Diamonds Are Blockchain's Best Friend: How DLT Helps Tracking Gems and Prevents Fraud

Last week, Russia's Ministry of Education and Science introduced a blockchain-enabled platform for tracking diamonds.

The history of blockchain in the diamond industry can be traced back to May 2015, when Australian entrepreneur Leanne Kemp founded Everledger - a global digital registry for diamonds powered by the IBM Blockchain Platform.

The idea of tracking gems is not new - in 2003, the Kimberley Process Certification Scheme regime was established by a United Nations General Assembly Resolution to increase transparency in the diamond trade and keep conflict diamonds out of the market.

Essentially, the process implies that KPCS participants monitor shipments of rough diamonds and certify them as "Conflict free." More specifically, they follow a series of self-regulatory principles aimed at ensuring that diamonds are bought from legitimate sources.

"Creating a blockchain-based tracing system is another step towards ensuring the transparency of the industry. Blockchain could allow to track each stone's history, from its extraction to the final purchase. This greatly lowers the chances of any unfair of [or] wrongful transaction for both consumers and resellers. Such transactions may include purchase of fake or synthetic stones under the guise of natural ones, sale stones with overstated specifications or blood diamonds coming from conflict areas."

"Diamonds hold enduring value and represent some of life's most meaningful moments, so it's essential to provide assurance that a diamond is conflict-free and natural. By leveraging blockchain technology, we will provide an additional layer of assurance to consumers and industry participants, with every diamond registered on the platform having a record as everlasting as the diamond itself."

In May 2018, De Beers claimed that they tracked 100 high-value diamonds from the mine to the retailer using blockchain in what was presented as a first for the industry.

While M2M is presented as a mine-to-market tracking program and mobile app for consumers, and is also based on the institution's grading reports, there is no indication that it is powered by DLT. Nonetheless, the number of blockchain-based platforms to track diamonds continues to rise.

There is also Clara, a digital platform that purportedly utilizes both cloud and blockchain technologies to ensure "Diamond provenance from mine to finger." It has been picked up by Canadian diamond exploration and mining company Lucara Diamond, whose CEO, Eira Thomas, announced a move toward modernizing the diamond industry with blockchain in February 2018.

As Everledger founder Kemp told Cointelegraph, there will always be room for fraud - for instance, she argued, diamonds could go offline and disappear from the ledger, and there's always going to be black markets.