Blockchain technology is the leading technology nowadays, and thus every industry wants to benefit from it. The technology’s transparency, security, and capacity to replace the traditional ledger or bookkeeping platforms make it the most desirable among the top industries. The diamond industry is also not left alone with its influence. Diamond trading is a complex process, and there are some potential risks that can be eliminated using blockchain technology.
If cryptocurrency is used for trading diamonds, blockchain technology will help improve the diamonds’ authenticity and transparency. The blockchain can be used to validate diamond origins and eliminate illegitimate trading by protecting the supply chain and locking the sources of payments. This technology can be used to ensure that the diamonds come from an ethical and reliable source and that they comply with all regulations.
Current Diamond Industry
Diamonds are an expensive commodity, and their business involves risks, too. The industry’s main issue is the illegal trading of these valuable gemstones. Thus, the industry is in dire need of a real-money solution. It is needed to track the lifespan of the diamond to prove its authenticity and legitimacy.
Blockchain As A Solution
A blockchain is a digitized distributed ledger. It is decentralized, meaning it is not controlled by any centralized authority. All the transactions on blockchain networks are visible to everyone, maintaining transparency.
How Does It Work
A blockchain network consists of nodes that work on specialized algorithms. This is done to maintain the legitimacy of the transactions. When a transaction is verified, a data block is created and linked to previously created blocks. Now, the uniqueness of this technology is that there is no single point of control and thus no single point of failure. If anyone tries to hamper the existing blocks, errors will start appearing in the linked blocks. This makes blockchain technology virtually incorruptible and transparent.
As A Solution
Now, when it comes to the diamond industry, regulators may initially be doubtful about the use of cryptocurrency because of fluctuations in its value. As mentioned above, the diamond industry needs a real-money solution, one that is in compliance with all anti-money laundering regulations and can provide real-money value for the diamonds.
Currently, blockchain is being used to track the lifespan of the diamond, from the time it is mined to the time it shines brightly on someone’s hand. Also, diamonds are being used to develop asset-backed tokens. For example, LCX has launched TIAMONDS, the diamond NFT backed by real-world diamonds that provide customers with 1-1 ownership rights. If blockchain technology is expanded in this industry, it can eliminate the critical issues within the industry.
Benefits Of Using Blockchain Technology For the Diamond Industry:
- When diamonds are traded entirely on blockchain, each transaction must undergo a clearance process.
- In this process, the trader must comply with all the regulations surrounding diamonds, such as the Kimberley Process, anti-money laundering, and banking protocols.
- The clearance process becomes 100% reliable and transparent when the diamond’s lifespan tracking data is entered into the system.
- There is no individual point from which the trader or anybody else can change the diamond’s verified lifespan.
- But if, by any means, someone is successful in altering the lifespan, all the subsequent blocks in the chain will be disrupted, raising a clear red flag for the traders and regulators.
Conclusion:
The diamond industry is currently struggling with lots of unfair transactions and deals. To bring transparency and security to the process, the introduction of blockchain technology for diamond trading is a much more feasible option. Using this technology ensures that everyone involved in a transaction is well aware of the alteration. Thus, good deals with tangible profits can be made more frequently.
