Blockchain technology is largely associated with cryptocurrency — Bitcoin to be specific. But the technology has broad applications that are disrupting several industries, including the diamond sector.
Historically, diamonds have always been a standard for luxury so it is therefore highly valued. But, the changing consumer behavior means the value can only be tied to its origin. The influx of blood diamonds and their negative economic and political impact on mining communities devalues the diamond’s status.
Blockchain technology is now enhancing the diamond supply chain transparency. To an extent, it is eliminating blood diamonds and giving back the diamond’s historical luxury value. But before diving deep into blockchain technology and its impact, let’s check out first what the current news is in the said industry.
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Current State of the Diamond Industry
The diamond industry has always funded the civil wars among major producers of diamonds in Africa. African countries like South Africa, Botswana, and the Democratic Republic (DR) of Congo still produce significant amounts of diamonds.
However, conflict in diamond mining in Congo has spilled over to other mining sectors. As a result, DR Congo’s natural wealth has turned into a curse. UN developed the Kimberly Process to certify diamonds and stamp out blood diamonds.
Kimberly Process reduced the number of blood diamonds in supply. But, it was not so effective. Blood diamonds would be taken to other countries and packaged as free of conflicts. This conflict in the diamond supply chain still exists today.
The lab-created diamonds help further curb the smuggling of conflict diamonds in the global trade. With advanced technology, it is now easier to create high-quality lab diamonds that are no different from naturally mined ones. As a result, there are high-quality loose lab created diamonds that you can customize to your preference.
But there is still a lack of supply chain transparency that can undermine user trust. And that is a serious concern to a conscious consumer base, especially Gen Z and Millenials. Using blockchain increases supply chain transparency. In turn, it improves your firm’s reputation and brand trust.
But the benefits go beyond diamond provenance and supply chain transparency. Let’s understand blockchain technology and its impact on the diamond sector.
What is Blockchain Technology
Blockchain is a distributed ledger technology that records and stores information in a way that makes it difficult to change or cheat the system. And it is accessible to anyone on the network so all the information is viewable without compromising or exploiting its content.
The immutability and transparency features of the technology are what’s driving the craze in supply chain applications. On top of that, it has exceptional encryption that keeps transactions secure from prying eyes.
Unpack those features and you get the benefits of the technology. You can run provenance systems (tracking diamond origins), supply chain transparency, and secure diamond payments. And that’s how technology is disrupting the diamond sector. Let’s uncover the details of how blockchain technology is doing all these in the said sector.
How Blockchain Technology is Applied in the Diamond Sector
1.Blockchain Diamond Tracking
Blockchain technology is enhancing supply chain transparency using fool-proof provenance systems. As mentioned earlier, proving legality and clearing human rights concerns on most diamond gemstones is a pressing concern.
You may be fueling conflict in diamond mining communities if you rock diamond jewelry sourced from those regions. Most conflict diamond mining is run by militia and may involve child labor too. Not to mention the crude mining methods used may not adhere to environmental safety.
So, laying your hands on these diamond jewelry directly fuel conflict, undermine human rights, and destroy the environment. You do not want to do these unknowingly. That’s where diamond provenance and tracking systems are elevating transparency to reduce these issues.
They are run on blockchain to further enhance transparency and prevent tampering with the documentation of the diamond origins. There are a handful of diamond blockchain provenance and tracking systems available:
- Everledger.io: Everledger makes supply chain transparency and product authentication easier. It allows you to showcase your product provenance across the whole chain. Also, it traces the sustainability of diamond products to users and customers.
The Gemological Institute of America (GIA) Diamond Origin Reports are a click away. So, Everledger is democratizing diamond products’ provenance for customer validation. - Tracr: Tracr is another diamond blockchain provenance system that provides source assurance at scale. It is supported by De Beers, a significant global producer of diamonds. That allows it to provide further transparency of the diamond sourcing and authenticity.
2.Diamond Trading
Blockchain technology is slowly turning diamonds into an asset class. Historically, people have always held on to gold with little liquid cash to navigate market volatility. As a result, gold can be used a strategic asset class that comes in handy in handling global stress and economic risks.
Put plainly, gold is a revered and trusted store of wealth and exchange. The same applies to silver and platinum but not a diamond. Blockchain is pushing diamonds as an alternative asset class.
There are cryptocurrency coins and tokens that use diamonds as a reserve asset to cushion against market volatility. One pioneering example is the Diamond Standard. Its Diamond Standard Coin has yielded over 25% return on investment (ROI) since its inception in 2021.
3.Ensure Safe and Secure Payments for Diamond Buyers
Blockchain technology is also making online payments for diamonds safer and more secure and private. The popularity of cryptocurrencies has prompted some major firms like Mastercard to accept Bitcoin as payment. And some diamond retailing firms are following the trend too. Cryptocurrencies have made local and international business payments much easier and hassle-free.
For example, an anonymous private collector paid for a 101-carat diamond worth $12.5 million using crypto at Sotheby’s auction house. That gives the buyer peace of mind without worrying about going for their head for coughing such an expensive amount in a pandemic.
Buying expensive luxurious goods, including diamond jewelry, will expand in the future because of security and privacy developments. And blockchain technology easily addresses these concerns like a pro.
Final Takeaway
The diamond sector is embracing blockchain technology for the better. It is reinstating its value through blockchain-powered provenance systems like Everledger and Tracr.
It is also elevating diamonds into an asset class like gold and other precious metals. You can now also pay for your diamonds safely and securely online using cryptocurrencies. The cryptos are powered by blockchain technology too so the technology is adding value to the diamond sector.
