ZhongAn Technology, a publicly listed Hong Kong-based corporation recently announced the launch of its new blockchain diamond tracking platform. The firm, which is a subsidiary of ZhongAn insurance, China’s first online insurance agency, believes that blockchain can potentially disrupt the luxury goods market.
The platform, known as Diamsledger, will serve the purpose of much-needed provenance when trading diamonds. The idea of creating better ways to authenticate luxury items goes a long way toward solving one of the market’s most distressing problems. Recently, Everledger launched a similar luxury-focused technology which provides solutions to diamond storage. There has also been a significant focus on blockchain applications for provenance and verification in several industries including art and transportation.
According to Diamsledger CEO, Zhang Yongwen, the company has successfully uploaded the data of 760,000 diamonds onto the blockchain platform so far. With this project, it hopes to increase the level of traceability and transparency at every single point of the luxury item supply chain. Using the platform, all relevant stakeholders including customers, diamond dealers, customs, logistics firms, exchange centers, and processing firms can easily view the entire history of a diamond from production to ownership.
Typically, diamond traders and customers are required to present certificates of authentication as proof that the gems being traded are not synthetic counterfeits. Unfortunately, in the face of recent technological advancements, this certificate system is fast becoming outdated. Blockchain technology has the potential to replace this failing system in the future. However, for now, those certificates are still functional and highly regarded.
Why Do Diamonds Need to Be on a Blockchain?
For centuries, global diamonds have represented beauty, luxury and wealth. They are mined and cut into various shapes that make their way onto the bodies of the wealthy and influential. However, not every diamond is really what it seems and beneath the shine is a fake gem and a customer who has been scammed.
This situation in which a customer purchases a luxury item that ends up being a counterfeit happens a lot in the industry. It is a huge challenge to deal with especially considering the lengths that scammers go to and the amount of money at stake. To prove that the gems are authentic, they have to be accompanied by a certificate of authentication from the relevant authorities. These certificates, while verifiable, can also be forged so the best solution may lie in blockchain technology.
As the diamond market becomes more saturated with fake products, increasingly anxious customers require knowledge of where their products came from and what processes they’ve passed through so far. There have been reports of cruelty to diamond mine workers and a host of other worrisome practices and customers often demand ethically sourced diamonds.
The technology makes corporations more accountable for errors in their supply chain. Also, such corporations can no longer claim to be ignorant about the sources of their products and the unethical processes used to source them. Using a blockchain platform, this can easily be verified.
A blockchain is a digital distributed ledger, hosted on a peer-based network, which records every single transaction on it. Since blockchains are append-only, new and old transactions concerning a particular diamond cannot be changed. This way, the entire journey of the gem can be traced at every single point. The issue of certificate forgery is also eliminated because a blockchain requires the consensus of its network nodes to append it. No single person can put out a false transaction.
The diamond industry has already started putting the technology to the test as several blockchain firms like Everledger and TrustChain have recently emerged within the space. While these projects have generated a decent amount of buzz and excitement, they were not the first blockchain projects that target supply chain traceability. The technology was once used in chicken farming to track and record progress. Each step of the supply chain was traced from production and processing to the final market.
What is Diamsleger?
During the announcement in August 2018, ZhongAn Technology revealed its partnership with Ediams, a prominent online diamond trading firm. As a result of the partnership between them, Diamsledger will serve as a subsidiary to both firms for the marketing of the project. Together, both companies have created and deployed the blockchain technology platform which is currently built on ZhongAn’s blockchain and hosted on the Anlink cloud platform.
The Guangzhou Diamond Exchange (GDE), a partly state-owned diamond trading platform has also announced plans to launch on the Diamsledger platform. Being the only government approved online merchant that specializes in rough diamonds, the firm has likely contributed to the large number of recorded diamonds on the platform so far.
How Does the Technology Work?
To ZhongAn Technology, the main aim of the project is merely to provide an immutable and transparent ledger, hosted on a decentralized network that handles easy and accurate tracking for diamonds. This platform will render every single piece of information concerning the gems and be easily retrievable.
Most of the diamonds on the Ediams online trading platform are certified with the Gemological Institute of America (GIA) or National Gemstone Testing Center (NGTC), China’s state-owned verification organization. Each diamond has its own electronic ID that is linked with its GIA or NGTC certificates.
On the Diamsledger platform, customers can easily search for the GIA, NGTC and HRD information for their diamonds by entering its certificate number. The system also has an advanced image recognition feature to prevent fraud by identifying diamonds using their pictures.
Although the blockchain does not replace the traditional paper certification, it provides even more information than the certificates. For example, users can view mining, cutting, inspection, dealership, logistics, clearance, processing and exchange information which isn’t readily available on paper certificates.
When diamond owners sell their gems, the information can be appended to the blockchain, constituting another milestone in its lifespan. Coupled with traditional certificates which contain the origin and physical specifications of diamonds, the authentication blockchain completely assures customers of the authenticity of their diamonds. This type of trade in the luxury goods market could change the way other commodities are traded globally, leading to more open and transparent commerce.
The firm hopes that in the future, customers can easily access information pertaining to luxury items from a smartphone when buying from their favorite retailers like Tiffany & Co. Currently, the WeChat applet can be used for this purpose.
Final Thoughts
For a while, ZhongAn technology has been experimenting with blockchain applications to solve various problems. One significant past initiative is a blockchain tracking application for the food supply chain. The firm has also secured a patent for a solution to media piracy, using the technology.
Diamsledger is the first platform in China that offers this particular service for now, but that may soon change. With the countries population and rate of technological advancement, it may only be a matter of time before more provenance and tracking companies emerge within the luxury goods market.
Globally, other corporations have been taking big steps towards the same thing. One example is De Beers which announced its blockchain project at the beginning of 2018. Another example is IBM (News - Alert) which announced its development of the TrustChain gem provenance platform. Together, these firms are building a solid foundation for a fraud-free market. Hopefully, in the near future, blockchain provenance will become commonplace for any luxury item.
