Supply chain management is one of the most promising applications for blockchain technology, thanks to distributed ledger technology’s promise of heightened transparency and streamlined data exchange — two areas of significant friction for global supply chains today.
It’s perhaps unsurprising, then, that the precious metals market is eagerly exploring blockchain for this very use case. The high value of diamonds and gold, combined with crowded supply chains rife with fraud and crime, make this industry ripe for disruption.
According to the United Nations Interregional Crime and Justice Research Institute (UNICRI), precious metals supply chains struggle with illicit trafficking linked to terrorism and other criminal activities involving an array of bad actors, from individuals to intermediary companies, buyers and suppliers. UNICRI’s 2016 report found evidence of corruption, money laundering and other organized crime activity within the world’s diamond and gold supply chains.
Aside from crime, there are other ways an opaque precious metals supply chain can negatively impact industry players, including a lack of transparency on pricing, value fluctuations and irresponsible sourcing.
This week’s Blockchain Tracker examines how blockchain innovators are tackling these supply chain management issues.
De Beers single-handedly turned the diamond into the engagement ring stone of choice with its “A Diamond is Forever” campaign. Now, the conglomerate wants to make sure data linked to diamonds are forever too. The company is working to develop a blockchain solution to track diamonds from their origin through the supply chain.
“The fact that records are permanent, that you cannot reverse transactions, means that we all have to endeavor to transact in a more accurate way,” explained Blockchain Research Institute Director of Research Hilary Carter in an interview with The New Economy earlier this month discussing De Beers’ initiative.
Other jewelry and diamond firms are taking a similar path.
Last month, Brilliant Earth discussed its exploration into blockchain via a partnership with Everledger in an effort to enhance diamond supply chain transparency to reduce the presence of conflict or “blood” diamonds (Everledger recently scored $10.4 million in funding from investors). Canada’s Lucara Diamond Corp recently announced the acquisition of Clara Diamond Solutions, a blockchain diamond tracking company.
Over in India, whose gem and jewelry industry is worth an estimated $60 billion according to the India Brand Equity Foundation, India-based Dharmanandan Diamonds (DDPL) and Everledger recently announced they are implementing a tool to enhance the traceability of diamonds through their supply chains.
The companies are part of a joint venture called the Diamond Time-Lapse Protocol, which enables the recording of data about each individual stone — including origins, certification and transactions, all on a blockchain platform. DDPL’s Diamond Time-Lapse report will be integrated onto Everledger’s blockchain.
Bitcoin is often referred to as the “digital gold rush,” but actual gold is fast becoming a target of blockchain and cryptocurrency players.
Emergent Technology Holdings recently announced plans to “digitally encode the gold supply chain using blockchain tech” sometime this year, according to CNBC reports this week. The company is collaborating with Yamana Gold to develop g-coins, which are cryptocoins backed by gold and pegged to gold’s spot price.
“Emergent is looking to build an ecosystem,” the company’s Chief Commercial Officer Mitchell Davis told the publication, and to “connect all steps in the supply chain,” from its source mine to buyer. Emergent wants gold miners like Yamana to use technologies like mobile apps to scan “smart chips in tamper-proof seals and [record] transfer of custody and other data on the Responsible Gold blockchain.”
Earlier in the week, technology firm TradeWind Markets revealed its own plans to develop a blockchain-based electronic trading and settlement platform for the gold industry.
“The gold market today is a very manual market,” said TradeWind President Matt Trudeau in an interview with Bloomberg. “A lot of the dealing is done over the telephone, via email, maybe even faxes or chat rooms. We feel like this will reduce the frictional and transactional costs in the market and lead to greater liquidity and price discovery.”
Bloomberg noted similar initiatives have been taken underway by the U.K.’s Royal Mint, which is working with CME Group to use blockchain to facilitate the buying, selling and holding of gold.
Taking a different approach to blockchain’s application in the gold market, Goldmoney recently said that Ethereum is joining bitcoin in its cold storage service that lets clients purchase cryptocurrencies and sell holdings back to Goldmoney as they trade precious metals.