New kid on the blockchain

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’ identities, 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, 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.”

diamondblockchaininitiative.com

Image: Shutterstock.

Article from the Rapaport Magazine - February 2018. To subscribe click here.