Will Blockchain Be a Boon to the Jewelry Industry?
By Elizabeth Paton, The New York Times
LONDON — For jewelers, dealers and collectors alike, some of the biggest challenges are the same — and all too familiar: How can one guarantee the ethical provenance of a diamond or precious stone? Ensure it is real and not fake?
How can one secure and track the movement of a jewel within a fragmented and opaque supply chain? And how can one authenticate ownership of a piece if that is called into question?
A number of jewelry industry heavyweights have recently adopted distributed ledger technology, an umbrella term for a shared and synchronized database, to record such information. And enthusiastic proponents of blockchain, the underlying system, say the technology could be a possible — and revolutionary — verification solution, although one still in its infancy.
Blockchain, which has been used since 2009 to underpin the crypto currency Bitcoin, allows a transaction to be recorded permanently on a database shared among computers without relying on a third party to authenticate or to process it. The information becomes accessible anytime, from anywhere, by anyone with a secure key, but it cannot be edited. A stakeholder (or consumer) involved in a transaction can verify the information on his or her own, instead of trusting a third party to do so.
“The opportunities for positive change using blockchain within the luxury business are endless,” said Joseph Lubin, co-founder of the blockchain computing platform Ethereum and a founder of ConsenSys, short for Consensus Systems, a blockchain venture studio. “And they’ve only just begun.”
In January De Beers unveiled Tracr, an initiative that aims to provide a single, tamper-proof and permanent digital record — from mine to consumer — for every diamond. And in September the Hong Kong giant Chow Tai Fook introduced a similar project developed with the blockchain provider Everledger and secured by the IBM Blockchain Platform. Competitors in the luxury industry aren’t known for sharing secrets but it is clear that some leaders in the space see short-term investment costs outweighed by long-term opportunities.
According to Laurence Haziot, IBM’s global managing director and general manager for the consumer industry, blockchain could be a lifeline for the luxury sector because it could enhance trust between a brand and its consumers.
“Blockchain helps to authenticate, in an instant, the apparent high value of any luxury item — from where it comes from to what it’s made of; from how many hands it has passed through to where and when it has been stored, stocked and delivered — and that is extremely important in the world of watches and jewelry,” Ms. Haziot said.
“For companies that embrace the technology, blockchain is an opportunity to clearly signal that they are willing to establish a closer and more transparent relationship with their consumers.”
Options on how businesses could deploy blockchain technology include creating trackable, tamper-proof packaging, devising serial numbers or sensor stamps, and closely monitoring the transportation of materials or products from one stage to another. Advocates say all of those practices would, gradually, create perfect data that could eventually make it more difficult for unwanted or illegal additions to be introduced into production and distribution systems.
In addition, advocates add, the eventual savings from greater efficiency and transparency as a result of using blockchain — removing the need for paper invoices, for example, as well as reducing the information silos that have traditionally existed among each point of the supply chain, like the mine, the refiner, the manufacturer and the retailer — are another major boon.
“Fundamentally, it reduces room for human error, boosts trust via open source cooperation and could, in time, redefine the way many luxury players do business,” Ms. Haziot said.
The question, however, is when?
Plenty of barriers still exist, especially for smaller brands, some of whom have suggested that, at a time when provenance has never been more scrutinized, the idea of blockchain is being hyped by laboratories eager to charge for origin testing. Then there are heavy upfront investment costs, the acquisition of a digital wallet and the need to wade through confusing and intimidating jargon to get on board with many blockchain service providers — who are often building their own separate blockchains, which could be counterproductive. Then there is the fact that most of the technology is constantly changing and still in its early stages.
“There is a lot that still needs working on,” Mr. Lubin said, “and a lot that could be made better.”
Nevertheless, the founders of start-ups like Arianee, a French blockchain project attempting to build an anonymous record of all global luxury assets by 2020, are convinced that the payoff would be worth the effort.
Put simple, their aim is to build a their aim is to build a universal registry for all luxury goods. Using blockchain technology to create a multilayered, transparent and decentralized platform, which they hope will then be collectively used and managed by thousands of luxury brands from allover the world, rather than a single, centralized company or body. Should Arianee take off, brands would purchase ‘aria’ tokens, the platform’s internal form of payment, to generate digital certificates of authenticity that would then follow an individual product throughout its lifetime, even when customers resell those products. But the project’s founders are aware that competition — and the chance of failure — is high.
“We don’t see what we offer as a product, we see it as a protocol,” said Emmanuelle Collet, one of Arianee’s founders. “When most luxury brands are still focused around Instagram and see that as embracing the future, it can be hard to convince them that they need to be looking forward at what technology is coming next. But blockchain is coming, whether they like it or not.”