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In an increasingly aware world, more people are looking to buy products that balance the negative effects of consumerism on the planet. This could mean buying sustainably made items or just shopping with brands that are committed to ethical work practices. As consumers are more aware than ever of the impact of their shopping habits, sellers need to embrace this shift in consumer behavior by changing the way they operate.
One area where this is particularly evident is the diamond sector. The demand for ethical diamonds has skyrocketed in recent years as consumers do not want to pay for a gem used to finance wars, uprisings or oppressive regimes, especially in Africa. So-called blood diamonds have long been a major problem for the industry, even with measures like the Kimberley Process, which aims to prevent “conflict diamonds” from entering the main rough diamond market.
While some manufacturers have turned to lab-grown diamonds instead, those who continue to sell natural jewelry have had to think about how to ensure the integrity of their products. One solution that the industry is looking for is blockchain technology.
What is blockchain technology?
Blockchain is a form of digital technology that allows the distribution of data that resists modification. A blockchain functions as a series of timestamped data records (blocks) managed by a group of computers, not owned by a single entity. Each of these blocks is secure and bound to each other using cryptography (ie the chain in “blockchain”), a series of mathematical equations (algorithms) and secret keys that encrypt the data. This chain cannot be altered, thus acting as a secure means to transfer and store data. Furthermore, because a blockchain is not centrally owned, the information it contains is visible to anyone and much more difficult to hack. Blockchains tend to store data as transactions (for example between a diamond miner and a cutter), including the date, time and value of any money exchanged, as well as information about who is participating in the transaction.
In order for a block to be added to the blockchain, a transaction must take place. Then it needs to be verified, with the computer network confirming that the transaction happened the way the parties said it happened. It is then stored in a block, which is assigned a hash, a unique cryptographic code that distinguishes the block from the others. At this point, the block can be added to the blockchain and viewed publicly by anyone. Each computer involved in the blockchain network gets its own identical copy of the blockchain, which makes it even more difficult to infiltrate. This is why blockchains are often referred to as distributed ledgers.
How can the blockchain guarantee ethical diamonds?
Tracing the origin and authenticity of a diamond is an extremely difficult task. The industry’s complex supply chain means that gemstones are often mined in countries like Africa, Russia, and Canada, then cut in places like India, Belgium, and Israel before being shipped to wherever they are sold. As such, they typically touch numerous hands before reaching consumers. It is even more difficult to ascertain the provenance of a diamond when the details are traditionally documented on paper or PDF, documents that can be falsified and therefore may not provide a truly accurate account of a gemstone’s provenance, or whether it is also a real diamond.
However, the use of blockchain technology means that data cannot be changed, so a diamond’s journey can be accurately documented from start to finish. As a public ledger accessible to anyone, consumers can turn to the blockchain to confirm that a diamond was ethically produced and not sold for unethical reasons. In recent years, this technology has proven invaluable in winning over aware and concerned consumers about the potentially unethical provenance of their products.
How do diamond companies leverage the blockchain?
Numerous blockchain solutions have been aimed at diamond companies in recent years, including one courtesy of perhaps the biggest name in the industry itself: De Beers. In 2018, the behemoth revealed plans for Tracr, a blockchain that uses the Ethereum platform developed alongside Boston Consulting Group’s Digital Ventures and five major diamond producers. Diamonds need to be scanned at every stage of the manufacturing and distribution process so that all data can be fed into the blockchain to accurately track the journey. Each diamond is also assigned a Global Diamond ID, a digital record that shows its key attributes such as carat, clarity and color. This can then be used to verify its authenticity and can then be shared with customers in a store so they understand exactly what they are buying.
Another company leveraging blockchain technology for similar purposes is IBM, which developed the TrustChain tool together with five major jewelry manufacturers. “By placing the current physical process on a blockchain, we provide better visibility to the consumer along the entire supply chain, to enable the exchange of information between participants,” says the initiative’s website.
Another example is Everledger, a relatively new blockchain technology that is making its way into the jewelry industry. Luxury jeweler Taylor & Hart uses Everledger to monitor their supply chain, citing the elimination of paper reports in favor of smart digital contracts as a key benefit, while eliminating the risk of tampering.
Could this pave the way for an ethical diamond industry?
Blockchain technology is clearly a very promising tool for dealing with counterfeiting and helping to prove the provenance of a diamond at every stage of the process. This can lead to a more ethical industry in general, as those who sell and buy diamonds can have more confidence in where their products come from.
However, it’s important to be realistic about how much change the blockchain can actually bring. As argued by Everledger founder Leanne Kemp, there will always be the potential for fraud and the existence of black market diamonds. Furthermore, blockchain can only make the diamond industry more ethical if companies actually use it. While larger companies are taking advantage of the technology, there are many smaller ones that are far less likely to understand blockchain or have the funds to implement it.
However, blockchain technology can certainly help make the diamond industry more transparent, and if used more widely it could almost certainly contribute to a more ethical future for the world’s favorite gem.
Nikolay Piriankov, co-founder and CEO, Taylor & Hart
