De Beers Is the New Kid on the Blockchain

RAPAPORT… Last
month, dozens gathered in midtown Manhattan to learn more about De Beers’
Diamond Blockchain Initiative — a project that aims to underpin confidence in
diamonds by creating permanent records for them. While most know blockchain as
the technology that underlies Bitcoin, De Beers is testing a system that will
safeguard stones’ identity, ownership, contracts and financing history.

In fact, the new program has
no relation to cryptocurrency. Instead, it lets users securely track assets and
digital record transfers through a tamper-proof and decentralized register that
shows the journey from rough to polished. Along the way, it validates the
identities of stones and their attributes, updating constantly as the diamonds
move through the pipeline.

Not only does this use of
blockchain help protect against counterfeit Kimberley Process certificates, its
time-stamped documentation of diamond transactions could inspire more trust
from the banks, which in turn would be more inclined to lend to the industry.

Checks and balances

But is
it secure? Very, according to speakers at the January 17 gathering, which De
Beers organized jointly with the United States Jewelry Council. Because the
blockchain system spreads its data across multiple servers instead of storing
it all in one place, it’s difficult for hackers to access, they explained, so
attacks like the one that hit credit reporting company Equifax in 2017 would be
thwarted.

Ultimately, De Beers envisions
its initiative as a resource for registered members of the industry, providing
a single address for verifying stones — as well as storytelling material for
retailers who want to describe a diamond’s journey. The miner also wants to
have an unbiased third-party organization manage the project and allow
developers to build apps on top of it.

One of the De Beers officials
who attended the Manhattan meeting was David Prager, executive vice president
for corporate affairs (pictured), who feels the top benefit of using blockchain is the
ability to assure consumers that their diamonds are naturally mined and
conflict-free.

In addition, he tells Rapaport
Magazine, it will “reduce inefficiencies, such as having to check stones
against paper invoices, and easily source primary information — cut, color, and
where it was found — and secondary data like grading certificates that it
accumulates along the way.”

Honing the tool

Of
course, the trade might not want all the information the technology makes
available. “Instead of a data dump, we’re trying to determine what’s really
important to share,” Prager explains.

Another caveat: The platform
will only reach its full potential if many use it. The more parties input data
along the way, the more there is to draw on.

Currently, the system can only
track newly mined stones weighing a minimum of 2 carats. However, De Beers is
looking into working with smaller diamonds and existing inventory.

Accessible to all

The
miner’s goal isn’t just to track its own goods; it’s financing the adoption of
blockchain to make it accessible to the trade. De Beers is consulting with a
small number of participants to ensure maximal effectiveness prior to its
late-2018 debut. There will be no charge per transaction, just an integration
fee that De Beers may help cover as well.

“We’re trying to lower the
barriers to entry,” says Prager. “Consumers increasingly expect a level of
assurance. If we don’t take this moment as an industry, then we will be left
behind.”

This article first was first
published in the February 2018 issue of Rapaport Magazine.