Regal Imports News for JANUARY 2018
Just saying 2018 is significant... I remember Y2K as if it were yesterday! That being said, Happy New Year.
The diamond business has witnessed a complete upheaval in the last 18 years. As for myself, I see the new reality as a challenge. I choose to treat my business as a journey rather than a life or death struggle.
A study commissioned by Jewelers of America found that the ability to 'evolve and compete in the rapidly changing retail landscape' is a jeweller's biggest fear. According to MasterCard, online retail still only contributes to 11-12% of all retail sales. David Bonaparte, CEO of Jewelers of America, notes that "The Jewellery shopping experience is different from other luxury purchases, and even with the rise of e-commerce, customers increasingly prioritize the in-store shopping experience." That being said, emerging technology is changing the landscape for all transactions. A lack of attention to technological advancements can lead to obsolescence and, on the other hand, if considered wisely, emerging technology will lead to new opportunities.
In this month's Regal Imports News, I will try to explain one of these emerging technological opportunities as it pertains to diamonds. Alrosa, De Beers and the Antwerp World Diamond Centre are considering implementing blockchain technology in order to create a more completely transparent diamond value chain.
Rather than trying to describe blockchain, I defer to Goldman Sachs:
Blockchain "combines the openness of the internet with the security of cryptography to give everyone a faster, safer way to verify key information.At its heart a blockchain is a record of transactions like a traditional ledger. These transactions can be any movement of money, goods or secure data.Blockchain is designed to store information in a way that makes it virtually impossible to add, remove or change data without being detected by other users. Today, transactions are verified by a central authority-like a government or a credit card clearinghouse. Blockchain applications could replace these centralized systems with decentralized ones, where verification comes from the consensus of multiple users."
A blockchain is created when programmed algorithms perform in harmony and eliminate the third party trust factor. Blockchain technology shifts responsibility in keeping a business ledger from humans to algorithms. Simplified, you don't trust individuals, institutions or audits; you trust the system and the users of the system to validate transactions. Blockchain technology also has the ability to block illegal or transactions performed outside the limits of the system. Blockchain assures that all transactions are complete and tamper free.
Blockchain technology is autonomous. It is an equalizer; a democratizing agent that allows for a more consistent and effective outcome. According to Matt Lockyer, blockchain is a special space that "abounds with inclusive good will and social impact projects."
A more in-depth analysis of blockchain technology is beyond the scope of my expertise. The study of artificial intelligence, big data and algorithms can be mind bending.
In early December, mining weekly reported that "De Beers is investing in a new digital platform service that provides a single, immutable record tracing a diamond's individual journey through the value chain. This diamond traceability platform is underpinned by blockchain technology.In a blockchain, each event or transaction is registered in a database backed by advanced information security technology.The system is able to verify activity on the chain.As the first traceability platform to span the entire diamond value chain, the solution aims to provide unprecedented levels of confidence and assurance." Bruce Clever, CEO of De Beers adds, "Consumers expect to know more about luxury goods, the route they have travelled, their authenticity and whether they have been a force for good in the world."
The advantages of blockchain technology are numerous. The new level of transparency will help banks to better assess the credibility of diamond manufacturers. It will guarantee that a particular diamond is not involved in conflict, is not an undisclosed synthetic, is not involved in money laundering, double tripping or transfer pricing, is mined in an ethical manner and is tracked to the place and time of mining. A digital ledger will provide all the information needed to create an extremely detailed report of origin and history for every diamond.
The implementation of blockchain technology could also assist the Kimberley Process in ensuring a legal supply chain. The Kimberley Process has been criticized for its inability to maintain an unbroken chain of custody. Inclusive blockchain technology will be more effective than current government agencies in eliminating illegal trade and will finally ensure full consumer confidence. The Kimberley Process needs to join De Beers, Alrosa, the World Diamond Bourse and the rest of the diamond community in implementing the necessary technology to maintain the highest level of transparency for the diamond supply chain. The world is evolving and the diamond industry needs to be at the cutting edge of this evolution.
Diamonds are currently witnessing sluggish consumer demand. Technological advancements are integral to creating renewed interest. Industry must be prepared to implement all new forms of relevant technological advancements. Artificial intelligence or machine learning is competing with human cognitive skills. There are new advancements in robotic diamond cutting technology that claim to be able to automate, in one operation, the complete cutting process from rough plotting to finished diamond. There is new technology that claims to automate the process of grading diamonds into a one step process that weighs, colour grades, analyzes cut and defines clarity objectively without any human interference. There is blockchain technology that is leading the way to a completely transparent chain of custody. There is an intelligence revolution happening right here and right now! New and transformative applications will underpin the viability of businesses going forward. Technological advancements are an integral part of a constantly evolving diamond story. A diamond story which finds its roots in enduring love and beauty and its new branches fortified with emerging technological advancements.