I come from a part of the world where, when people buy a Diamond, they ask for a trial period to test if the Diamond had positive energies. The belief is that when there are ethical issues in the production of a precious stone, it comes as bad luck to the family buying it. Hopefully, that should change with Blockchain.
The manufacturing process and supply chain of the Diamond industry, and that of other precious metals is complex, paper based and lacks traceability and lineage. This often results in thefts, counterfeits and other malpractices that are hard to track. Counterfeits cost the global economy up to $250 billion a year. And the cost of fraud to insurers is about $2.5 billion a year.
Demand for precious metals has been growing at a staggering pace. As a result mining is carried out in an unsustainable fashion. For instance, 62,500 hectares of forest were lost due to unauthorised mining in Peru. This often happens in several parts of the emerging world, where governance and controls are lacking, and poverty levels force people to prioritise their livelihoods ahead of their environment.
In recent times however, a few firms have attempted to bring transparency and traceability to precious metals manufacturing and supply chain process using Blockchain. Everledger was the first firm to address this problem using Blockchain. Since 2015 they have managed to get about 2 Million Diamonds on to their Blockchain. Leanne Kemp who founded the firm wanted to address “Blood Diamonds” and bring a tamper proof way of dealing in precious metals.
More recently, IBM announced Trustchain that addresses this problem using Hyperledger fabric. They have set up a consortium of big names like Asahi Refining, Helzberg Diamonds, LeachGarner, The Richline Group and UL. The solution is based on IBM Blockchain and Hyperledger fabric and provides digital verification, physical product and process verification, and third-party oversight.
Trustchain would act as an immutable record of diamonds and precious metals and can be used to verify ownership by retailers, insurance firms and governance and law enforcement bodies.
There are other global players in precious metals who are looking at Blockchain. De Beers Group announced earlier this year that they were looking into Blockchain to get every diamond registered and have a digital identity. They successfully did a proof of concept on Creating a register of Diamonds using Blockchain. Fura Gems, another player in the gems market also announced their interest in using the technology.
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
Industry players are coming together to onboard their existing data and processes (which are currently paper based) onto blockchain. 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 would take time, and customers would end up paying a premium for the facility, however in a recent survey more than 66% percent of customers were prepared to pay a premium for diamonds that are produced through sustainable means.
IBM expects Trustchain Jewellery to be available to customers by end of the year. However, I just hope Blockchained Jewellery soon starts to become an industry standard not just in the developed world, but in countries like India, China and the Middle East that are massive markets for precious metals.
Arunkumar Krishnakumar is a Fintech thought leader and an investor.
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