- Blockchain technology can identify the origin of an item and trace its journey from its source to its destination.
- Luxury items like diamonds and fine wines are highly valued because of their historical value. Blockchain can be used to verify provenance and increase its value.
- To bring transparency to the diamond industry, companies have created a blockchain. The blockchain currently stores data points for more than a 1.6million diamonds.
How confident are you that the diamond you are about to buy was actually mined diamond and not a lab-grown diamond? How can you make sure that the diamond is truly yours?
In practice, we must trust that the retailers we deal with are telling us the truth about what we buy, and they must trust their suppliers to do the same. Unfortunately, this trusted web is often flawed, subject to fraud, error, and mismanagement.
It doesn’t have to be that way. Bitcoin and other cryptocurrencies use blockchain technology to provide the trust necessary for parties who do not know each other to securely transact business, such as securely enabling the transfer of millions of dollars in a single transaction. Blockchains ensure that the trust you place in the origin of goods – where they come from – is well-founded.
What does blockchain have to do with your diamond ring? Before 2000, a diamond’s path from the mine to the retail trade was not closely followed. In 2000, the United Nations initiated the Kimberley Process “to ensure that diamond purchases did not fund violence by rebel movements and their allies seeking to undermine legitimate governments.”
Although 81 countries have joined the process, including all significant producing, exporting, and importing countries, it has not worked well. It is based on a system of participant certification and a paper transaction record. Corruption and smuggling are widespread, and it is rarely possible to trace a diamond’s provenance to its country of origin, let alone the mine from which it originated.
Blood diamonds remain a problem today. Document tampering, fraudulent claims, falsely identified synthetic stones, and double funding is challenging to detect. There is an urgent need for a single point of truth so that all parties in the supply chain, from manufacturers to cutters to bankers and insurers, have shared access to documents documenting the extraction, production, and sale of a diamond.
Rough to Cut Diamonds
Diamonds undergo a multi-stage transformation between the mine and the jewelry store.
- Mining: More than 69 million carats of rough diamonds were mined in 2016, mainly from mines in South African countries, Russia and Canada.
- Sorting and Pricing: Rough diamonds are sorted into more than 5,000 categories. Only about 20% of all rough diamonds are of gem quality, while 80% of the diamonds mined are sold for industrial purposes. Rough diamonds are priced and sold to manufacturers at one of the ten annual fairs called sights.
- Manufacture: Gemstone quality gemstones are purchased by cutting centers. There, the rough stones undergo a 3D scan to make a computer model. Experts examine each rough diamond for its size, shape, and the amount and position of its internal inclusions and imperfections and update the computer model. Then they decide how to cut the stone to generate the most significant value.
- Becoming a jewel: The stone is then marked and cleaved or swan with a diamond saw or laser. Different diamond cutters, each with their own specialty, help craft the gem. Polishing is also a multi-stage process, with various experts polishing the main facets of the gemstone and others polishing the final facets. The last step is quality control to verify the diamond’s characteristics and make sure it meets the manufacturer’s standards. It can also be a GIA laser engraved with an identification number (inscription).
- The Sale: The finished diamond will be sold to jewelry manufacturers and wholesalers. They, in turn, sell the jewel online to customers or to diamond traders and jewelry stores.
Diamonds on the blockchain
Some companies have been set up to bring transparency to the diamond market using the open-source Hyper ledger software in recent years. The company also created software to interact with the scanning, modeling, and cutting equipment used in gemstone production. These highly calibrated and accurate instruments can automatically generate and store data related to the production process directly on the blockchain.
About 1.6 million diamonds now stored on the blockchain are identified with 40 metadata points and a high-definition image of the diamond. At each stage of the manufacturing process, the company protocol allows users to enter data such as the time and date of the process and the craftsman’s name running it. Retailers can enter information about each piece of jewelry containing the diamond, such as store location and warranty details. Customers can view the entire origin by simply logging in with their credentials.
The value of luxury items, such as diamonds and artifacts, bottles or chests of fine wine, watches, and other jewelry, depends mainly on their history. The parties that have agreed to participate believe that creating such records increases the prices that they can count on the entire supply chain and retailing of diamonds that produce them and follow.
What is blockchain?
A blockchain is a distributed ledger, a list of simultaneously tracked and updated transactions on thousands of computers. Parties to a transaction use cryptographic techniques to digitally sign a transaction record, confirming their agreement. Other parties, called miners or validators, check and validate this record before adding it to a blockchain. Records on a blockchain are linked, making it impossible to change previous records without invalidating the entire chain.
Once created, a blockchain is not owned by anyone, making it an ideal platform for inter-company use, even among competitors. It continues to operate, following the rules and logic outlined in its creation. The transactions it contains cannot be changed, even by the company or person who initially created the blockchain. That is why it is such a valuable tool for identifying an item’s origin and tracing its path from its source to its final destination.
What if a certified organic apple grower sells a pesticide-treated apple to a distributor and correctly signs the transaction as coming from an organic farm? If anyone in the supply chain detects pesticide residues on the apple, transactions on the blockchain will trace it back to the grower no matter how many other companies have handled it in the meantime. The grower will almost certainly lose his certification. The ability to control blockchain transactions in such cases provides a strong deterrent to potential fraudsters.
The weak part of any technological control system is human interaction. In many cases, a blockchain overcomes this weakness by using digital signatures. For example, when a certified mine places a diamond on the blockchain, it signs the transaction with its private key. The signature can be verified by anyone using the mine’s public key. This means that the mining company cannot later deny that it was the source of the diamond. It also means that a rogue company cannot put a diamond on the blockchain and claims it will be the certified company because the rogue company’s signature will be immediately considered invalid.
Blockchain is an added value
The blockchain, combined with digital signatures and machine-to- blockchain software, provides a way to securely record the origin of diamonds and other goods. Users can easily view the movement of a product in the chain from the source to the present. This transparency adds value to the product at every point in the supply chain and at the consumer’s final purchase.
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Frequently Asked Questions:
What is the blockchain used for diamond tracking?
Blockchain technology can identify the origin of an item and track its journey from its source to its final destination. Luxury items like diamonds, fine wines, and works of art have a lot to do with their history.
What are the challenges and opportunities of blockchain in the diamond industry?
The potential for a diamond to be an investment asset is immense. Despite this, there are still many issues that hinder the progress of the diamond industry, including provenance, traceability of supply chains, involvement of third parties in the verification process, and the reliability of transactions. Blockchain is a promising technology that bridges the gap between the diamond industry and burgeoning financial markets. Individuals feel confident that they have purchased legitimate crystals and that stolen property can be returned to their legitimate owners.
What is the bitcoin diamond blockchain?
Bitcoin Diamond is a fork that aims to increase the transaction volume on the Bitcoin network. Bitcoin Diamond is 10 times more prevalent than Bitcoin, so the total supply of Bitcoin Diamond will eventually exceed 210 million.
What is a Bitcoin Diamond Blockchain Explorer?
Bitcoin Diamond uses blockchain and cryptocurrency technology to offer the unbanked and undeserved world a currency that they can trust, access, and use. We believe that everyone should have equal opportunities to create wealth.
What is Blockchain?
Blockchain technology can be described as a distributed, decentralized ledger that records the provenance and ownership of digital assets. The data stored on a blockchain can’t be altered, making it an industry disruptor in healthcare, cybersecurity, payments, and cybersecurity.
What is a Blockchain Diamond?
Blockchain technology can identify the origin of an item and track its journey from its source to its final destination. Everledger created a blockchain that will bring transparency to the diamond market. It stores data points for more than a 1.6million diamonds.
What is the Everledger diamond Blockchain?
Everledger created a blockchain that will bring transparency to the diamond market. It stores data points for more than a 1.6million diamonds.
What is Blockchain Diamonds De Beers Tracr?
Tracr was designed as a digital road system. It will function like this: Raw diamonds will be first scanned at the mine. … They will be added to the platform again if they are cut or changed hands.
What are IBM Blockchain diamonds?
IBM’s advanced technology solution may be used by companies to authenticate and track precious metals and diamonds at every stage of the global supply chain. This includes the mine, retailer, and end-user. IBM technology could use a proven technology platform that allows data verification at every step of the blockchain.
What are blockchain blood diamonds?
Blood diamonds, also known as conflict or blood diamonds, continue to pose a severe problem for the industry. This happens when rebels, militias, or government-backed soldiers control mines, most notably in Africa, and use them for continued violence against civilians.
These are “rough diamonds” used to finance wars between governments around the globe” and are De Beers’ company. In 2018, Tracr launched a blockchain platform called Tracr. It aims to traceability, authenticity, provenance, and traceability throughout the diamond supply chain.
What Are NFTs?
Now that you understand the role of blockchain in determining the authenticity of diamonds let’s delve into a more complicated concept known as the non-fungible token or NFT.
An NFT is a data unit that goes into a blockchain or digital ledger. The token’s purpose is to deem each blockchain authentic, which means one can’t be switched out for another. All types of digital files might have NFTs associated with them, everything from audio to video and images.
Although they might seem similar, NFTs are not copyrighted. However, they can prove who the original owner was, even if copies of the NFT are made.
The best way to think of an NFT is as a certificate of authenticity. The NFT will include a serial number or URL that’s part of your blockchain and proves you own an item and that the item is authentic. An NFT, though, is not the asset itself.
For example, let’s say you were shopping for digital art. Purchasing an NFT of the art does not give you access to the image file but rather proves that you authentically own the art.
So what does that have to do with diamonds? A lot, actually.
Digital diamonds have become quite popular as NFTs are widely used. The thing about digital diamonds is that they’re just that–digital. Yet, they’re just as costly as a real diamond. Although you would think that digital diamonds wouldn’t catch on with their high prices, they’re considered among the rarest types of NFTs.
According to those who support digital diamonds, the quantity of lab-grown diamonds is tightly controlled to increase the demand. This is the rule of supply and demand in action. The greater the demand, the higher the price of the supply.
Yet lab-grown diamonds are much more common than mined diamonds. And on the note of real diamonds, NFTs offer protection from fraud.
Although you trust a diamond retailer when they say their diamonds are mined rather than grown in a lab, blindly believing what you hear could lead to some less-than-authentic purchases. You can find out later if you sell the diamond that it’s not as it appears.
NFTs prove whether a diamond is authentic. Considering that other parts of the blockchain can trace back ownership via digital signatures all the way back to the original owner, you’ll know for certain that you’re buying a mined diamond over a lab-grown one.
How Does the GIA Grade Blockchain Diamonds?
With blockchain diamonds becoming more commonplace, it was only a matter of time before the Gemological Institute of America or GIA incorporated the blockchain when grading such diamonds.
The GIA is a nonprofit established in 1931 that sets the standards for gemstone and diamond quality. The purpose of the organization is to protect consumers from fraudulent diamonds. To create and uphold its gemstone standards, the GIA thoroughly researches gems, identifies them, and offers educational programs for others to do the same.
To grade the quality of any gem, the GIA uses four main criteria, known as the 4Cs. These refer to the diamond’s color, clarity, cut, and carat.
Although gemstones come in a variety of colors, real diamonds are generally colorless. Well, at least to the naked eye, that is. Diamonds feature fluorescence, which is another way to say they twinkle or gleam.
A fluorescence color can tell you a lot about the authenticity of a diamond. Authentic diamonds feature blue fluorescence. The shade of blue can be medium or much more intense, but either way, if it’s in the blue family, the diamond is real.
If the fluorescence is another color, that doesn’t bode well for a diamond’s authenticity. Hues such as gray, yellow, or green indicate the diamond is fake.
If you’ve ever looked at a diamond and you’re able to see through it, that too is a fake gem. Real diamonds are somewhat translucent but still opaque enough that you can’t see all the way to the bottom. If you can hold a diamond over a newspaper and still read what the newspaper says, then it’s a fake.
The cut of a diamond is also very revealing. Fake diamonds are melted into molds that give the stone a round edge in some instances. Manufacturers, though, are clever and can try to cut glass or other faux diamond materials to look more like the real deal.
An authentic diamond will undergo professional-level cutting to give it sharp, straight edges on all sides. The realness is unmistakable.
The carat of a diamond is representative of its weight. Cubic zirconia is denser than diamond and can be the heavier of the two, which could mislead uninformed consumers and cause you to buy a fake diamond.
Fortunately, you don’t have to do any crazy diamond authenticity tests, such as scratching your diamond on glass or even burning it to see if it’s real or fake. The GIA’s digital diamond grading report can do it for you.
When you buy a GIA-certified diamond, you’ll receive a grading report to your blockchain. The report cannot be claimed by others, nor can anyone copy it or otherwise modify it. If you have a real diamond, the report will say as much, and if the diamond is fake, the report cannot be altered to claim that the diamond is real.
The GIA makes it convenient to access your digital diamond grading report whenever you need to, as it’s viewable on your computer or smartphone.
The Inspiration Behind GIA’s Blockchain Digital Diamond Grading Report
What caused the GIA to get on board with blockchain technology? In 2018, the GIA paired with Chow Tai Fook Jewellery Group. The partnership allowed customers of Chow Tai Fook who bought T MARK diamonds to receive their own digital diamond grading support with blockchain through the GIA, says this GIA article.
That program was successful enough that the GIA and Chow Tai Fook decided to expand on it, bringing it to mainland China and Hong Kong stores.
In the case of Chow Tai Fook, the T MARK app stores the digital blockchain data so the diamond buyer could access it anytime paper-free.
Today, even if you buy your diamonds in the United States, you can safely rely on the GIA’s blockchain diamond grading reports, so you’re confident in your purchase.