The world's largest diamond producer is toying with the idea of implementing a crypto-technology, blockchain system, similar to the one that powers the crazily valued Bitcoin network. De Beers' CEO said that the system, a roll-out of which could be expected in a couple of months, will work across the globe and monitor the transfer of diamonds from the minute they are mined to the last chain - the retailers and customers.
This is not the first time that a major diamond entity has considered implementing blockchains. The Singapore Diamond Investment Exchange had shared several months ago, that it had partnered with Kynetix, a digitisation expert and Everledger, a blockchain infrastructure supplier for a proof of concept on a blockchain authenticating and record-keeping service for the diamond exchange.
Bruce Cleaver, the Chief Executive Officer of De Beers, an entity that mines gems, primarily diamonds, was quoted in a Reuters interaction as saying that blockchain's huge public ledger system allows anything "immutable" to be invented. Blockchain according to him was unhackable than anything on a single server. And this characteristic functionality could help the world's largest Diamantaire track originality, source and authenticity of diamonds.
Unlike crazily valued cryptos or Venezuela's petrol back petro-coins, this diamond-coin may not be listed. Cleaver did not share details of whether the crypto could be sold and whether De Beers would accept crypto-tokens to purchase diamonds, but the diamond-token from De Beers will be a mark of purity, proving the ethical value of the stone.
Why the fuss with being ethical?
In recent times, the Diamond industry has had a major concern over the issue of synthetic or lab-processed diamonds. The only difference between a lab synthesized diamond and an ethical or real diamonds is the way in which they are processed. Diamond experts have at various conferences labelled them fake.
A lab processed diamond has till date, managed to fool customers, retailers and even traders, since it has the same chemical and physical properties as that of a real diamond.
Environmentalists, however have supported the cause of lab-processed diamonds, stating that mining real diamonds is an environmentally degrading process. Lab processes, environmentalists pointed out, seek an eco-friendly route, which was superior than the current Kimberley process of mining diamonds. A blockchain technology to track the ownership and details of how a diamond was mined would therefore not just ensure clarity of ownership, but also reveal whether the diamonds were lab-processed.
Simon Lawson, the head of technologies at De Beers UK, was quoted in a Bloomberg news-report related to DIY (Do-It-Yourself) Diamonds, as stating that De Beers had technologies in place that could differentiate the fake from real diamonds. "It underpins the integrity of natural diamonds and ensures that consumers cannot be duped into buying a synthetic diamond," he said.
Mines and Economy
Unfortunately, while ownership of a pure diamond does indicate the richness of the owner, sadly the countries with the largest reserves of Diamonds are not among the richest. For years, observers, including various trade bodies have pointed out that the natural reserves of their country have been put to use to harness and create richness for others. The process of diamond mining has not only been exploitative of nature, but it has also sparked social concerns.
The hard toil and labour Africans spent in shoveling and cleaning 'the woman's best friend' and indicator of purity has usually gone unrewarded. The Time magazine came out with report indicating what labourers in Congo, an economy estimated at nearly $20 billion, had to go through. For the record, Chennai's GDP is estimated at $70 billion while Mumbai's GDP (the erstwhile Financial Capital of India) stands at $368 billion.
Hundreds of miners die every year in tunnel collapses that are seldom reported because they happen so often. Teachers at government schools in these mining nations demand payment from students to supplement their meager salaries. This leads to many parents choosing to send their teenagers to the mines instead. “We do this work so we can find something that will let us eat,” the miners say
Your diamond maybe your prized possession, but for thousands of Africans, its processed at the sacrifice of their food, education, peace and life. Read the Time Report here.
“It’s a scandal,” says Zacharie Mamba, head of Tshikapa’s mining division. “We have so much wealth, yet we stay so poor. I can understand why you Americans say you don’t want to buy our diamonds. Instead of blessings, our diamonds bring us nothing but misfortune.”
How diamond-coin could help African economies
The top ten reserves are located in Russia (Botuobinskaya Yakutia, Sakha Yakutia, Grib Verkhotina, Udachny Yakutia, Mirny of Yakutia), Australia (Argyle), Angola (Catoca), South Africa (Venetia), Botswana (Jwaneng, Orapa,). African countries (South Africa, Botswana, People's republic of Congo, Zimbabwe, Namibia, Angola) contribute 48.4% of diamonds according to data from Alrosa, a Russian Diamantaire.
Data from Alrosa, a Russian Diamantaire, showing the contribution of major diamond mining countries.
Of the $77.99 trillion estimated Global GDP in 2016, the countries Congo (estimated GDP of $35 billion in 2016), Namibia ($10.27 billion), Zimbabwe ($16.29 billion), Angola ($89.63 billion), Botswana ($15.27 billion), South Africa ($294.8 billion) contributed a minuscule 0.59% (GDP for these six countries adds to $461.26 billion).
It can be assumed that a blockchain tool will help eradicate the odd practices associated in the trade, and yield some assistance to improving the GDP of these countries. After 2003, when the Kimberley process arrived, agencies including Diamantaires, advocacy groups, governments and human rights agencies insisted that every Diamond would arrive with a passport. The bitcoin could eradicate the practice of passport. This, on the assumption that adoption of crypto-tokens becomes a norm, embraced by Diamantaires and government agencies.
A Sample image of how a diamond passport may look like. This one has been issued by the Government of Sierra Leone.
Whats for India?
It will be ignorant to discuss diamond and not touch upon the impact on India. India is still a Gold country and not a major consumer of diamonds. But India is where diamond imports are processed to be exported. India is the world's largest cutting and polishing centre, with Surat contributing an estimated 85% diamond trading and processing in India. According to the Gems and Jewelery Export Promotion Council, India ranks number 1 in terms of exports of polished diamonds.
Export destinations have been mostly Singapore and Belgium. And the availability of a diamond-coin led information will not only help the end-buyers but also traders in India.
The major feature of the blockchain would be in sharing information on how the diamond was processed and also who processed it. Since this would be an electronic documentation, the miner could also add notes on how families that spent time on shoveling ground and polishing the diamond were rewarded. Buyers would also find it interesting that they can access information which will tell them whether their prized possession was a blood diamond.
What is not looking good
Although blockchain can be hailed as a messiah in the diamond industry, there are still challenges waiting to be resolved. The biggest among them is solving the puzzle of tracking the origin of rough diamonds that could get cut into multiple polished stones. Cleaver, De Beers' Chief says, "we've spent a lot of time thinking about how you can triangulate the polished back to rough. That's the area going to require most amount of work."
The second challenge for De Beers is the fact that the diamond trade business has remained in the grip of parties who swear by secrecy rather than share information on price. Blockchain technology does offer transparency, but only if minutest details of price and ownership are added. Cleaver suggests that De Beers is looking at ways to get all parties on the board . He refers to the project as an initial pilot, saying “we’re very focused on maintaining confidentiality if that’s what participants want.”
It’s unlikely the industry will give up its secrets easily. But if De Beers succeeds, then among the biggest losers would be shady Bollwood plot-lines. Cliched plots of fooling customs agency or grooms gifting brides with the generationally- flown (readParampara) diamonds would hold no water unless accompanied with a bitcoiny-receipt or e-token, confirming the ownership. Another flipside would also be pre-nuptials for Diamond gifts that could end up becoming a farce in the aftermath of this diamond-coin.