The global technology industry has been abuzz for over a year now with news of advancements in blockchain-enabled platforms. The technology, which is the underpinning of cryptocurrencies like Bitcoin, has started to turn up in some pretty unexpected and innovative places. There seems to be no limit to the ways that this exciting new technology will be applied.
It has been adapted to create a rights-managed service for artists and musicians to self-publish their work. Also, the distributed computing resources inherent in blockchain systems are being leveraged by businesses like Golem, to bring massively-scaled computing to companies and individuals on an on-demand basis. The most unexpected use thus far though, has been in the diamond industry.
An Ancient Industry
The diamond trade has been around for thousands of years. The stones were first discovered in India at least 3000 years ago, and have been a precious commodity worldwide ever since. Unfortunately, the amount of wealth generated worldwide by the diamond trade has led to widespread fraud and abuse, dating back nearly to the industry’s inception.
Diamonds are often used in money-laundering schemes, to finance civil wars, and are often the focus of other fraudulent activities. The decentralized global nature of the industry makes policing it to guard against abuse a unique and difficult challenge. Consumers are left to fend for themselves when looking to make any diamond purchase.
Efforts to curb the problems, like the Kimberley Process, have thus far had limited success. Year after year, the industry as a whole suffers from the deleterious effects of all of the self-inflicted wounds, as a new generation of well-informed consumers decide to avoid buying diamonds for fear that they will be victimized or that their purchase will be funding the suffering of others. The introduction of the blockchain, though, may be on the verge of changing all of that for good.
Supply Chain Transparency
The key to solving many of the diamond industry’s long standing problems is in finding a way to create a traceable record of every mined diamond from the point of production all the way to the eventual owner of the stone. That’s exactly what blockchain platform Everledger aims to provide. They’ve created an immutable blockchain diamond registry, which uses more than 40 characteristics of each diamond to create a unique identification marker for it. That marker is logged into the blockchain system every time the diamond changes hands, beginning at the mine it originated from and continuing through the global supply chain.
They’re not alone in their efforts, either. Industry giant De Beers has also announced that they will be creating a similar system that will cover all of the parts of their global diamond business. They hope that all of their partners around the world will buy into the system and help to put an end to the years of abuses in the industry. As a consumer-oriented business, their adoption of the blockchain should help to enhance buyer confidence in diamonds as a commodity and should push other industry players to follow suit.
Buying With Confidence
As these blockchain ledger systems become fully integrated into the diamond industry, the increased transparency may allow it to finally shake off years of controversy and bad publicity. It couldn’t come at a better time. In the U.S. market, the aging baby boomer generation will be transferring $30 billion in wealth to their children and other heirs in the coming years. This means that opportunities for the sales of luxury items like diamonds should increase exponentially as well.
To capitalize, De Beers is focusing on reorienting their sales strategy to cater to the growing millennial generation at the same time that they are securing the market with the blockchain. These things dovetail nicely since millennials are known to prefer doing business with companies that support ethical practices. In an industry rife with problems, the blockchain may turn out to be the key to ending the worst abuses the industry has harbored for years; thus preparing it to make a whole new generation fall in love with diamonds, much like their parents did.