If you’re thinking of purchasing a diamond ring for a sweetheart, it’s natural to have questions about its origin. In the past, you had to take your seller’s word that your imminent purchase was not in fact a conflict or blood diamond. Nowadays, you have a better solution: you can look it up on a blockchain.
Everledger is a London startup that has created a blockchain-based digital vault that now holds the records of almost 1 million diamonds. Once items are registered on the blockchain, the records are permanent and can’t be changed, providing a clear audit trail to be used by multiple parties throughout the supply chain to prove authenticity and reduce the risk of fraud, theft and trafficking.
The company creates a unique, digital “thumbprint” of a diamond recording its individual set of attributes including: color, clarity, cut and carat weight (the diamond trade’s well known “four Cs”) as well as 40 other metadata points and links these to the laser inscriptions on the girdle of the stone. All of this data is written into the blockchain.
Once a diamond’s data has been recorded, that then allows you to trace, recall history and validate the diamond. And if you do go ahead and buy that diamond ring, you’ll be able to add your name to its blockchain entry, thereby creating an immutable record of your ownership of it. If it’s ever stolen and resold, you’ll be able to prove it’s yours.
Everledger was set up in April 2015 and formed relationships with companies across the diamond pipeline in the U.S., India, Israel and Belgium, to name a few. It has quickly attracted interest among the media and diamond owners. In the future, Everledger’s digital vault will not only hold diamonds, as they look to expand into fine wine, art and luxury goods in 2017.
“Blockchain is a new technology that fundamentally changes the way we trade, and it might even change the way we think,” Leanne Kemp, CEO of Everledger, told attendees at Rakuten FinTech Conference 2016 in Tokyo. “It’s important in luxury goods. It relates to diamonds, to watches, to art and to jewelry.”
Diamonds are relatively simple and were a good place to start; Everledger now has about 980,000 diamonds registered in its database. Other asset classes, however, would require their own sets of identifying attributes that could be recorded in the blockchain.
“Art will always have to rely upon expert opinion,” Kemp said in an interview at the conference. “We’re able to apply science to diamonds with accuracy of 99%, whether that be through spectrography for high-definition photographs or otherwise, with a layering of all that technology you can get an intelligent machine outcome. It’s unlikely you could get to that level of perfection with a Picasso.”
Kemp also sees many opportunities for the financial services industry to use blockchain technology. She compares the antifraud maxim of “knowing your customer” to “knowing your object” through Everledger technology. A particularly promising application is reducing insurance fraud, which accounts for $58 billion lost annually in the U.S. and Europe, according to the startup.
“From an insurance perspective, the insurer is insuring me, but it doesn’t really know a lot about my watch or diamond. Who’s to say that the Rolex I insured isn’t actually a counterfeit I purchased in Thailand?” Kemp said. “Once you know the customer and you know the object, we’re really building the reputation layer.”
“The diamond industry has relied on a gentleman’s handshake and paper,” she told the conference. “We can coexist with the largest names in the industry, but we can respectfully provide them with a Ferrari engine of technology.”
Read more posts from the Rakuten FinTech Conference 2016 here.