In an increasingly conscious world, more people seek to buy products that balance out the negative effects of consumerism on the planet. This could mean purchasing items made sustainably, or only shopping with brands committed to ethical working practices. As consumers are more aware than ever about the impact of their buying habits, sellers have to accommodate this shift in consumer behavior by changing the way they operate.
One industry where this is particularly noticeable is the diamond sector. Demand for ethical diamonds has skyrocketed in recent years, due to the fact consumers don’t want to pay for a gemstone being used to finance wars, insurgencies or oppressive regimes, especially in Africa. So-called blood diamonds have long been a major issue for the industry, even with measures like the Kimberley Process in place, which aims to prevent ‘conflict diamonds’ from entering the mainstream rough diamond market.
Although some producers have turned to lab-grown diamonds instead, those continuing to sell natural jewels have had to think about how to guarantee the integrity of their products. One solution the industry is looking towards is blockchain technology.
What is blockchain technology?
Blockchain is a form of digital technology that enables the distribution of data that resists modification. A blockchain works as a time-stamped series of data records (blocks) managed by a group of computers, not owned by any single entity. Each of these blocks is secure and bound to one another using cryptography (i.e. 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 of transferring and storing data. In addition, because a blockchain is not centrally-owned, the information it contains is open for anyone to see, and much harder to hack. Blockchains tend to store data like transactions (such as between a diamond miner and 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 occur. It then needs to be verified, with the network of computers confirming that the transaction happened in the way the parties said it did. It is then stored in a block, which is given a hash, a unique, cryptographic code distinguishing the block from others. At this point, the block can be added to the blockchain and publicly viewed by anyone. Each computer involved in the blockchain network gets its own identical copy of the blockchain, which makes it even harder to infiltrate. This is why blockchains are often referred to as distributed ledgers.
How can blockchain guarantee ethical diamonds?
Tracking the origin and authenticity of a diamond is a hugely 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 such as India, Belgium and Israel before being shipped to wherever they’re sold. As such, they typically touch numerous hands before reaching consumers. It’s even harder to ascertain a diamond’s provenance when the details are traditionally documented on paper or PDFs, records which are open to forgery and therefore may not give a truly accurate account of where a gemstone has come from, or if it’s even a genuine diamond.
However, using blockchain technology means the data cannot be altered, so a diamond’s journey can accurately be documented from beginning to end. As a public record accessible to anyone, consumers can turn to blockchain to confirm that a diamond has been produced in an ethical way and not sold for unethical reasons. Over the last few years, this technology has proven valuable in winning over conscious consumers concerned by the potentially unethical provenance of their products.
How are diamond companies harnessing blockchain?
Numerous blockchain solutions have been aimed at diamond companies in recent years, including one courtesy of perhaps the biggest name within the industry itself: De Beers. Back in 2018, the behemoth revealed plans for Tracr, a blockchain using the Ethereum platform that was developed alongside Boston Consulting Group’s Digital Ventures and five leading diamond manufacturers. Diamonds must be scanned at every stage of the production and distribution process so all the data can be entered into the blockchain to track the journey accurately. Every diamond is also assigned a Global Diamond ID, a digital record showing 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 harnessing blockchain technology for similar purposes is IBM, which has developed the TrustChain tool alongside five leading jewelry makers. “By placing the current, physical process on a blockchain, we provide better visibility to the consumer throughout the entire supply chain, to allow exchanges of information amongst participants,” the initiative’s website states.
Another example is Everledger, a relatively new blockchain technology making inroads in the jewelry industry. Luxury jeweler Taylor & Hart uses Everledger to monitor its own supply chain, citing the elimination of paper-based reporting in favor of smart digital contracts as a key benefit—simultaneously 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 forgery and helping prove a diamond’s provenance at every stage of the process. This can lead to a more ethical industry overall, as those selling and buying diamonds can have more confidence in where their products have come from.
However, it’s important to be realistic about how much change blockchain can actually drive. As argued by Everledger founder Leanne Kemp, there will always be 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. Although bigger businesses are harnessing the technology, there are plenty of smaller ones which are much less likely to understand blockchain or have the funds to implement it.
Nevertheless, blockchain technology can certainly help make the diamond industry more transparent, and if used more widely, could almost certainly contribute to a more ethical future for the world’s favorite gemstone.
Nikolay Piriankov, co-founder and CEO, Taylor & Hart