The international markets for diamonds and precious stones has long been struggling with problems such as conflict diamonds, the use of child labor, etc. However, even strict certification within the Kimberley Process cannot definitively eradicate fraud and falsification in the market.
Diamond and precious stones market is still very open to fraudulent activity and we see this happening all the time. A prime example is Sierra Leone where there are diamonds being mined illegally and people trying to defraud the system by coming up with fake certificates. Large players such as De Beers, Fura Gems looking to blockchain as a way to solve this problem once and for all.
Bloody (or conflict) diamonds are a major problem for the precious stones market. It usually occurs when militia, rebel or government-backed troops take physical control of mines — most prominently in Africa — and use them to fund continued violence against civilian populations. Revenues from the diamonds sale go to finance the activities of these groups. As you know, blockade is the basis of crypto-currencies such as bitcoin (Bitcoin). Because of its decentralized nature and the ability to save any type of operations to the blockade, they are scrutinized in many sectors, from finance to healthcare.
At the beginning of this year, De Beers, an international corporation that specializes in diamond exploitation, diamond mining, diamond retail announced its plan on creating the first blockchain ledger for tracing stones from the point they are mined right up to when they are sold to consumers.
As consumers are increasingly demanding reassurance that stones they are buying as jewelry have been ethically sourced, De Beers’ blockchain initiative is seen as a hugely important part of the marketing process.
The highly sophisticated computer encryption underlying the blockchain, allows only permissioned persons – those who overseeing the mining, cutting, wholesale and retail of precious stones – to enter and edit data on the blockchain database. This provides assurance that stones which are certified as child-labor or conflict free actually are.
De Beers is not the only operators looking to improve the security and transparency of the market with the blockchain. Previously, the startup Everledger introduced its diamond tracking platform, and Fura Gems — which specializes in other precious stones (in particular emeralds and rubies), recently announced its own initiative.
‘The way this is used for supply chain management, in the mining industry, is that right from the point of mining a stone – in our case a Colombian emerald or a Mozambican ruby – right through to the consumer’s pocket, the stone can be tracked. And the great thing about using blockchain for this is that everything is decentralized – so anyone can go into the ledger, and see the movement of a particular stone, or set of stones’, Fura head of investor relations, Vikram Pathak, told.
A blockchain provenance record would also allows to grapple with the challenge of synthetic stones, which are passed off as naturally mined diamonds, emeralds and rubies.
“What we will be able to say,” Pathak tells me, “is that these minerals have come from a mine in Colombia, where they were shipped to India to be cut and polished, and combined in a bulk container and transferred to a wholesaler in Switzerland, and from there they were sent to multiple retailers in the UK and Canada. And we’re tracking every single movement of these stones around the world and know exactly where they are going.”
As blockchains are publicly accessible, any person, including the buyer, will be able to check the origin of his stone and be sure that the record was not fabricated by a third parties trying to cash in on counterfeit or fake stones.
Although De Beers and Fura’s blockchain initiatives are still in the very early stages, it’s certainly good to see that the unique technology has found practical application and helps to solve major problems of the industry.
The precious stones market clearly has issues that blockchain seems perfectly suited to solving. If the big players can successfully roll out the kind of innovative solutions they are touting, then we will witness a major breakthrough in the application of the blockchain technology.