Though diamonds have been around forever, it wasn’t until the 1950s that the four Cs for diamond quality—cut, color, clarity and carat—became a globally accepted standard for describing diamonds. There is a fifth C, however, and that is certification.
A diamond certification is a diamond-grading report, which is a printed opinion on the quality of a diamond by a specific diamond grader at a set time under exacting conditions. The certificates provide an unbiased third-party opinion as to a diamond’s characteristics and a means of identifying one diamond from another.
In 2000, an additional certification measure went into effect when the United Nations (UN) General Assembly passed a resolution to create an international certification scheme for rough diamonds to stem the trade of conflict diamonds. This measure, approved by the UN in 2000 and in effect by 2003, is known as the Kimberley Process Certification Scheme, and sets the standard for controlling rough diamond production and trade.
However, despite having precise certification methods in place, fraud still runs rampant in the diamond world. In April of this year, the Federal Bureau of Investigation (FBI) arrested 10 men in New York for their alleged role in fraudulently obtaining millions of dollars in untraceable diamonds in New York, Las Vegas and Mumbai. A few years earlier, a criminal network in London, known as the boiler-room gang, was convicted for selling dozens of colored diamonds to investors at up to 30 times their value.
Leanne Kemp, the founder and CEO of Everledger, a startup launched in 2015 through the Barclays Techstars accelerator, hopes to restore the diamond industry’s tarnished image by making sure the provenance of diamonds is crystal clear.
The London-based fintech company seeks to accomplish this by cross-referencing certified diamonds against a digital ledger that records ownership and origin of the stones to prevent fraud. Everledger securely captures the defining characteristics of the diamonds and creates a digital thumbprint that is stored in the blockchain for each one. This information, which includes history, transport, events and ownership, is relied upon by multiple stakeholders across global supply chains to verify each diamond’s authenticity.
Blockchain, the decentralized record book that underpins Bitcoin, was the perfect place to create a digital ledger designed to trace and verify certification of diamonds, according to Kemp.
“Diamonds are the perfect use case for blockchain technology,” she says. “Blockchain is a network technology, orchestrating trade amongst participants with embedded trust and smart enablement of contracts. Take the Kimberley Process as a prime example of a network in which there was already a consortium and operating protocols. This framework of consensus plays well into the fabric of blockchain. In the diamond industry, we have inspection points, certificates and physical scientific laboratories. It is a controlled environment where certain levels of science and scanning technologies are applied. All of these are important parts to the structure of integrity.”