50 STATE OF THE MAJORS 2018 identifying diamonds through emerging technology means they can be confidently tracked on the blockchain and, therefore, protect their future value.” This can have a large impact on a growing number of consumers who want to ensure the ethical provenance of their purchases be it cof- fee, clothing or diamonds, and often are will- ing to pay a premium for any product meeting their exacting individual requirements. But that doesn’t necessarily mean they will have to with blockchain. Both Zerouki and Helzberg’s Yoakum say diamonds tracked on the blockchain will not cost more than other diamonds. Zerouki says the system is about meeting evolving consumer expectations and helping to address existing challenges in the industry, while Yoakum thinks there are already enough tracking and chain-of-custody systems to make blockchain price inflation unlikely. She also says the technology can bring efficiencies to the market, providing real benefits to the industry and saving money along the way in the long run. For example, verifying a diamond as conflict-free and mined at source (neither Tracr nor Everledger are registering lab-grown diamonds) and then tracking it as it moves through the supply chain removes the need for constant testing and verification and keeping track of reports since all the informa- tion is stored in an online digital certificate. So instead of having to send a diamond to a lab for testing to verify it is untreated each time it changes hands, the new buyer can just check the details on the ledger, saving both time and money. While blockchain is still an emerging technology, its growing implementation signals the start of a major digital shift that could change how the diamond business is conducted forever. Another use of blockchain, and one that returns the technology to its roots, is the creation of a diamond-backed cryptocurrency. Among the start-ups rolling the virtual dice in this arena are Glitzkoin, D1 Coin, CEDEX and Carats.io. Carats.io appointed Eli Avidar, former manag- ing director of the Israel Diamond Exchange (IDE) and Israel Diamond Institute, as its president. It has developed an algorithm that it says has standard- ized and automated a “primitive market.” The algorithm compares individual diamond grades to daily market conditions. So far, it has priced more than $1 billion worth of diamonds. Commoditizing the diamond market in this way lowers the barrier of entry, meaning it would no longer be necessary to have expert knowl- edge to trade in diamonds. But that’s only part of the process. Carats.io CEO Avishai Shoushan says its diamond-backed cryptocurrency, the CARAT Token, will provide a new way of transacting value that will “eliminate the industry’s massive banking and, even more importantly, financing issues.” The token will be used in two ways: as a means of payment for members of the “crypto world” to buy diamonds and jewelry, and as a means of payment by members of the diamond industry. It is a change he believes the industry must make. “Nowadays, we see more traditional indus- tries prosper as they adopt modern innovative technology,” explains Shoushan. “The diamond industry realizes that without technology and innovation, it will stay behind. Modern markets demand innovation, so it has to adapt.” There is still some way to go before this idea receives wider acceptance. The IDE, for example, ended its partnership with the company because the Carat Token did not have regulatory approval. (Israel’s diamond control- ler, who regulates the industry, rejected Carat.io’s request for a license to trade in diamonds.) A different type of innovation is being pio- neered by the Singapore Diamond Investment Exchange (SDiX), which bills itself as, “the world’s first commodity exchange in physically settled dia- monds,” and is using Everledger to fuel its business. Everledger provides the baseline infrastructure for traceability and enables a digital twin of the item to be stored, tracked, traced and traded on the exchange, explains Everledger CEO Leanne Kemp. “The solution accurately [authenticates] the key details of a consigned diamond basket on SDiX, consisting of GIA-certified stones using unique data points hosted securely online; a key part of the output is a ‘view receipt’ of the digital certificate for each stone in the basket, housed on the blockchain,” she says. “The system opens up the potential for a range of future applications for diamond market participants, including enhanced provenance data, increased supply chain security and efficien- cies, and new risk management tools.” However, not everyone is in favor of using the blockchain to (further, some would argue) commoditize diamonds. Tracr, for one, is not looking to be involved in the move toward equalizing diamonds. Instead, it is focusing firmly on the uniqueness of diamonds, which is not at all surprising when one considers the driving force behind Tracr is De Beers. “Tracr will offer retailers a greater ability to tell the story of a diamond,” says De Beers’ Feriel Zerouki. “[It] will support the consumer perception of diamonds as unique luxury items and prevent the risk of them being commoditized.” She says the key objective of Tracr is to build a platform that “enables the creation of a perma- nent and immutable digital record of a diamond journey across the full value chain and ensures that a diamond’s physical properties match its digital record. This, in turn, will enable the retailer to provide much more of an individual story about the diamonds they sell.” THE COMMODITIZING CHAIN “[Tracr] will only maximize its potential if it is a platform developed by the industry on the behalf of the industry. [It will provide] a single source of truth for the diamond industry.” — Feriel Zerouki, De Beers Group THE STATE OF THE MAJORS THE DIAMOND INDUSTRY JEWELRY DESIGN THE COLORED STONE MARKET