Diamonds On The Block
For quite a few years the diamond industry has been going through major changes. One change was the addition of a special blockchain to create trust in an environment that corruption and safety concerns run rampant. If a blockchain was used in place of the standard paper procedures, there would be clear and transparent ability to identify points of interest when it comes to: supply chain problems such as shipping and receiving, inventory loss and accountability for errors.
When it comes down to architecture of business models, without proper leadership and guidance, there is a logical allowance for error. So at what point does that allowance for error grow into an increased tolerance forced on consumers to sacrifice quality for price, or trust of purchase in their forever diamond?
Whether it be the inability to trace product back correctly to accommodate a buyer, or the inability to provide the proper clarity of grading, it could be argued the vendors are not at fault for lack of regulation or guidelines. There is also an element of mischief from some business owners exploiting these types of neglected regulations at the buyers’ expense, and this could trend into a number of other business genres from medical and auto insurance, to property managers and slum lords neglecting to address restorations and improvements at the renters expense. . .
There is no shortage of necessity to drive improvement-driven audits and force the change in our world’s broken systems.
Why Blockchain?
A key reason for pursuing a permissioned and encrypted method of blockchain for the diamond industry would be safety and transparency of traceability. If the chosen blockchain were public vs. private-permissioned, and participants were not limited, or data was not encrypted to an adequate level, it could prompt malicious actors to plan data-driven attacks in real time and compromise parts of the industry harming potential employees and threatening their safety, while also assuming the loss of the product in the process to theft or other “unknown reasons or unethical activities”. If a private-permissioned blockchain was used in place of the public chain, there would be clear ability to audit and identify problems of interest when it comes to: supply chain problems such as shipping and receiving, inventory loss and accountability. All this leads to a much bigger point of necessity for proper digitization and regulation in industries whether they use permissioned Blockchains or SQL/no-SQL type of storage, since most methods of paper practice are becoming obsolete, due to more cost effective and efficient methods.
From a world trade perspective, a larger benefit to using this type of system is it would establish trust and add documented validation of proper credentials as a requirement for a general standard of practice, to ensure the validity of all Gemologists participating in the project. Ensuring the right credentials should be simple, and form oriented, so that upon submission it cross-verifies the validity of certificates submitted from the described provider (whether that be a university or other accredited provider) with the corresponding official database of that firm or university. That way (like an NFT, or a soulbound token) an immutable picture PNG/Jpeg photo can be created as visible proof of the type of certificate that was submitted, while verifying and double checking the validity; or at least find a source of accountability and peer review for continual performance of tasks correctly in a potentially globally implemented system.
Documented Corruption
Digging deeper and prying past the glamour and hype articles, a blog from Grunge.com in May 2022 sources facts about how a majority of diamonds are still tainted with violent transactions in the African trade regime, and that the Kimberly Process has too many loopholes. Even in the midst of the Covid19 pandemic, when schools shut down, child labor in the mines went up 50%, while stating “it’s illegal to hire child workers, and punishments can include fines and up to three years in prison, these laws are enforced poorly, if at all. Right now, it’s impossible to know how many children are working in the mines of the CAR, many of which are controlled by militias.”
While taking a look at their participants, it mentions:
“The Kimberley Process (KP) is open to all countries that are willing and able to implement its requirements. The KP has 59 participants, representing 85 countries, with the European Union and its 27 Member States counting as a single participant, represented by the European Commission. KP members account for approximately 99.8% of the global production of rough diamonds.”
Taking a look at noted loopholes in the Kimberly process, a more recent article titled:
“Loophole in Kimberley Process fails to ensure availability of ethical diamonds in the market”
The article specifies that the limited coverage of “rough diamonds used by rebel movements or their allies to finance armed conflicts aimed at undermining legitimate governments” — as stated on its website; allows many other diamonds, whether cut or polished, as well as mined while violating human rights or other illegal means, to be labelled as ethical. This causes a misrepresentation for the stone and defies meaning behind the purchase while sullying the idea of a clean diamond.
Still No Change?
The necessity for change in this industry is decades old, yet this first documentation of change goes back before 2007 when the first publications for the Kimberly process were made in 2003 with all good intentions of preventing conflict diamonds (aka Blood Diamond) from entering the world trade market. Global witness (who left the KP in 2003), and IMPACT (who left 2007) both claimed the Kimberly Process has “failed its purpose” in providing markets with assurance that diamonds in the trade are not conflict diamonds. Whether nine years after inception in Zimbabwe, or 2020 in Sierra Leone, there is no short of corruption from some of the world’s most powerful men such as Benny Steinmetz forcing the unprecedented need for transparent social justice and economic systems to be set and allow for an adoption of blockchain as a new standard for the world trade diamond industry.
