Blockchain’s Bid to Simplify the Diamond Supply Chain

Blockchain’s Bid to Simplify the Diamond Supply Chain

The journey of a diamond from the mine to the consumer’s finger is a fascinating one. Before it becomes a permanent part of any diamond consortium, it starts, as you know, in a diamond mine where tonnes of earth is sifted through to find the precious crystallized carbon deposits. However, most of the diamonds aren’t even gem quality diamonds; these are used for industrial purposes and industrial tools. Because of their hardness they are tipped on saw blades and rotary saws etc to facilitate constructional purposes.  
But the very small percent that makes it to the gem industry go through a convoluted process. The gem quality rough diamonds are first collected and put into packages. The diamond corporation in charge generally has a set number of clients called site holders in the industry, who are very large companies within the industry. They have to meet very specific criteria to be accepted into this exclusive club. Now, the site holders have to commit to a set dollar amount purchase every month, and they generally don’t have the ability to reject any of the items in that parcel. 

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These site holders, who are also members of larger diamond consortiums, either forward the content of these packages to other companies to manufacture them, or they manufacture them themselves. Manufacturing here indicates the process of taking a rough diamond and polishing and fashioning it into the shiny gem that you are used to seeing. A large part, around 40-50%, of the rough diamond is lost in this process, which means if they have a one carat rough diamond, the end product is about 60% of a carat. This loss does not translate into a money loss because the lost rough diamond is factored into the price of the finished product. 
There is a huge trade of rough diamonds within diamond consortiums as well. Rough diamonds are parceled and are brokered between companies in order to maximize returns on the rough diamonds, if you are not intending to produce the actual diamond.
Once the gems reach its end form, they are sold through a network of dealers around the world. You can have dealers sitting in diamond cities such as New York, Dallas, Chicago, Los Angeles here in the United States, or across the globe in Sydney, Mumbai, Tel Aviv, Antwerp, etc. These dealers purchase in bulk from their manufacturer suppliers, usually based on pre defined terms. And they in turn sell to wholesalers or directly to retailers.

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Now, some specific or unique diamonds are given to brokers in the city and it’s the broker’s responsibility to connect between the wholesale merchant and the dealer, or the retail merchant diamond and the dealer. 
That’s generally the chain of events before the rough diamond reaches the end user. 
However, over the years, as in any industry, there is always the attempt to cut out the middle man. So, a lot of retailers bypass wholesalers and dealers, create relationships with the manufacturers overseas, and purchase directly from them. In some situations, diamond manufacturers become jewelry manufacturers themselves, and produce the end product to sell it directly to retailers, or they open up websites and sell it to consumers from there.

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Evidently, it is extremely difficult, if not impossible in some cases to keep a tab on the highly valuable rocks as they move from one step of the supply chain to another, which often results in frauds, misplacements, and thefts. In an effort to curb this recurring problem, diamond consortiums like De Beers, and Diamante, are incorporating blockchain technology to track the movement of registered diamond in real time. A decentralized, immutable, digital ledger will add transparency, and unparalleled security to the data cache which is meant to file details of every transaction within the Diamante network, is aimed to increase trust and accountability among participants across sectors in the industry. Such a system will also actively work toward reducing diamond related crimes, the gem being the most preferred currency that circulates in the underworld.

Source:Original

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