Diamonds are some of the most valuable gems in the world and the global diamond industry has managed to stay afloat despite being partially obscured by the advent of modern equities and new virtual assets.
The diamond industry, however, seems to be undergoing a change of concept in recent times – with modern technologies such as blockchain to improve diamond production, measurement and final sales.
Leanne Kemp, CEO of independent technology company EverLedger, emphasized the need for blockchain integration in the industry to improve the measurement of stone origin.
Speaking about data creation on the origins of diamonds four years ago, Kemp pointed out that “we are referring to documents that have required one stone on similar timelines for many insurers.
While it has not yet provided a direct solution to all of the diamond industry’s concerns, blockchain is used to address some of them by facilitating transparency that helps trace the origins of diamonds. This is primarily aimed at suppressing the sale of “diamonds”. De Beers Group has identified the potential of blockchain in the industry for increased accuracy, trust and transparency in determining the origin of diamonds.
The diamond industry retains its uniqueness
Despite being hit by the Great Depression in 2008, when the general stock market fell by an unprecedented margin, the diamond industry has managed to maintain its lead despite a marked decline in international rough diamond production.
The idea of integrating blockchain into the industry – which was only introduced in recent years – is likely to rekindle public interest and further improve international production.
The years leading up to 2008 saw a steady increase in rough diamond production. According to data from the German database company Statista, international production of rough diamonds from 2005 to 2008 never fell below 160 million carats.
After the economic collapse of 2008, however, the average production of the last decade has been 142 million carats on average and 116 million carats produced in 2021. 2017 was the highest turnover of the decade, with 152 million carats of diamonds.
About 99% of international diamond mining processes take place in nine countries, with Russia, Botswana, the Republic of Congo, Australia and Canada being considered the top five participating countries. Diamond mining is almost a monopoly, as companies such as ALROSA and De Beers control a large part of the industry.
Ethical concerns about the diamond industry are high
There are several reasons why investors do not seem to be flocking to the $ 68 billion company that is the diamond industry, especially in recent times.
Profitable as it is, ethical concerns about the backbone of the diamond industry prevail. This has deterred potential investors, especially at a time like this when investor behavior is increasingly influenced by the ethical and ethical attitudes of consumers.
According to Johannes Schweifer, CEO of CoreLedger Crypto Valley, security and transparency challenges, as well as ethical concerns, plague the diamond industry. For more than a decade now, there have been claims of a link between diamond mining and regional warfare, as has been observed in some parts of Africa. Schweifer told the Cointelegraph:
“The biggest problem in the diamond industry has always been transparency. Most gems cannot tell their origin. But what if the stone on your wedding ring is actually a blood diamond, you would not want to know? Knowing the origin and ensuring transparency from the “finger to the finger” can not only help you sleep better, but it can also save lives. ”
Conflict diamonds, otherwise known as blood diamonds, are diamonds mined in areas controlled by rebels who oppose a legitimate government and then used to finance these rebel movements.
Some examples of unethical use of blood diamonds were evident in the 1990s in countries such as the Republic of Congo, Angola, and Sierra Leone. Evidence proved that these diamonds were mined and used to buy weapons and ammunition for military and military movements.
In addition to the sale of diamonds to fuel conflict, there have been numerous reports of unscrupulous working methods used to exploit miners. Child labor also appears to be predominant in most of these areas.
Furthermore, the diamond industry has been criticized for its patent monopoly over the control of the process of processing, distribution and sale of diamonds. This has raised concerns about the current cartel that controls the flow of the industry.
In addition, the industry seems to be overcrowded with problems such as the environmental concerns of mining, dangerous working environment and insecurity, to name a few.
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Where traditional methods end, blockchain begins
In view of the problems with blood diamonds, the international mining giant De Beers announced a pilot project of the blockchain program Tracr, which will ensure that the company does not take care of blood diamonds, especially in distribution and sales. This announcement was issued in January 2018.
However, De Beers would not be the first to make plans to trace diamonds to resolve conflicts in diamond distribution.
Nearly 20 years ago, in 2003, the United Nations established the Kimberley Process Certificate Scheme with the aim of preventing the flow of blood diamonds into the international diamond market. This decision was made in the wake of the 2000 Fowler report which showed that blood diamonds were still being used in conflict financing by the National Union for the complete independence of Angola.
However, the Kimberley Process has been condemned by organizations such as the Canadian-based non-profit organization IMPACT and Global Witness, London-based NGOs that seek to prevent the exploitation of natural resources and human rights violations. They meant inefficiency.
Charmian Gooch, founder of Global Witness, told the BBC in a 2011 interview that “almost nine years after the Kimberley Process was launched, the sad truth is that most consumers can still not be sure where their diamonds come from.
Gooch noted that the initiative fell on three separate tests, specifically to address individual concerns in Côte d’Ivoire, Venezuela and Zimbabwe when its NGOs abandoned the process.
Furthermore, IMPACT mentioned that the failure to provide detailed reports on the origin of diamonds and the “false trust” given to consumers as a reason for their criticism of the Kimberley Process. Joanne Lebert, CEO of IMPACT, pointed this out when the NGO withdrew from the initiative in January 2018.
IMPACT withdrew from the process a few days after the announcement of the Tracr from De Beers. Tracr was piloted in early May 2018 with initial plans to launch later that year and a vision to make the platform accessible to the global diamond market.
In the pilot project, De Beers announced that it was able to track 100 precious diamonds as they went through the traditional journey from their birthplace, the mine and to the perfect retailer.
“Blockchain technology and authentication can provide a way to divide ownership – instead of going full risk on one stone, you can spread the risk over many investors. You can even outsource or share the evaluation and evaluation process. From an investment perspective, identification is a great way to open up diamonds to the average person, “Schweifer added.
Tracr uses an identification mark that De Beers called the Global Diamond ID, specifically for each diamond, which identifies unique features of the diamond such as clarity, color and carat weight. Individual information that is specific to a particular diamond, such as its identifier, is then recorded in an official book used by Tracr to monitor the progress of the diamond in the distribution chain.
Tracr was officially launched earlier in May and De Beers noted that the initiative was already integrated into its global business unit. About a quarter of De Beers’ value-based production has already been recorded on Tracr in their first three TVs in 2022. Sight is a concept for a sales event with the relevant batch of diamonds put up for sale.
De Beers also pointed out some of the key advantages of the blockchain used, which include immutability, security, data security, privacy, transparency and speed. According to De Beers, the blockchain is expected to “register one million diamonds a week on the platform.
Blockchain increases transparency for everyone involved
De Beers is not the only company working on blockchain tracking solutions for diamond origins. IBM unveiled the TrustChain Initiative in April 2018 in collaboration with the jewelry industry association.
The TrustChain Initiative was established with the aim of increasing consumer transparency by monitoring the origins of jewelery using the IBM blockchain platform.
On January 12, 2021, the Rare Carat diamond market partnered with EverLedger to provide more transparency about the origins of diamonds in its field using EverLedger’s blockchain.
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The global diamond industry is at the forefront despite various challenges and a sad past. Like finance and a number of other sectors, blockchain has proven useful in improving the diamond industry, especially in addressing issues related to diamond origins.
The correct ledger to be used for tracing the origin of jewelery should be unchangeable and transparent, therefore an official ledger should be used without a central control point. Otherwise, the whole idea of transparent food is dead on arrival, as was said in the Kimberley Process.
“When it comes to transparency, the biggest users of blockchain are consumers and authorities. Ultimately, this will keep the industry at a higher level and hopefully improve the working conditions of the miners as well. In such a murky and dangerous trade as diamonds, this can certainly be seen as a benefit, “said Schweifer.
He added that diamonds are high-density assets, so “it is almost impossible for the average person to have a large stone in the investment grade. Even for those who can afford it, diamonds are a difficult investment, as a lot of experience is required to avoid being cheated or losing money.
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