whom they lend. And at just the moment that these changing expectations are converging to shape our future, new technology is emerging that can enable the diamond industry to respond in ways that were previously unimaginable, the miner said.

De Beers is investing in a new platform that will provide “a single, immutable record that traces a diamond’s individual journey through the value chain“, he stated. “This diamond traceability platform is underpinned by blockchain technology, which allows for a highly secure digital register that creates a tamper-proof and permanent record of interactions – in this instance, a diamond’s path through the value chain. In a blockchain, each event or transaction is registered in a database backed by advanced information security technology. This chain maintains a record of the activities that have taken place, the order they occurred in, who they occurred between and what they involved.

He says that a significant advantage, and what makes it unique is that the system is able to verify activity on the chain without needing to reveal sensitive details to the wider community. As a result, participants can be confident that a transaction occurred, but safe in the knowledge that the sensitive data remains between them and their buyer/seller/supplier. Once established, the blockchain will operate as a shared platform, on top of which a range of solutions could be built.

The Antwerp World Diamond Centre (AWDC), a considerable player in the global industry, has also been investigating the use of blockchain technology. And with De Beers adopting it, the AWDC decided to ramp up its activity by working on the technology together with De Beers. CEO Ari Epstein said: “We have been exploring many initiatives to further our mission to boost business in the rough and polished diamond trade, as well as manufacturing. In addition to our B2B initiatives in this field, we have closely examined blockchain technology as a potential solution to strengthen compliance as a means to reinforce the banks’ trust into the diamond industry. Last year, we finalized a feasibility study that demonstrated how the blockchain could increase transparency and confidence. In October, we launched a public request for proposal, inviting the blockchain community to submit solutions, specifically targeted at the diamond industry.

CIBJO President Gaetano Cavalieri then voiced the World Jewellery Confederation’s support for a De Beers development project that employs blockchain technology. “This has the potential of being a game changer, with new technologies offering solutions to a challenge that has been notoriously difficult to achieve to date,” said Cavalieri. “While we still are waiting for more information from De Beers about how specifically the system can be applied to diamonds, we are well aware of blockchain’s capacity to record for perpetuity chains of transactions, allowing goods to be traced back to their source.

And then, in early January, the Gübelin Gem Lab and blockchain company Everledger announced that they had signed a partnershipto create new transparency levels in the gemstone industry“. The Gübelin Gem Lab, is a well-known gem lab, while Everledger is a global emerging technology enterprise. They said in a joint statement that are teaming up to drive more transparency in the gemstone industry by creating the Provenance Proof Blockchain for colored gemstones.

Under the Provenance Proof initiative, the Gübelin Gem Lab is developing technologies to further drive transparency in the gemstone industry. In the past month, as part of this initiative, it has kicked off a major project to establish a blockchain for colored gemstones. The project aims at providing a digital, decentralized ledger that tracks gemstones throughout their lifetime along the supply chain, from mine to end-consumer. To design and build the required technical backbone, it has partnered with Everledger, a leading expert in tracking the provenance of high-value assets using blockchain technology. All parties involved in the lifecycle of a gemstone will be engaged including miners, dealers, cutters, gemological laboratories, wholesalers, jewelers, retailers and the end consumer. The Provenance Proof Blockchain aims to combine transparency, integrity and security, with the level of privacy and confidentiality required to bring these stakeholders together. This technology can be applied to every colored gemstone and enables a completely new level of transparency across the industry.”

There can be little doubt that blockchain is going to be the system that provides a transparent means for monitoring diamonds and gemstones – from the mine to manufacturing and through to the retailer. Clearly, there is a way to go yet, as De Beers’ CEO Bruce Cleaver commented. The system’s kinks and possible weak spots need to be addressed, but nonetheless it seems it is only a matter of time before blockchain commands a strong presence in the global industry.

Source Rough&Polished