Diamonds, one of the world’s most valuable gemstones, have managed to stay afloat even as the advent of modern stocks and new types of virtual assets has eclipsed parts of the global diamond industry.
However, the diamond industry seems to be undergoing a paradigm shift recently – combining modern technologies such as blockchain to improve diamond production, tracking and eventual sale.
Leanne Kemp, CEO of independent technology firm EverLedger, highlighted the need for blockchain integration in the industry to improve the tracking of stone provenance.
Turning to the data processing issues about diamond origin four years ago, Kemp famous “We’ve seen documents tampered with and one of the stones was claimed within similar timelines from multiple insurers.”
While it has yet to directly provide solutions to all of the diamond industry’s problems, blockchain is addressing some of them by facilitating transparency that helps track the origin of diamonds. This is mainly to curb the sale of “conflict diamonds”.Diamond mining company De Beers Group owns point out Blockchain has the potential to improve the accuracy, trust and transparency of diamond origin determination in the industry.
The diamond industry retains its uniqueness
despite being Affected During the Great Recession of 2008, the overall stock market plunged at an unprecedented scale, and the diamond industry managed to maintain its prominence despite a marked decline in global rough diamond production.
The idea of integrating blockchain into the industry (introduced only in the last few years) could reawaken mainstream interest and further improve global production.
Rough diamond production grew steadily until 2008. according to From 2005 to 2008, global rough diamond production never fell below 160 million carats, according to German database firm Statista.
However, following the recession in 2008, the average production over the past decade is 142 million carats, of which 116 million carats will be produced in 2021. 2017 was the largest turnover of the decade, producing 152 million carats of diamonds.
About 99% of the world’s diamond mining process takes place in nine countries, with Russia, Botswana, the Democratic Republic of Congo, Australia and Canada each being considered the top five participating countries. Diamond mining is almost monopolized, with companies such as ALROSA and De Beers controlling a large part of the industry.
Ethical concerns about the diamond industry abound
There are several reasons why investors don’t seem to be flocking to the $68 billion diamond industry business, especially recently.
Despite the lucrative profits, ethical concerns about the backbone of the diamond industry are widespread. This scares off potential investors, especially in an era where investor behavior is increasingly shaped by consumers’ moral and ethical stances.
Johannes Schweifer, CEO of Crypto Valley’s CoreLedger, said security and transparency challenges as well as ethical concerns plague the diamond industry. A link between diamond mining and regional hostilities has been claimed since more than a decade ago, as noted in some parts of Africa. Schweifer told Cointelegraph:
“The biggest problem in the diamond industry has always been transparency. Most gems can’t tell their origin story. But if the gem in your wedding ring is actually a blood diamond, wouldn’t you want to know? Know the origin and make sure it’s ‘mine to finger’ Transparency not only helps you sleep better, it saves lives.”
Conflict diamonds, also known as blood diamonds, are diamonds mined In territories controlled by insurgents opposed to the legitimate government, it was subsequently used to finance these insurgent movements.
In the 1990s, some examples of the unethical use of blood diamonds emerged in countries such as the Democratic Republic of Congo, Angola and Sierra Leone. There is evidence that the diamonds were mined and used to buy weapons and ammunition for military and paramilitary movements.
In addition to fueling conflict with the sale of diamonds, many reports of unscrupulous labor tactics have been used to develop Workers at the mine have surfaced. Child labor also appears to be widespread in most of these regions.
In addition, the diamond industry has come under fire for a patent monopoly that controls the diamond mining process, distribution and sale. This has heightened concerns about existing cartels that determine industry flows.
Additionally, the industry appears to be rife with issues such as mining’s environmental concerns, hazardous work conditions, and insecurity, to name a few.
Where traditional methods end, blockchain begins
In response to the blood diamond problem, the global mining giant De Beers Announce A pilot of its blockchain initiative Tracr, which will ensure the company does not deal with blood diamonds, especially in distribution and sales. The announcement was made in January 2018.
However, De Beers is not the first company to plan to track diamonds to resolve diamond distribution conflicts.
Some 20 years ago, in 2003, the United Nations established The Kimberley Process Certification Scheme aims to curb the flow of blood diamonds into the global diamond market. The decision came after the Fowler report in 2000, which showed that blood diamonds were still being used for conflict funding by the National League for the Full Independence of Angola.
However, the Kimberley Process has been condemned by groups such as Canadian NGO IMPACT and London-based NGO Global Witness, which aims to prevent natural resource exploitation and human rights abuses, among others. They claim to be inefficient.
Speaking Charmian Gooch, founding director of Global Witness, told the BBC in 2011, “Nearly nine years after the Kimberley Process, the sad truth is that most consumers are still not sure where their diamonds come from.”
Gooch noted that the initiative failed three separate tests, particularly in addressing the unique problems of Côte d’Ivoire, Venezuela and Zimbabwe, as her NGO dropped out of the process.
In addition, IMPACT cited failure to accurately report the origin of diamonds and giving consumers “false confidence” as reasons for its criticism of the Kimberley Process. IMPACT executive director Joanne Lebert pointed this out when she quit the initiative in January 2018.
IMPACT dropped out of the process a few days after De Beers announced Tracr. Tracr is Trial in early May 2018 Originally planned to launch later that same year, it hopes to enable the platform to enter the global diamond market.
In a pilot project, De Beers announced that it was able to successfully track 100 high-value diamonds through their regular journey from birthplace, mine and final retailer.
“Blockchain technology and tokenization can provide a way to decentralize ownership — instead of taking all risk on one stone, risk can be spread among many investors. Even the appraisal and appraisal process can even be outsourced or shared From an investment standpoint, tokenization is a great way to open up diamonds to ordinary people,” Schweifer added.
tracking device use De Beers’ identification tag, called the Global Diamond ID, is dedicated to each diamond and identifies various attributes of the diamond, such as clarity, color and carat weight. Unique information specific to a particular diamond, recorded by its ID, is then recorded on a public ledger that Tracr uses to track the diamond’s progress through the distribution chain.
Tracr is officially Launched in early May De Beers noted that the program has been integrated into its global business module. About a quarter of De Beers’ production by value in the first three Sights of 2022 has been recorded on Tracr. Sight is a term for a sale event that contains the corresponding number of diamonds for sale.
De Beers also pointed to some of the key advantages of the blockchain used, including immutability, security, data security, privacy, transparency, and speed. According to De Beers, blockchain is expected to “register 1 million diamonds on the platform every week.”
Blockchain increases transparency for all parties involved
De Beers is not the only company working on a blockchain solution for diamond provenance. IBM launched the TrustChain Initiative in April 2018 in partnership with the Jewelry Companies Association.
The TrustChain initiative is create The goal is to increase consumer transparency by tracking the provenance of jewelry using the IBM blockchain platform.
Rare Carat, Diamond Market, January 12, 2021 cooperating Partner with EverLedger to provide more transparency on the provenance of diamonds on its platform by using EverLedger’s blockchain.
Despite many challenges and a bleak past, the global diamond industry is still leading the way. Like finance and many other industries, blockchain has been shown to help improve the diamond industry, especially in addressing issues related to the origin of diamonds.
A proper ledger for tracking the provenance of jewelry should be immutable and transparent, so a public ledger with no central point of control should be used. Otherwise, as pointed out in the Kimberley Process, the whole idea of transparent assessment dies as soon as it arrives.
“When it comes to transparency, the biggest beneficiaries of blockchain are consumers and authorities. Ultimately, this will bring the industry to a higher standard and hopefully improve working conditions for miners. In an industry as shady and dangerous as diamonds, this It can really be seen as a benefit,” Schweaver said.
Diamonds are a high value density asset, he added, so “it’s almost impossible for the average person to own a large, investment-grade diamond.” Even for those who can afford it, diamonds are a tricky investment because it requires a lot of Experience to avoid being scammed or losing money.