Blockchains and blood diamonds.

Earlier this year the global diamond giant De Beers announced that they had managed to use blockchain technology to track high-value diamonds all the way from the mine to the retailer. According to their 10th of May press release, this is the “first time a diamond’s journey has been digitally tracked from mine to retail.”

De Beers new platform know as Tracr is expected to launch in the latter part of this year and is not just an in-house solution but will be open to the entire diamond industry. The motivation behind this project is to increase consumer confidence and public trust that diamonds marketed by De Beers were not conflict or “blood” diamonds whilst increasing the efficiency of the supply chain.

Conflict or “blood” diamonds are diamonds that are illegally traded to fund conflict in war-torn areas, particularly in central and western Africa, according to the World Diamond Council, which represents the commercial diamond trade.

The United Nations defines conflict diamonds as “…diamonds that originate from areas controlled by forces or factions opposed to legitimate and internationally recognized governments, and are used to fund military action in opposition to those governments, or in contravention of the decisions of the Security Council.”

The diamonds have generally been extracted but have not been cut.

An estimated four percent of the world’s diamond production were conflict diamonds at the height of the Sierra Leone civil war.

During the Sierra Leone war, thousands of men women and children were used as slaves to extract diamonds. They were often kept in primitive conditions and forced to perform back-breaking work digging with their own hands.

The Kimberley Process came into being when South African diamond producing states met in Kimberley, South Africa in 2000. The discussed ways to stop the trade in blood diamonds and ensure that diamonds were not funding conflict.

Subsequently, the United Nations, European Union, the governments of 74 different nations and a number of interest groups reached an agreement and The Kimberley Process Certification Scheme (KPCS) was born. A certification requirement is that all rough diamond exports are produced via legitimate mining and sales activities are conducted “conflict free”.

Each shipment of diamonds is required to carry a certificate that documents where the diamonds come from, how they were mined, the place where they were cut and polished, all parties involved and their intended final destination.

According to Global Witness the problem is not limited to diamonds. They claim that it is not just the diamond trade that is fueling conflict and that rebel fighters and army units from eastern Democratic Republic of Congo (DRC) have been actively trading in mineral ores used in the production of various computer components and mobile phones. They suggest that local populations have been massacred, raped, extorted and subject to slavery.

These conflict of blood minerals are laundered into the global money supply by export houses. They are then transformed into refined metals by large international smelting firms. Chances are some of the metals in the everyday products you use were at some point a conflict mineral.

Tracr was developed by De Beers in association with five leading diamond manufacturers: Diacore, Diarough, KGK Group, Rosy Blue NV and Venus Jewel.

The CEO of De Beers Group Bruce Cleaver has stated:

“The Tracr project team has demonstrated that it can successfully track a diamond through the value chain, providing asset-traceability assurance in a way that was not possible before. This is a significant breakthrough made achievable by the close engagement of the pilot participants who share our commitment to industry progress and innovation…”

Under the Tracr system, each diamond is assigned a unique “Global Diamond ID”. This ID documents the characteristics of a diamond such as carat, clarity, and color. The data is then aggregated on an immutable blockchain. Tracr then re-verifies this data at each milestone along the diamond’s journey from mine to the retailer. This process utilizes blockchain to build upon the fundamentals of the KPCS essentially moving it to the blockchain. As each stage recorded on an immutable ledger it should make the verification process of all previous stages somewhat easier.

Founded in 1888, De Beers has operations 35 countries worldwide. It has mines in Canada, Botswana, Namibia, and South Africa. De Beers had a virtual monopoly on the world’s diamond trade until pressure from countries with large stockpiles pressured them to change their business model. The diamond trade is worth over $80.4 Billion US dollars annually.

In April the leaders of the diamond and precious metal industries in Africa teamed up with IBM to develop the Trust Chain initiative. This is a blockchain platform which will provide more transparency to the industry. Just like Tracr, the initiative will track from mine to retailer diamond, precious metals, and other gems.

Canadian diamond company Lucara Diamond appointed a new CEO in February. Her appointment was seen as a move to modernize the company. Eira Thomas will lead the company which has purchased Clara Diamond Solutions, another company seeking to ensure the provenance of diamonds through blockchain.

Although the Kimberley Process website purports that it blocked 99.8 percent of conflict diamonds from entering the world market, some groups have claimed that this is not enough. If the Kimberley Process can be improved upon through blockchain we may have come up with a solution that reduces the possibility of armed conflict on the continent of Africa. Maybe Blockchain can help prevent another Sierra Leone.