Blockchain – Untapped Resources for the Diamond Industry

Internet of Things is everywhere. From bootstrap startups to unicorns, everyone is leveraging the concept. One more addition to this could be Tracr, a blockchain-based platform built by UK-based diamond mining and trading company De Beers, where diamonds, small or big, will be tracked from the mining stage till the product reaches a retail store.

 

 

Some diamonds, known as conflict diamonds, are illegally traded to fund wars abroad. You may not know this due to the high demand for diamonds. Almost 50 percent of the demand for diamonds come from the US — and it isn’t a surprise. After all, it is the go-to jewel of engagements and weddings. And because of its hardiness, diamond is ideal for industrial use.

 

So What are Conflict Diamonds?

For those who don’t know, a conflict diamond is an uncut diamond that is mined in an armed conflict zone. The diamond is then traded, and the funds are used to finance the fighting. These blood diamonds are usually associated with conflicts in central and western Africa.

According to CNN, about 4 percent of the world’s diamond population came from Sierra Leone during its civil war (1991-2002). And that’s from just one country! In an article by CBS, experts suggested that blood diamonds could make up 15 percent of the diamond trade.

Despite these statistics, there are measures in place that attempt to smother the illegal industry. The primary actor is the Kimberley Process. This certification scheme connects local governments and international organizations to solve the problem. Their solution: Ensure every shipment of diamonds from these areas has certification.

 

How can Blockchain Make a Difference?

 

The diamond industry faces numerous challenges when it comes to security, trust and transparency. Traditionally, the diamond industry has struggled to maintain authentic accurate records about the source and provenance of diamonds, as well as identifying lab grown diamonds fraudulently sold as natural mined diamonds, and transactions between traders and buyers. In all these areas, the diamond industry can deeply benefit from blockchain technology.

Every diamond, on its way from the mine to the consumer, takes a journey that passes through many hands. The journey covers the entire diamond pipeline, from the mining company, through rough purchasing tenders, the long manufacturing process, to the diamond trader, and finally the retailer. The diamond is also processed by various technological devices along the way, which are used to plan and produce the diamond. This entire trail can be secured in the blockchain, increasing the trust and transparency of the diamond’s origins and journey. Most rough diamonds are cut into a number of smaller polished diamonds, and blockchain can also be used to record this important fact.

If the diamond’s entire history is stored on the blockchain, it cannot be tampered with, nor can the diamond be sold with a fake or enhanced report. The diamond’s source from a particular country or mine is secured, which can help in the processes used to combat the problem of ‘conflict diamonds’.

 

What’s more, the diamond’s blockchain data will exist forever, which means that even if the diamond is resold in a second hand market, its provenance and digital report will remain intact and untouched. For an industry that has often struggled with issues of flagging consumer confidence, blockchain may well be the ideal solution.

How Does Tracr Come into the Picture?

The platform will work on data science and physical identification techniques to curb duplicity and ensure transparency in the diamond trade. De Beers has roped in many industry players to make Tracr, which will work on Etherium blockchain technology. Players like Venus Jewels and Rosy Blue (New York) from the Indian diamond industry, which is the largest processor of diamond products in the world, have also tested its pilot version.

The project would benefit the industry with better product delivery, greater efficiency and boost in overall revenue. “The project will cover the full diamond value chain – from the mine to the end consumer – providing consumers with confidence in the product, the trade with increased efficiency, and lenders to the industry with greater visibility,” said Feriel Zerouki, Senior Vice President, International Relations and Ethical Initiatives, De Beers Group, reported Business Standard.

De Beers has partnered with corporate investment and incubation firm BCG Digital Ventures for the project. It will enable units with options like privacy controls over who can see what.

The system would bring all small and unorganised businesses on a single transparent platform. From mining to cutting and polishing and then retail, a diamond will be tracked through its unique number registered on the blockchain platform.

During the pilot project, the company focussed on tracking rough diamonds above 10.8 carats, but now Tracr can keep a track all diamonds between 5 and 10.8 carats.

Every time it will go from one stage to another, each entry would reflect on the blockchain system, tracking it through all stages. To make the system free from nefarious elements, each member coming on board will have to go through a KYC (Know Your Customer) process.

De Beers has asked all industry players, including miners and traders, to become a part of the system. Diamond traders also believe that integrating every diamond unit on one platform is a good idea, provided it help in bringing transparency and reducing paperwork.

Integrating formal and informal diamond units would be a challenge but De Beers is confident the platform would be able to provide safe and secure services. The company has not decided on the cost of joining Tracr but is working on minimising costs for smaller players.

Conclusion

Saying conflict diamonds are an issue is an understatement. The funds from these illicitly traded gems are funding violence and terror. Blockchain offers a stunning solution.

So far, we’ve seen industry leaders accept the new tech with open arms, but there’s still room for the technology to grow, and the process can still evolve.

But one thing is certain: These initiatives are making us think about how we can prevent the trade of blood diamonds and pave the way to peace.