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Russia’s Ministry of Education and Science introduced a blockchain platform for tracking diamonds.
Last week, Russia’s Ministry of Education and Science introduced a blockchain-enabled platform for tracking diamonds.
Indeed, blockchain has been bringing transparency into the diamond industry — a complex ecosystem where corruption and irresponsible mining appear to be largely present.
Self-regulation in the diamond industry — and how Everledger’s arrival pivoted it from a dead end
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. One of its main goals was to solve the “blood diamonds” issue — i.e., preventing the circulation of diamonds mined in war zones and sold to finance oppressive regimes. Everledger uses grading reports provided by Gemological Institute of America (GIA) for assessing the diamonds. Kemp told Cointelegraph in July 2018:
“We do not see ourselves as a crypto company — and, to be honest with you, we don't even see ourselves as a blockchain company. We're building a platform of provenance to help with transparency, and conflict and opaque markets. And we want to build an ethical trade platform.”
The idea of tracking gems is not new — in 2003, the Kimberley Process Certification Scheme (KPCS) 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. Some of those guidelines are mentioned in the System of Warranties introduced by the World Diamond Council in 2015.
While the KPCS scheme has been adopted by more than 80 countries since then, its efficiency has been questioned. In December 2011, international nongovernmental organization (NGO) Global Witness quit the program, arguing that “most consumers still cannot be sure where their diamonds come from” and criticizing more specific KPCS members’ decisions:
“The decision to endorse unlimited diamond exports from named companies in the Marange region of Zimbabwe – the scene of mass killings by the national army – has turned an international conflict prevention mechanism into a cynical corporate accreditation scheme.”
Further, in December 2017, Canada-based NGO Impact, which monitors the management of natural resources in Africa, also pulled out of the scheme. In an accompanying statement, the NGO’s executive director argued that KPCS “did not establish a conflict-free and legal diamond supply chain,” instead giving consumers “false confidence about where their diamonds come from.”
Decentralization, on the other hand, and the transparency that it implies, might help the industry evolve further and make sure that self-regulatory precautions are followed.
An immutable ledger would allow access to the full account of a particular diamond’s history and eliminate the possibility of forging documents, as every milestone of the gem’s destination would be recorded on the blockchain, according to representatives of Alrosa, a Russian partially state-owned diamond mining company that reportedly handles around 27 percent of global diamond production by volume:
"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 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.”
Blood diamonds are not the only issue, as gem retailers are also trying to detect laboratory-grown diamonds, which are less valuable among customers, and sometimes are sold as natural ones.
Synthetic diamonds. Image
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