In the part of the world that I come from, when people buy a diamond, they ask for a trial period to test whether it has positive energies. The belief is that where there are ethical issues in the production of a precious stone, it brings bad luck to the family buying it. The Blockchain model has the potential to change all this.
It all comes down to traceability. The manufacturing process and supply chain of precious metals can be incredibly complex, and diamonds are no different. The reality is that the trail is paper-based, which can cause all sorts of problems when it comes to documenting the history and lineage of any one stone.
Unfortunately, this provides a huge opportunity for those undeterred by the prospect of increasing their own wealth through improper production. Counterfeits cost the global economy up to a staggering $250 billion a year while insurers are forced to pay out is about $2.5 billion a year as a result of fraudulent activity.
As demand for precious metals continues to grow, so too does illegal, and frankly unsustainable, mining. As it stands, unauthorised mining in Peru has already led to the deforestation of a devastating 62,500 hectares. The sad reality is that this is happening in other parts of the emerging world too.
In developing countries, lack of education makes it impossible for those stricken by poverty to understand the irreversible damage they are doing to the Earth’s forests and the wider environment. Although not justifiable, we can perhaps understand their decision to prioritise income over environment, and severe lack of structure, governance and control allows them to do so.
Now, with the help of ethical trade platforms like Everledger, crypto company Blockchain is providing the tools to combat illegal production.
Since 2015, Everledger has registered the histories of approximately two million diamonds on Blockchain. The company’s founder and CEO, Leanne Kemp, was keen to provide a revolutionary, tamper-proof means of dealing in precious metals that would significantly increase the protection of buyers.
More recently still, IBM announced Trustchain, which will use Hyperledger Fabric to further address these issues, with big names including Asahi Refining, Helzberg Diamonds, LeachGarner, The Richline Group and UL all onboard.
By providing a solution based across IBM Blockchain and Hyperledger Fabric, IBM is able to implement enhanced security measures that incorporate digital verification, physical product and process verification and third-party oversight.
Trustchain will act as an unalterable record of diamonds and precious metals, making it a simple and secure verification process that can be utilised by all parties, including retailers, insurance firms and governance and law enforcement bodies.
All of this has attracted Blockchain attention from big names. Earlier this year, De Beers Group outlined plans to create a digital identity on the blockchain for all of its diamonds, following a successful trial in which it claimed to have successfully tracked 100 “high-value” diamonds from mine to jeweller using its blockchain-based electronic ledger, Tracr.
By leveraging Blockchain technology, we will provide an additional layer of assurance to consumers and industry participants, with every diamond registered on the platform having a record as everlasting as the diamond itself.
– Bruce Cleaver, CEO of De Beers Group
In an effort to preserve existing records, industry players are coalescing and using the blockchain to collate all of their data and processes (which are currently paper-based). In the case of IBM Trustchain, the network should provide the following,
- Diamonds and precious metals to be mined, refined and manufactured with a visible handshake between every single stakeholder involved
- A shared record/ledger of transactions that creates traceability
- A digital identifier for the diamond that can be verified across the globe
- An assurance of authenticity for the customers
Building this infrastructure will be time-consuming and such services won’t come cheap to the customer, but the demand is there. A recent survey revealed more than 66 percent of customers were prepared to pay a premium for ethically sourced diamonds.
IBM expects Trustchain Jewellery to be rolled out in full by end of the year. With huge markets for precious metals in countries like India, China and the Middle East, hopefully, Blockchained Jewellery becomes industry standard worldwide and is not just reserved for developed countries.