Over the last two decades, the diamond industry has undergone fundamental changes. The move to ethical sourcing and the emergence of synthetic stones with gem quality standards have introduced a new and sometimes daunting level of transactional detail.
“There’s actually very little existing technology that authenticates, globally and quickly, the legitimacy of gem transactions for each participant in the supply chain,” points out Leanne Kemp, founder and CEO for gem-tracking firm Everledger. “There’s a need for a complete view into the transactional layers of the industry and specific gems.”
The U.K.-based company—which identifies fraudulent gems for buyers, insurance companies and law enforcement agencies—is now taking verification to a transactional level. It recently turned to emerging blockchain technology to build a transactional ledger that allows the industry to authenticate and track gems.
Although some banks and other companies already use blockchain technology (which was invented for use with the virtual currency Bitcoin) to record financial and supply chain transactions, Everledger is promoting the concept within the gem industry. It has turned to a newly released blockchain platform called BlueMix from IBM to deliver a more secure and accurate record of gem transactions.
Building and Testing Blockchains in a Secure Cloud
The IBM Open Blockchain technology allows users to build and test blockchains in a secure cloud that operates within its LinuxOne platform. Using this technology, Everledger is developing a more advanced system, including APIs, for tracking diamonds across the supply chain—from mines to jewelry stores.
“This introduces an immutable time-based record that pieces together critical data and creates a chain of custody,” Kemp explains. However, blockchain is only part of the equation. “When we start sliding in other emerging technologies, such as artificial intelligence and the ability to extract a high-definition photograph from the transactional record, there’s an ability to add a whole new level of security,” she adds.
Everledger is currently placing more than one million certificate records in the blockchain and building the private ledger. Because blockchain creates permanent transactional records, the system is far more secure than paper records, which are sometimes manipulated, altered or forged. Even electronic systems are subject to hacking and crime.
For example, Kemp points out that in late 2015, hackers broke into computers at the Gemological Institute of America and altered clarity report data. In the GIA’s case, more than 1,000 stones were involved. In other instances, synthetic diamonds have been sold as real diamonds at online marketplaces. This obviously undermines trust and consumer confidence.
With an immutable blockchain history, altering records becomes next to impossible. Although the technology—and Everledger’s use of it—remain in the early stages, Kemp believes that it addresses the long-elusive challenge of delivering bulletproof authenticity.
Other organizations agree. For example, consulting firm EY predicts that the technology will hit critical mass within the next three to five years, and will span an array of industries.
“Blockchain makes it possible to reduce a very complex problem into a manageable solution,” Everledger’s Kemp points out. “It has matured to the point where it now delivers real results.”