The international markets for diamonds and precious stones have taken steps to eradicate conflict diamonds as well as issues such as child labour in recent decades.
However even with measures such as the Kimberley Process in place, fraud and falsification is still a problem. Now, players such as De Beers and Fura Gems are looking to blockchain as a way to solve the problem once and for all.
Blood Diamonds – also known as conflict diamonds – continue to be a major problem in the industry. 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.
Though blockchain is best known as the foundation of cryptocurrencies such as Bitcoin, due to its ability to act as a decentralized ledger and record any type of transaction, industries from finance to healthcare are adopting it for very different uses.
At the beginning of this year, De Beers – which mines, trades and markets over 30% of the world’s supply of diamonds – announced that it will create the first blockchain ledger for tracing stones from the point they are mined right up to when they are sold to consumers.
This is seen as a hugely important part of the marketing process, as consumers are increasingly becoming aware of issues surrounding conflict diamonds, and demanding reassurance that stones they are buying as jewellery have been ethically sourced.
As blockchain technology is backed by highly sophisticated computer encryption, only those with permission – in this case those overseeing the mining, cutting, wholesale and retail of precious stones – can enter or edit data on the blockchain database. This gives the strongest reassurance yet that stones which are certified as conflict or child-labor free actually are.
De Beers are not the only operators looking to blockchain to shore up supply chain security in the market. Startup Everledger previously unveiled their traceability platform, and Fura Gems – which specializes in other precious stones, particularly emeralds and rubies, recently unveiled their own initiative.
Fura head of investor relations, Vikram Pathak, told me “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.
“And what that brings to the space is transparency. People can go in and see that if there’s a particular stone where the chain hasn’t acted in quite the right way – maybe there’s a part of the tracking which has been missed – that allows us to question whether the stone is free of conflict, or even if it’s a genuine stone.”
Attempts to pass of synthetic stones as naturally mined diamonds, emeralds or rubies is another problem plaguing the industry. A blockchain provenance record would also help to mitigate against this.
“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 (or can be) publicly accessible, anyone right up to the end consumer will be able to check the provenance of their stone and have confidence that the record wasn’t altered by any parties attempting to unscrupulously profit by passing off conflict or fake stones as genuine.
“The Kimberley Process has done great things for the space, but its still very open to fraudulent activity and we see this happening all the time – Sierra Leone is a prime example, where there are diamonds being mined illegally and people trying to defraud the system by coming up with fake certificates.”
Although De Beers and Fura’s blockchain initiatives are still in the very early stages, it’s certainly good to see practical uses and real-world problem solving involving this undoubtedly revolutionary technology.
Though the manner that many businesses have jumped onboard the blockchain bandwagon is sometimes easily dismissed as a somewhat cynical marketing move, 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 could start to see the technology living up to its promise.
