Diamonds are Forever: On the Ethereum Blockchain
Everledger, a London startup, is utilizing the Ethereum blockchain to tackle fraud and theft in the diamond industry. Starting with diamonds and any other high value item, (whose provenance may otherwise rely upon paper certificates and receipts which can easily be lost or tampered with), Everledger is using the Ethereum blockchain as the distributed public ledger for tracking those diamonds in a way that’s more efficient than a paper trail. While this ensures that the diamond may find its way back to the owner in case of loss or theft, it’s also is being used to combat fraud.
According to a 2012 study from the Association of British Insurers, around 65% of fraudulent claims go undetected, with diamonds playing a key role in those numbers. Back then, there wasn’t a way to detect or digitize those diamonds, but with the Ethereum blockchain- new portals are opening.
“We are a fraud detection system, overlaying big data from closed sources like insurers and law enforcement.”
To exercise this mission, they have partnered with different companies and institutions all across the diamond industry, from insurers to law enforcement and all the diamond certification houses in the world. Through Everledger’s API, each of these groups can access and supply data around the status of a diamond. Information such as police reports, insurance claims, when a diamond is recovered, or if it’s still missing, all help investigators find ownership or track it down.
There are currently just under one million diamonds that are uploaded onto Everledger’s platform by their team. Each one of these diamonds employs a unique identifier- a digital fingerprint that is calculated from 40 data points related to each stone, including the typical Four C’s of the diamond. Any diamond over .16 carats will also have a serial number inscribed on its girdle during the grading process. While diamonds could be reshaped to obscure this “digital fingerprint”, this completely reduces a diamond’s value and is not typically practiced even by criminals. This can destroy the diamond or even split it in two, thus rendering it devoid of its high value.
In the past, there has never been a digital registry of diamonds, therefore the risk of stealing diamonds and getting caught isn’t high for criminals. No one knows where a diamond came from, or if it was stolen. Diamonds also accrue value over time so a thief has no reason to sell the diamond quickly after a theft. They can sit on it, wait for the value to increase, and watch it form into a high-value nest egg.
CEO, Leanne Kemp, has stated:
“We would sit side by side with them [law enforcement] in assisting with better data, better visibility, better background, which then would lead to better prosecutions.”
Kemp is hoping that Everledger will act as a reducer to this crime by catching offenders and dissuading potential theft. Online retailers such as Amazon, Blue Nile, and ebay could vet the inventory of sellers on their platforms as well, which will further authenticate these diamonds for the potential buyer. Which Kemp emphasizes that Everledger is not really a consumer product but more of a B2B service that bills out on access to its data. While the platform is partially public, it doesn’t reveal police reports or policy information. The public can only cross reference diamond certification, but the businesses have access to the details.
As Everyledger takes off, Kemp has stated that she would like to branch out into the vintage diamond industry, then after that, even more high-end goods:
"Luxury goods is a big spend, and there are a lot of items, a lot of money and cross-border as well - that's where the blockchain comes in, the ability for it to be a global ledger."