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Alex_g

Uniqueness of diamonds

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Hi,

First of all, this is probably the wrong place to ask for. I'm currently writing my bachelor thesis. One statement I'm using is that Blockchain technology can achieve physical trust in diamonds trading since (as far as I know) every diamond is unique. That means no diamond in the world is equal to another. Does someone here have a good reference for that so I can confirm this statement?

Thanks in advance!

 

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Hi Alex, welcome to Diamond Review!

The current technology for the identification of diamonds relies on a few, very simple tools: a source of light, a loupe, a micrometer and gem scales. There isn't a major issue in "trusting" the results of that technology; diamonds can be identified easily and cheaply and there are very few if any disputes in this respect- the issue if anything is in trusting the grades provided by one vendor (or grader/lab) since they have a significant impact on fair price, but the grading decision is ultimately a judgement expressed by a (set of) human being(s) on whether a certain stone is (say) D, E or F colour. How would blockchain help?

On the statement that every diamond is unique, I would say that it depends very much on what you consider "unique". At the atomic level, I'm pretty certain that it is right. At the macroscopic level, it's almost certainly false: smaller diamonds (say up to 0.10 - 0.20 ct) are rarely graded individually, and there is relatively little to distinguish them from each other once they have been sorted into fairly homogeneous groups as to cut, clarity, colour, shape and weight. However, the value of these diamonds is quite low individually, so why would a "blockchain-type identifier" be used?


Davide - Specialised Consumer Information and Assistance,
Diamonds by Lauren (http://www.diamondsbylauren.com)
davide@diamondsbylauren.com

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Hi davidelevi, 

First of all thanks a lot! I think I'll find enough references based on your comments (I cannot use a forum post as a reference). 

Blockchain can help in achieving trust in the origin of a diamonds (e.g. it's not a blood diamond) since it is to be able to digitally track a diamond’s journey from mine to a consumer in a tamper-proof way. The literature criticizes that there is no way of achieving physical trust by blockchains since there is no "real" connection between the data stored in a blockchain and the real world goods. My argument is that for diamonds this is not the case since every diamond is unique and thus once the metadata (the unique properties of a diamond) and the respective certificates are stored in the blockchain there is no way to replace a diamond in a later stage of a supply chain. 

So it's more about proving the real origin of a diamond. I just needed an argument that it's verifiable that a diamond entered in the first step of a blockchain cannot be replaced at a later stage. 

If you're interested in this topic I would recommend you to have a look at Everledger, a startup that is using the blockchain technology to improve the diamond supply chain. 

Here are some interesting articles and papers:

http://ecis2018.eu/wp-content/uploads/2018/09/2038-doc.pdf

http://fortune.com/2017/09/12/diamond-blockchain-everledger/

 

Best

Alex 

 

 

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I think you misunderstood my remarks. The existing process of diamond identification (without blockchain) works perfectly well without anyone needing to use a more sophisticated process.

The metadata that would enable you to track a piece of rough (which is how blood diamonds are typically traded - and BTW the blood diamond issue was largely solved 10+ years ago with the Kimberly process) would be destroyed in 99.99% of the cases once the diamond is cut.

The metadata that would enable you to identify a large (>3.00 ct) diamond can easily be altered in a number of ways that still leave the diamond very resellable, especially as a rough. The very abundance of smaller diamonds (<0.30 ct), their relatively low value and the lack of adequate unique characteristics to produce the metadata without having to resort to (very expensive) atomic-level scanners and high-precision positioning equipment to perform the scan in a consistent way are all factors making the application of blockchain to those diamonds unlikely.

The two articles are - I am afraid - largely written by people that have no idea of what they are talking about on the subject of diamonds. If I have time, I will dismantle some of the fallacies in the academic paper. The Fortune article is largely an advertorial.

Edited by davidelevi
Completed sentence in 3rd para

Davide - Specialised Consumer Information and Assistance,
Diamonds by Lauren (http://www.diamondsbylauren.com)
davide@diamondsbylauren.com

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2 hours ago, Alex_g said:

I just needed an argument that it's verifiable that a diamond entered in the first step of a blockchain cannot be replaced at a later stage

I'm afraid you have found no such argument here. At least so far.

Edited by davidelevi

Davide - Specialised Consumer Information and Assistance,
Diamonds by Lauren (http://www.diamondsbylauren.com)
davide@diamondsbylauren.com

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Sarine.com is offering exactly this service for approximately that reason.  They are a large and well established company in the industry.  Mine to finger provenance.  It’s the underlying technology for the everledger people  

If you want to make even a remotely scholarly paper, make you understand the concept of ‘blood diamonds’. That’s a PR term that doesn’t mean what people tend to expect.  

Blockchain is designed to make it difficult to alter records. It does that quite well and it’s a darling for investors. Anything with the word ‘blockchain’ in it is a topic of discussion.  That doesn’t make the underlying data valid, useful, or even true.  The problem, and the solution, of so-called blood diamonds mostly has to do with do with local power in the source countries. Everledger doesn’t have anything to do with that.  What they do is connect the word blockchain to diamonds, and that’s an advertising opportunity in the west.  That has merit, but it doesn’t sound like what you’re looking into. 

Edited by denverappraiser

Neil Beaty

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There's never a crowd when you go that extra mile.

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Hi all,

Thanks a lot for your constructive comments. I'll just skip the statement that says diamonds are unique by default. It was just a really small part of my thesis where I'm talking about supply chains of luxury goods.

 

 

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When you are done, please post us a link to your thesis, if your college/university allows! Would be interesting to read.


Davide - Specialised Consumer Information and Assistance,
Diamonds by Lauren (http://www.diamondsbylauren.com)
davide@diamondsbylauren.com

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Having worked on the rough side of the diamond trade, I am always fascinated by the concept of being able to actually track a specific stone.  Aside from large "special" stones, 10 cts +, most rough is sold in parcels.  Rough dealers buy from various sources, then combine similar lots (not necessarily from the same source) and divvy them back up to best suit their business or their customers' needs.  Manufacturers buy these mixed parcels and sell off rough they do not want to cut, either to other manufacturers or back to dealers (again, not necessarily where they bought from).  I'm not talking about the vast quantities of small rough stones below 1ct, but even stones in the 1 to 10 carat range get treated this way.  So the idea of actually tracking the life of a stone might be as difficult as tracking a specific $10 bill.  There are of course some companies that are more vertically integrated and make a point of tracking this path and use it as an endpoint selling proposition, but that is a small minority of the business.

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Laurent George
Diamond Ideals
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laurent@diamondideals.com

 

 

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The weakness is in the value chain.  The miner knows where they found each stone.  Also when, what tools and techniques they were using, which workers were involved, what part of the mine and all sorts of other details.  Not tracking these things would just be bad management. The same happens at the cutter. They know what they paid, where and when they bought it, who worked on it, what results they expected and how it worked out. Anything less would just be stupid.  They know who they sold it to, when, and for how much.  The whole supply chain looks like this.  It’s not that the data isn’t there, it’s that they don’t want to pass it along for any reason short of a court order.  Why not?  Money.  A lot of this is proprietary information, it’s extra work and extra exposure to track it, and there’s no extra money for those who do it.  Customers claim they want to know, but when it comes time to pay, they’re happy enough without it.  They want it if it’s free.  Yeah, right.

 

That’s why I’m suspicious of these blockchain type claims. What the blockchain adds to the program is to protect the data from tampering.  That’s interesting, and possibly even useful, but it's solving a problem that no one has. 

Edited by denverappraiser

Neil Beaty

GG(GIA) ICGA(AGS) NAJA

 

There's never a crowd when you go that extra mile.

Professional Appraisals in Denver

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