B for Blockchain

Diamonds and Blockchain – a match made in heaven?

They might seem an unlikely pairing, but diamonds have recently been adding a touch of sparkle to the world of tech. Or is it the other way round? Yup - Blockchain is forcing the jewellery industry to clean up its act by unlocking the potential to ensure that every diamond sold is squeaky, sparkling clean.

Supply chain evolution driven by digital transformation holds exciting possibilities for the jewellery industry. As consumers increasingly demand transactional transparency, concerning themselves with issues around diamond provenance and sustainability, suppliers are being held to account for the journey that their stones have taken. Those who cannot prove that their gems are responsibly and ethically sourced will wave goodbye to consumer confidence and likely see their profits dwindle.

While the Blockchain technology itself is mind-boggling in its scale and complexity, the overall concept is remarkably simple. It is essentially a system of interconnected databases; a sort of digital ledger where transactions are recorded and no single person can control data records, thanks to a decentralised storage system. Any inputted data must be validated by the entire network of computers if it is to be embedded in the Blockchain, so rogue actors would have their work cut out if they wished to tamper with the records!

Alrosa and De Beers have recently partnered in an exciting new traceability venture incorporating Blockchain, Artificial Intelligence and the Internet of Things (connecting the physical and the digital eg. the Apple Watch). In building their ‘Tracr’ platform, their mission is not only to facilitate the authentication of diamonds, but also to enable value to be exchanged as easily as information. This relatively new concept has been termed “the Internet of Value”. It has the potential to revolutionise the hugely international gemstone and diamond industries by removing the need for intermediaries such as banks and allowing for instant, validated transfers of money across currencies. If it were to be implemented in conjunction with Blockchain, with its validation technology and decentralised system of control, it could well prove instrumental in curbing corruption and foiling fraudulent or illegal transactions.

These developments come at a time when a fifth ‘C’ is increasingly finding its way into conversations around the well-established 4C diamond-marketing model. This 5th C stands for ‘conflict’, a blight that has plagued those living in diamondiferous countries for decades - it is no secret that diamond revenues have fuelled and facilitated devastating civil wars in countries such as the Democratic Republic of Congo, Sierra Leone and Angola. The human rights abuses that have plagued the diamond supply chains in these countries have been well documented, and the media exposure has undoubtedly fostered an increased appetite to clamp down on individuals and companies who pursue profits over peace.

That said, the industry is badly in need of another shakeup. While the 2003 Kimberley Process (designed to prevent the trade of conflict diamonds) was initially a force for good, it has lately been found wanting, and consumers have lost faith in its efficacy. Part of the problem is that the Kimberley Process defines a conflict diamond as “a gem that is used to fund rebel groups”. As a result, several countries have been given the green light to trade in ethically dubious diamonds. Zimbabwe is a case in point: a report by Global Witness in 2017 found that profits generated by the sale of Zimbabwe’s diamonds were being funnelled into the coffers of the corrupt Central Intelligence Organisation, the country’s secret police force, which has been accused of numerous human rights abuses and the ruthless suppression of dissent. Similarly, countries with unregulated mines, or those that carry out broader human rights abuses, are often excluded from the list of countries with which diamond trading is banned. The upshot of this is that diamonds mined under abusive or dangerous conditions (child labour, poor safety standards and systemic violence are just a few of the issues reported by monitoring groups) are often still eligible for sale as Kimberly-certified stones.

It goes without saying that Blockchain alone cannot possibly solve all of these problems. It could, however, provide a new impetus for change, amid stricter regulations and far greater transparency. It’s a small step towards a great ideal, but if Blockchain can see to it that ethical supply chains become the rule, rather than the exception, then yes, interconnected data and diamonds could be the next big bling!