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Do you know the difference between Bitcoin and blockchain? About one-third of senior advertising executives can’t, though it’s unlikely any of them are from the diamond industry.
Last year, international diamond corporation De Beers announced plans for Tracr, the first industry-wide blockchain. Using the Ethereum platform, De Beers developed Tracr alongside Boston Consulting Group’s Digital Ventures and five leading diamond manufacturers. Diamond industry giants such as Signet, the world’s largest diamond retailer, and Alrosa, a Russian company that accounts for about 25% of global production, have since joined.
“What we’re trying to address with DeBeers is coming back to consumer confidence and look at who’s touching the diamond all along its journey,” explains David Bouffard, Signet’s President of Corporate Affairs, who spoke at NRF 2019: Retail’s Big Show in January. “Blockchain helps us guarantee that.”
How does it all work?
The Reader’s Digest version: Tracr tracks diamonds through the entire supply chain. Where did it come from and how did it get here?
Each stone is assigned a unique Global Diamond ID, a digital record that contains the stone’s key attributes, such as carat, clarity and color. They’re logged onto an uneditable digital ledger, with Tracr verifying the data at each step of the supply chain. When a diamond makes it to a store, the retailer can then share this information with the consumer. (Andrea Hill, whose consultancy specializes in jewelry and luxury verticals, outlines the entire process in far more detail in this Forbes column.)
According to a Deloitte survey of more than 1,000 senior business executives, lack of understanding is one of the biggest barriers to blockchain adoption. That’s less of an issue in the diamond industry. Major players are partnering with blockchain platforms rather than trying to develop their own entirely in-house.
“This comes up a lot in conversations around blockchain and crypto: individuals involved have to have in-vertical expertise,” says Jay Kolbe, EVP of Emerging Technologies at Clarity PR and host of a podcast called Blockchain Bridge. “You have to understand the market in order to change the way that market runs in the back room.”
Within the diamond industry, De Beers isn’t alone. Global jewelry manufacturer Richline Group, Inc., uses IBM’s TrustChain platform, the same one Walmart uses for food, in a similar manner. Another IBM partner, London tech company Everledger put more than 1.6 million of Hong Kong conglomerate Chow Tai Fook’s T MARK diamonds on the blockchain as well.
Wait. Didn’t millennials kill the diamond industry?
Diamonds are just one thing millennials have purportedly killed, along with Applebee’s, napkins, mayonnaise, the housing market and countless others. Of course, millennials haven’t actually killed any of those things. According to the De Beers Diamond Insight Report, they make up 27% of the population but 41% of all diamond jewelry sales. Making up a large percentage of these purchases are engagement and wedding rings, which are practically synonymous with diamonds. Look no further than this Google search for “engagement rings:”
Blockchain has potential to elevate the diamond industry in these consumers’ eyes. More than previous generations, millennials are socially-conscious shoppers concerned with a brand’s values. Laryssa Wirstiuk, who owns Joy Joya, a digital marketing agency for jewelry brands, adds that they’re also less trusting of institutions.
“The Kimberley Process was put into place to do the job that blockchain is doing now,” she says. “The problem is, the Kimberley Process relies on local governments. Millennials have more trust in something technology-based.”
In 2003, the United Nations General Assembly pioneered the Kimberley Process Certification Scheme to authenticate diamonds and declare them conflict-free. It’s had demonstrable success but also applies to batches of diamonds, rather than individual stones. This eliminates some of the transparency blockchain promises.
Not every consumer cares where their diamond came from or whether it’s conflict-free. Wirstiuk adds that blockchain still has a value proposition for those people: a personalization story.
“Blockchain allows someone to purchase something, and know exactly where it came from and the journey it took,” she says, noting the popularity of Domino’s online pizza tracker.
The possible downside
Tracr was the first diamond industry-wide blockchain project. De Beers is a tremendous company with more than $6 billion in annual revenue. Additionally, De Beers controlled the entire diamond market through most of the 20th Century. Signet owns household names Jared, Kay Jewelers and Zales.
The diamond industry is far more privatized than average. For every titan like Tiffany & Co., Signet or De Beers, there are a ton of small family-owned businesses less likely to fully understand blockchain or have the budget to go all-in.
For now, at least. Kolbe, who believes blockchain will be popular among diamond investors, points out that blockchain is still an emerging technology.
“The first people to bring something to us are looking for a revolution. They’ve got the energy and most people don’t know what they’re talking about,” he says. “But the reality is, when something comes around and you’re really going to find scale, it’s actually an evolution.”