Diamantaires warm up to blockchain
Authenticity of diamonds have been the diamond industry’s key concern since ages. But with the advent of blockchain technology, many industry veterans are not just of the opinion that now diamantaires can heave a sigh of relief but also see it as a game-changer. How? Studying the blockchain technology, the team Floroscent decodes the applications of this technology and also, helps readers understand its boons.
It’s a eureka moment for the diamond industry. Finally, they have discovered a way to address the concerns related to establishing the authenticity of diamonds. The blockchain technology, the decentralised record book that underpins Bitcoin, is what the industry experts are vouching for. While this disruptive technology can reliably trace diamonds, it is also believed that it has got all the trappings to transform the global diamond scene.
Unanimously the whole industry has welcomed it with open arm and of late several diamond miners, exchanges and start-ups have also stepped on the gas with exploratory projects such as De Beers, Alrosa, Lucara Diamond Corp, CIBJO, AWDC, Israel Diamond Exchange, Everledger etc.
Given the challenges the industry faces in the absence of a secure platform to store and share the diamond data – including information like the diamond origin, the 4Cs and certification, which makes it vulnerable to smuggling, fraud, counterfeit diamonds and unethically mined stones, it makes sense to have such information stored on a system that guarantees confidentiality and mitigates some of these challenges. Cool! But let us first understand what is blockchain technology.
The whole bit on blockchain
Blockchain, also known as distributed ledger technology, is a decentralised distributed database that maintains a continuously-growing list of records called ‘blocks’ that are secured from tampering and revision without the need for a central authority. Records encrypted on the blockchain are immutable, permanent and cannot be changed. This provides a single version of the truth and offers assurance on the authenticity of the data.
The decentralised nature of blockchain ensures security for the records. Information is also secured using cryptographic methods. A combination of public and permissioned ledgers allows everybody to have viewing accessibility to the provenance of the asset and at the same time, controls the access to private and confidential information for permissioned users only. Owing to these core characteristics of blockchain, immutability, speed and security, it is an ideal platform for tracking and protecting high-value assets and critical data.
Blockchain and Bling
A primary area in which Blockchain can bring a positive change is in the creation of a digital database. The passage of a rough diamond from mine to market covers a complex journey through legal, regulatory, financial, manufacturing and commercial hurdles. Blockchain can enable a single, tamper-proof and permanent digital record for every diamond.
Leanne Kemp, the founder and CEO, Everledger – a start-up launched in 2015, is working towards securing the diamond supply chain. Everledger now has about 980,000 diamonds registered in its database. According to Kemp, blockchain was the perfect place to create a digital ledger designed to trace and verify certification of diamonds.
“Diamonds are the perfect use-case for blockchain technology. Diamonds rely on records of origin, identity and custody to prove authenticity and provenance. The industry is embracing the technology to solve some of the real problems that it faces in today’s market – trust, transparency and integrity. In the diamond industry, we have inspection points, certificates and physical scientific laboratories. It is a controlled environment where certain levels of science and scanning technologies are applied. All of these are important parts to the structure of integrity,” she explained.
Technology that boosts consumer confidence
As diamonds are traded, the blockchain will help ensure that ownership details are recorded. Moreover, the physical tracers enable the location of where diamonds were mined to be established. This helps remove blood diamonds from the market and provide an audit trail of how different mines perform.
Enlightening on the attributes of the blockchain technology that are helpful for the diamond industry, Vipul Sutariya, director – sales and marketing, Dharmanandan Diamonds Pvt. Ltd. shared that although people think of blockchain in reference to Bitcoin but the technology is not limited to crypto currency only.“In various sectors of business operations including diamonds, it may be a solution to many current and future issues pertaining to transparency, fraud detection, provenance or traceability and above all, consumers confident. As per the research, blockchain can be the next revolution in the world of business and the diamond industry is no exception,” he predicted.
Eliminating the risk factor
Customers want to be sure that they’re getting the diamonds that they’re paying for. By mitigating the risk of buying unethically mined diamonds or synthetic diamonds, blockchain help restore consumer confidence and integrity of the industry.
Brijesh Dholakia, CEO, HK Exports, pointed out that blockchain is meeting an important need in the industry – authenticity. “We have used blockchain technology to ensure that the security of data is maintained. Blockchain technology is secured using cryptography, which means that no one can tamper with the data once it has been recorded and since the data is stored across its network on multiple locations, it eliminates the risk that comes with holding data centrally. This ensures authenticity of information. The diamond ledger speaks for itself, thus guaranteeing the authenticity,” he opined.
Commenting from the consumers’ point of view, Dinesh Navadiya, regional chairman, Gem and Jewellery Export Promotion Council, said, “The blockchain initiative will go a long way in protecting the real identity of diamonds and would provide a sense of confidence to consumers. Surat’s diamond companies are working hard to restore consumer confidence in diamonds. Imagine, you own a diamond and also have its entire history from mine to market. Great!”
Disruptive yet worthwhile
All industries are testing blockchain technology in one or another way and diamond mining companies too are not left behind. Recently, De Beers had launched a pilot scheme using blockchain technology with a small number of participants.
The main objective behind this initiative, according to De Beers, is to underpin confidence in diamonds and the diamond industry by ensuring that all registered diamonds are conflict-free and natural, while also enhancing efficiency across the sector. De Beers has high hopes that blockchain will be a transformative technology with the potential to completely disrupt and change the way global trade is done.
Commenting on the initiative Bruce Cleaver, CEO, De Beers Group said, “Diamonds hold enduring value and represent some of life’s most meaningful moments, so it’s essential to provide assurance that a diamond is conflict-free and natural. 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.”
The Antwerp World Diamond Centre (AWDC) is also in discussions with De Beers about a potential blockchain venture. Last year, AWDC has finalised a feasibility study that demonstrated how the blockchain could increase transparency and confidence. In particular, the increased ability to trace a diamond would make it easier for companies in the industry to access financing, explained Ari Epstein, CEO of the AWDC. “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,” he stated.
Shortly after De Beers’ announcement, CIBJO president Gaetano Cavalieri voiced his support for the project, calling it a potential game changer. “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. A cloud-based blockchain platform, which is both tamper-proof and accessible to all members of trade, has the potential of eliminating financial barriers of entry, while also being more reliable and effective than a paper-based trail,” he shared.
Another miner, Lucara Diamond Corp announced the acquisition of Clara Diamond Solutions – a secure digital platform that uses blockchain technology to match rough diamond production to specific polished diamond whilst tracking diamonds across the entire supply chain. The aim is to improve transparency and to provide a greater level of assurance to consumers about the origin of their diamonds.
Gemstones next in line
In early January, the Gübelin Gem Lab and Everledger announced a partnership to create new transparency levels in the gemstone industry. The new partners claimed that they are creating the Provenance Proof Blockchain for coloured gemstones, with the aim to bring in transparency in the industry.
Raphael Gübelin, president, Gübelin Gem Lab, commented: “The concept and technology of blockchain transform an opaque business based on trust into a business based on transparency. The combination of the blockchain with the application of physical tracers – such as the Emerald Paternity Test, is a quantum leap for our Provenance Proof initiative. Thinking further into smart contracts, it opens up completely novel business models in our industry and unleashes opportunities to establish more sustainable and fairer practices.”
Indian companies in race for blockchain
While international companies are betting big on this next game-changing technology, Indian diamantaires are also at the forefront of this new game. Reasons? Blockchain can help reduce transaction costs and complexity of financial transactions while improving transparency and regulation.
Dharmanandan Diamond Pvt. Ltd. has partnered with Everledger to place its diamond-tracking data onto a blockchain platform. The collaboration marries two existing projects: Everledger’s diamond blockchain and Dharmanandan’s Diamond Time-Lapse, a report that tracks a stone’s journey from rough to consumer. The companies have named this joint initiative the Diamond Time-Lapse Protocol.
The Diamond Time-Lapse Protocol has two user interfaces – Manufacturer and Retailer User Interface and Consumer User Interface. The former is a two-pronged platform for manufacturers and retailers. For manufacturers it will allow data capture of the diamond asset as it moves through manufacturing processes, whereas retailer will have pertinent retail information recorded when the diamond reaches point of sale. The Consumer User Interface is in the form of a mobile application, in both native iOS and Android versions, where the customer can login and view the complete provenance report of their purchased diamonds.
Vipul Sutariya of Dharmanandan Diamonds said, “We, together aims to provide transparent, secured, most cost effective and scalable solution, there is a strong commitment to ensure that the Diamond Time-Lapse Protocol is available for all and there is transparency along the entire diamond’s lifetime journey, instilling consumer confidence and driving industry growth. The DTL platform definitely benefits the industry at large but also adds value to the lives of the artisans and their families who have dedicated their generations to the trade.”
Meanwhile, Hari Krishna Group, too, has incorporated blockchain into its updated mobile app to offer customers simplicity, security and speed while purchasing diamonds. “By using blockchain technology and innovation, we leveraged distributed ledger technology. This initiative will ensure traceability of diamonds and documenting its journey from mine to customer while reducing fraud and duplication and thus, ensuring customers’ faith in our company,” asserted Ghanshyam Dholakia, managing director, HK Group.
The time for disruption is now
While it is clear that blockchain technology is something that the industry is in dire need of, there is still a lot to be explored on how blockchain can revolutionise the diamond industry. Recent studies have shown that millennial customers see diamonds as long-term investments and in that quest, blockchain’s ability to provide proof of a stone’s authenticity and provenance could add significant value to a purchased stone. It will arguably increase the attractiveness of diamonds in the eyes of younger customers.
Nonetheless, Kemp is of the opinion that companies that focus only on that blockchain are going about it the wrong way. “Blockchain is important, of course. But it is nothing more than the framework on which one can build promising new applications. You can only do really great things if you combine the technology with other innovations like artificial intelligence, robotics, you name it. Only then can you make a difference using blockchain,” she signed off with a valuable piece of advice.