There are several different parties involved in securing that diamond that you’re wearing on your finger. And over the years, diamonds have become the most sought-after and expensive stone there is. According to Petragems, inflation brings their value up approximately 4% each year, with an overall 33% increase in value over the past ten years. It’s safe to assume that at some point in your life, you will be buying a diamond or two as well. After all, diamonds are a girl’s best friend, and most expensive pieces of jewelry seem to incorporate some diamond touches.
But the diamond industry can be tricky, and a diamond’s journey from the mine to consumer is complicated. So how could blockchain help the industry? Read on to learn more.
What Makes the Diamond Industry So Complex?
There are several different distinct stakeholders in the diamond supply chain. A diamond’s journey begins at the mine, and then it needs to pass through the refinery, the manufacturer, the retailer, and finally to the consumer. And the whole thing gets even dicier, because each step of the way involves strict regulations, and often, the gems are crossing different borders. In order to accomplish everything, the diamond industry relies heavily upon intermediaries.
And ultimately, each additional step in the supply chain adds to the final cost, and diamonds already don’t come cheap. Additionally, the rate of fraud and theft in the jewelry business is exceptionally high, with Prableen Bajpai at Nasdaq reporting that “the cost of fraud to insurers tops $2.5 billion a year.”
With all of the mentioned complexities, the diamond industry could clearly benefit from the increased supply chain visibility that blockchain can provide.
What Will the Diamond Industry Look Like on Blockchain?
One of the biggest changes will be that paper logs will be replaced by the digital ledger. Each grouped batch of stones or metals will have a serial number assigned to it, and everything pertaining to that serial number will post to the blockchain. All data documented on the blockchain is secure and cannot be tampered with or changed. Additionally, blockchain greatly decreases the need for middlemen, which lowers costs for all parties.
Ultimately, when a final piece of jewelry is constructed using different batches of stones or metals (say gold and diamonds to create your engagement ring), retailers and consumers will have access to all of the associated serial numbers. You can then use those numbers to track the stones and metals to their points of origin. The consumer can now have verified proof that their money is going towards exactly what they want (think the 4 Cs- cut, carat, color, and clarity).
You will also no longer have to second-guess whether or not you are buying from a reputable seller, as the blockchain will reveal all truths about that piece of jewelry. Ultimately, people are willing to pay more if they can verify the quality of a product, so blockchain will end up allowing retailers to charge competitively for their jewels. Additionally, blockchain will ensure that there are fewer instances of fraud and theft, and will be able to pinpoint accountability if either occurs. This will increase profitability over time.
Something else worth mentioning is that blockchain can ensure that only ethically sourced diamonds are available for purchase. As mentioned in a previous blog post about blockchain and sustainability, blockchain allows you to ensure that you are supporting businesses whose values align with your own. This rings especially true for diamonds, which in developing countries have long been notorious for causing “civil wars, violence, worker exploitation, environmental degradation, and unspeakable human suffering,” according to Brilliant Earth. Blockchain can help ensure that the diamonds available for purchase are all coming from nonviolent means, and ultimately, can make “blood diamonds” a thing of the past.
How the Diamond Industry Can Move Forward
It is time for the diamond industry to embrace blockchain’s potential and leverage it for the global good. If you work in the jewelry industry and want to learn more about our Track and Trace solution, request a demo from us today!