De Beers Is the New Kid on the Blockchain

RAPAPORT... Lastmonth, dozens gathered in midtown Manhattan to learn more about De Beers'Diamond Blockchain Initiative - a project that aims to underpin confidence indiamonds by creating permanent records for them. While most know blockchain asthe technology that underlies Bitcoin, De Beers is testing a system that willsafeguard stones' identity, ownership, contracts and financing history. In fact, the new program hasno relation to cryptocurrency. Instead, it lets users securely track assets anddigital record transfers through a tamper-proof and decentralized register thatshows the journey from rough to polished. Along the way, it validates theidentities of stones and their attributes, updating constantly as the diamondsmove through the pipeline. Not only does this use ofblockchain help protect against counterfeit Kimberley Process certificates, itstime-stamped documentation of diamond transactions could inspire more trustfrom the banks, which in turn would be more inclined to lend to the industry. Checks and balancesBut isit secure? Very, according to speakers at the January 17 gathering, which DeBeers organized jointly with the United States Jewelry Council. Because theblockchain system spreads its data across multiple servers instead of storingit all in one place, it's difficult for hackers to access, they explained, soattacks like the one that hit credit reporting company Equifax in 2017 would bethwarted. Ultimately, De Beers envisionsits initiative as a resource for registered members of the industry, providinga single address for verifying stones - as well as storytelling material forretailers who want to describe a diamond's journey. The miner also wants tohave an unbiased third-party organization manage the project and allowdevelopers to build apps on top of it. One of the De Beers officialswho attended the Manhattan meeting was David Prager, executive vice presidentfor corporate affairs (pictured), who feels the top benefit of using blockchain is theability to assure consumers that their diamonds are naturally mined andconflict-free. In addition, he tells RapaportMagazine, it will "reduce inefficiencies, such as having to check stonesagainst paper invoices, and easily source primary information - cut, color, andwhere it was found - and secondary data like grading certificates that itaccumulates along the way." Honing the toolOfcourse, the trade might not want all the information the technology makesavailable. "Instead of a data dump, we're trying to determine what's reallyimportant to share," Prager explains. Another caveat: The platformwill only reach its full potential if many use it. The more parties input dataalong the way, the more there is to draw on. Currently, the system can onlytrack newly mined stones weighing a minimum of 2 carats. However, De Beers islooking into working with smaller diamonds and existing inventory. Accessible to allTheminer's goal isn't just to track its own goods; it's financing the adoption ofblockchain to make it accessible to the trade. De Beers is consulting with asmall number of participants to ensure maximal effectiveness prior to itslate-2018 debut. There will be no charge per transaction, just an integrationfee that De Beers may help cover as well. "We're trying to lower thebarriers to entry," says Prager. "Consumers increasingly expect a level ofassurance. If we don't take this moment as an industry, then we will be leftbehind." This article first was firstpublished in the February 2018 issue of Rapaport Magazine.