The diamond industry has been chattering about blockchain for some years now. In fact, the Everledger company, one of the first to focus on diamonds in the blockchain, was founded back in 2015. It has already tracked 2 million diamonds.
Recently however, concrete steps have been taken to start using blockchain diamonds in practice on an even much larger scale. Companies such as De Beers and IBM are running pilot blockchain programs to trace and track diamond authenticity and provenance. So, now is a good time to get back to basics, and get a broad understanding of blockchain, and how it may well revolutionize the diamond industry.
What is Blockchain?
Blockchain is a digital ledger of data records, maintained not by a central authority but rather by a broader community of computer networks. Blockchain is made up of ‘blocks’ of data that link together to form a chain. Once part of the blockchain, data cannot be altered or interfered with.
Data blocks in the blockchain consist of a group of records of transactions. These transactions may be financial, as with Bitcoin or other cryptocurrency, or they may be contracts, data records other types of information. As each transaction is verified by the network of computers, it is then added to the blockchain by linking it with the previous block, creating a chain of blocks.
Because the blockchain is distributed and stored over a large network of computers, there is no single ‘owner’, and the blockchain acts as a verified public ledger. The blockchain setup makes it impossible for the blocks to be tampered with, and the history of the data cannot be changed. This makes it an open, decentralized, secure, and verified system.
Check out this neat video by the World Economic Forum, which gives a general overview of blockchain:
What is Blockchain Used For?
The beauty of blockchain is that it has seemingly endless practical applications in numerous industries. Many of these are still just theory and speculation, however given time, blockchain will be increasingly relied upon in a range of ways. Here are some examples:
- Cryptocurrency: Although the concept of blockchain has been around for about two decades, the working blockchain system in use today was actually invented in 2008 as the public transaction ledger for Bitcoin, the first and still largest cryptocurrency. Blockchain technology is the heart of cryptocurrency, as it forms the decentralised record of the entire history of the currency’s trading.
- Smart Contracts: Blockchain can be used to facilitate contracts without the need for an intermediary third party. Smart contracts are the same as physical contracts, however they take the form of digital software that lives in the blockchain. The smart contract software contains rules and terms of a negotiated agreement, and only carries out the agreed actions once each stage of the contract has been verified within the blockchain. Ethereum is the widest known blockchain technology used for smart contracts.
- Voting: The first blockchain election was recently held in Sierra Leone, and it is believed that blockchain will be used in the US already in the next elections. Blockchain technology is a secure, tamper proof method of running computerized voting for elections. Standard computer-based voting is ripe for hacking and fraud. Blockchain may be a solution that enables safe, secure mass voting for elections and other purposes.
- Stock market: Share trading is a complex business, involving millions of transactions based on complicated processes. Blockchain could change all that by transforming share trading into a transaction that occurs directly between sellers and buyers, rather than through a central hub, such as the stock exchange. Blockchain could make the stock markets more secure and faster, while increasing transparency and reducing risk.
- Real Estate: There are many potential uses for blockchain in the real estate industry. These include purchase and sale or properties, transfer of ownership, contracts, purchase of title insurance and more. Essentially, blockchain would enable the real estate transaction to occur digitally and safely, with the transfer of title or deed occurring automatically as soon as the seller receives the payment for the property. Check out this article, which gives a great overview of the blockchain concept, in general and in real estate.
- Medical Records: Blockchain could have very important applications in health care. Today, an individual’s medical records are usually kept on file by their doctor or health care provider. During an emergency, or if the patient consults another doctor, getting access to an individual’s medical records can be a slow, inefficient process. This increases the likelihood of medical error, and also hampers the ability to give timely medical care. Blockchain could be used to create a decentralized system of medical records that are in the control of the patient, yet can be easily made accessible to a variety of doctors and health care providers. As a secure, tamper proof system, blockchain could solve issues of privacy and confidentiality, which are critical in health care, while maintaining medical records that are secure, accurate and accessible.
The Diamond Industry: How Blockchain Can Make a Difference
The diamond industry faces numerous challenges when it comes to security, trust and transparency. Traditionally, the diamond industry has struggled to maintain authentic accurate records about the source and provenance of diamonds, as well as identifying lab grown diamonds fraudulently sold as natural mined diamonds, and transactions between traders and buyers. In all these areas, the diamond industry can deeply benefit from blockchain technology.
Every diamond, on its way from the mine to the consumer, takes a journey that passes through many hands. The journey covers the entire diamond pipeline, from the mining company, through rough purchasing tenders, the long manufacturing process, to the diamond trader, and finally the retailer. The diamond is also processed by various technological devices along the way, which are used to plan and produce the diamond. This entire trail can be secured in the blockchain, increasing the trust and transparency of the diamond’s origins and journey. Most rough diamonds are cut into a number of smaller polished diamonds, and blockchain can also be used to record this important fact.
If the diamond’s entire history is stored on the blockchain, it cannot be tampered with, nor can the diamond be sold with a fake or enhanced report. The diamond’s source from a particular country or mine is secured, which can help in the processes used to combat the problem of ‘blood diamonds’.
What’s more, the diamond’s blockchain data will exist forever, which means that even if the diamond is resold in a second hand market, its provenance and digital report will remain intact and untouched. For an industry that has often struggled with issues of flagging consumer confidence, blockchain may well be the ideal solution.
Blockchain Diamonds: A Hot Trend
In April 2018, IBM announced that it was partnering with leading diamond and jewelry companies to track and authenticate diamonds using its own blockchain platform. It’s called the TrustChain initiative. The program will track six styles of gold and diamond engagement rings, which will be available in retail stores at the end of the year.
De Beers Group has also joined the fray, with its own blockchain initiative, called Tracr. The pilot program began in early 2018, which will be followed by a complete launch later in the year. It was recently announced that Signet Jewelers have signed on to the Tracr pilot program, helping to expand the capability of the blockchain technology to work with smaller diamonds - a must if blockchain is going to have real world applications with standard retailer goods.
Although blockchain has entered into everyday vernacular, there is still a long way to go before it hits the mainstream in most industries. Now that some of the diamond industry’s leading players are testing the technology, it won’t be long before we see whether blockchain is truly the cure-all it is predicted to be.
Diamonds are forever. Is the blockchain too?