The rapid advances in technology has enhanced our way of life in countless ways from communication, information dissemination to data storage. Various institutions in finance, healthcare, real estate, fashion and more are ditching manual processes for automation and have employed technologies such as blockchain system and the use of artificial intelligence. These have enabled industry players to optimize performance and provide seamless customer service while cutting down on costs and lead time.
Blockchain is a system that contains records of transactions called blocks which are linked using cryptography. According to Wikipedia, each block contains a cryptographic hash of the previous block, a timestamp and transaction data. It works like a public digital ledger, eliminating the need for centralized control. A blockchain system is also designed to disallow data modifications and reversing of transactions.
Blockchain has the potential to transform the industry by providing transparency through tracing the source and verifying its authenticity across different members of the supply chain. The diamond industry has forayed into the blockchain phenomena with the announcement of international diamond producer De Beers’ development of Tracr, an end-to-end blockchain technology established exclusively for the diamond industry. De Beers had developed Tracr in collaboration with five diamond manufacturers: Diacore, Diarough, KGK Group, Rosy Blue NV and Venus Jewel alongside Boston Consulting Group’s Digital Ventures. De Beers also owns most of its supply chains, making it easier to track and to control each process in the blockchain.
Alrosa, the world’s top diamond mining company, has joined in the Tracr initiative along with Signet Jewelers, the largest retailer of diamond jewelry. Tracr aims to improve transparency and customer trust by tracking down the diamond value chain from mining to retail. It assigns a key certificate for each diamond which includes key attributes and transactions. This is also in line with providing confidence to the customer that the diamonds they purchase are verified as natural and conflict-free. Conflict diamonds, also known as blood diamonds, are uncut diamonds that are mined in a conflict zone and whose profits are used to fund combat. This will also support existing regulations surrounding the diamond industry’s quality such as the Responsible Jewelry Council Code of Practices, World Diamond Council System of Warranties and Kimberley Process Certification Scheme.
The Kimberley Process Certification Scheme has been launched by the United Nations General Assembly in 2003 to verify diamonds and declare them conflict-free. While it did achieve successful results, it checks the diamonds batch by batch instead of individually, not exactly providing complete transparency. A blockchain steps up the process and adds more transparency by verifying each diamond. This is especially attractive to millennial consumers, who prefer to engage and transact with socially-conscious brands that reflect their values. Contrary to claims that millennials have killed the diamond industry, in fact they make up 41 percent of all diamond jewelry sales according to a De Beers Diamond Insight Report.
So how does blockchain work for the diamond industry? From the starting point of the production chain, which is the raw materials such as gold or diamond from the mine, to the gem cutter, then through the distributors and manufacturers, to the retailer and all the way to the consumer, the raw material is tracked by assigning a serial number and then data is encoded in the digital ledger as it goes through different vendors and various processes. Since blockchain is an extremely secure system, any recorded transaction cannot be edited and stays permanent. In turn, the consumer knows each material’s origin, the refinery and company responsible for the mining and the production and consequently be able to verify if the diamond is authentic and if the manufacturer has existing ethical standards on the production of the jewelry.
IBM’s TrustChain Platform, whose successful partnership with Walmart to ensure the safety and security of food supplies by enabling them to trace the origins from farm to fridge when food contamination issues arise, has also been tapped by Richline Group, Inc. to establish another blockchain initiative catered to jewelry. TrustChain has collaborated with UL, an independent third-party verification system, and with five diamond and jewelry companies that make up the supply chain: Rio Tinto Diamonds (diamond supplier for Proof of Concept only), Leach Garner (precious metals supplier), Asahi Refinery (precious metal refinery), Helzberg (US jewelry retailer) and the Richline Group (global jewelry manufacturer). TrustChain aims to cover a wide range of jewelry materials from metals to gemstones. With the addition of third-party verifier UL or Underwriter Labs in their blockchain system, additional security measures and consumer confidence will be provided to the system. This blockchain platform also covers all kinds of jewelry such as freshwater pearls.
Blockchain has already provided numerous benefits to different industries that are using the system, especially in consumer trust and transparency. It’s a win-win situation that will push industries to develop uniform processes that exercise social responsibility and discipline especially companies who don’t own all their supply chain. Blockchain possesses a promising quality but is only the start of a traceable system. A consistency must be instilled and the openness for traceability in order to make this a success.