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Traceability of diamonds will pass through the blockchain to avoid scams
Traceability of diamonds will pass through the blockchain to avoid scams
Blockchain

Traceability of diamonds will pass through the blockchain to avoid scams

By Fabio Lugano - 21 Feb 2019

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As reported by the Indian Express, a new method to avoid fraud on the evaluation of diamonds has been developed by a group of scientists. This new system is based on the blockchain and allows traceability, ensuring the origin of natural diamonds throughout their history.

The method, developed by experts from the Russian National University of Science and Technology, will protect natural diamonds, which are among the most valuable assets commercially available.

The goal of this startup called Bit Carat is to create an asset backet token that allows the trade of certified and safe diamonds through traceability using the blockchain.

Currently, on the market one can find natural diamonds, fake diamonds and synthetic diamonds. Synthetic diamonds have the same physical and molecular characteristics as natural diamonds, but they are human-made and do not take 3 billion years to form like natural diamonds. The process for their production is costly due to high energy consumption, but it ha been now so refined to produce diamonds which are difficult to distinguish from natural. However, synthetic diamonds have a value of 40% lower than the natural ones.

In order to be able to distinguish the two types of precious stone, the blockchain could be the ideal solution. This because the Blockchain can create a unique token for each natural diamond, with the physical characteristics of the product that cannot be changed, and that can be recorded and traced across the different steps; from the mine, to the cut to the final buyer. Also, certified security tokens would allow easy transfers among buyers.

The valuation of precious stones on the market is a hot topic in Italy these days, with a scandal of over 700 million euros that has involved traders, major national banks, and many investors including famous singers like Vasco Rossi.

The scam consisted of selling authentic diamonds at a much higher market price through internal evaluations, linking the companies that sold them with established and reliable banking channels to attract customers.  

A blockchain diamond tracking system based on a security token would make it possible to erase the opacity of the price and thus the reduce scams on the market.

Fabio Lugano

Graduated with honors from Bocconi University, Fabio is a consultant for companies and wounded shareholders of the Banche Venete. He is also the author of "Scenari Economici", and lecturer and analyst of cryptocurrencies since 2016.

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