Precious Ledgers: Why Blockchain Is the Right Fit for Gold and Diamonds

Blockchain has been pioneering both gold and diamond industries - complex ecosystems that heavily rely on supply chains, where cargo passes through dozens of geographical locations before arriving at its destination.

"They wrap a gold bar into a tamper-proof case electronically tagged, and they can track the gold bar from the mine to end point - with the use case being, if you know it's a socially responsible mine, someone will be willing to pay a higher spread on that gold versus if you don't know where it comes from. Diamonds is another example."

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

The company announced it was looking into blockchain to improve the transparency of the diamond value chain and get permanent digital records for every diamond registered on the platform.

"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."

On May 10, De Beers claimed that it tracked 100 high-value diamonds from the mine to the retailer using blockchain.

The company's move attempted to improve consumer confidence and public trust that their diamonds were non-conflict, in addition to increasing efficiency in the supply chain, as it was designed to complement existing regulations and schemes within the industry: the Kimberley Process Certification Scheme, World Diamond Council System of Warranties, and Responsible Jewellery Council Code of Practices.

The TrustChain Initiative include precious metals refiner Asahi Refining, jewelry retailer Helzberg Diamonds, precious metals supplier LeachGarner, jewelry manufacturer the Richline Group, and independent verification service UL.Based on the IBM Blockchain Platform and the Hyperledger Project, the initiative is designed to track and authenticate diamonds and precious metals from their place of origin to their retail location.

D1 employs a pricing algorithm to establish the price at which crypto investors can redeem their tokens for selected diamonds from their diamond reserve at any given time, using the technology to translate traditional industry parameters of value - namely diamond's shape, carat, cut and clarity.

While the diamond industry has seen stagnating demand among retailers, with spending on diamond jewelry staying flat at around $80 billion a year since 2014, as per a De Beers study, Alexei Chekunkov, a member of Alrosa's Board of Directors, stays optimistic - his company believes that the innovation of blockchain can transform the precious gem industry by making natural diamonds an investment asset class with wider appeal across "Various investor groups, driving higher demand."