Provenance of Precious Metals & Gems using Blockchain

By: Sonali Gupta, Associate Consultant, Blockchain Practice, LTI

That solitaire you own; that diamond ring you gifted your spouse; that gold wedding ring – do you know where is it coming from? Have you ever pondered about the origin of these items? Found in the mines of Africa, sent to India for designing, exported to the US as a wedding ring, which Joe gave to Sandra – these precious metals travel across the world before being bought.

But, why is origin and history important? For a very long time, we paid no attention to the fact that there was child labor employed, human rights abuse and violation of labor regulations to get the products to the consumers. Companies were careless in conserving environment, and in the process, this approach caused irreversible harm to the indigenous people, to animals, and to forests. Consider the case of blood diamonds, they were sold to indirectly finance wars, insurgencies and trouble-inducing activities.

Steps in the buzzword of today – Blockchain. Blockchain is a distributed ledger technology, which is immutable. What does it mean? Everyone on the blockchain platform has her own ledger that records the transactions happening on the platform. Once stored on blockchain, no one can go back and alter these transactions.

Okay! Now how does blockchain help in provenance? Let’s take that ring that perched on Sandra’s ring finger and rollback time. Ngozi found the diamond in the mines of Kalahari desert in Botswana. From the miner, the diamond travels to a manufacturing company, along with a Kimberley Process Certificate (which assures it isn’t conflict diamond). The manufacturer employs Jiteshbhai to work on the beautiful wedding ring. The ring has characteristics such as carat, colour, cuts, grade among others. The ring after completion is exported to the US. Finally, Joey purchases the ring from a store. This entire information is stored on the blockchain. You can track where was the diamond found and by which mining company, you can see the accompanying certificates, track where was it designed and shaped into a ring, you can see the characteristics of the ring, and see who imported it to the US. This information is available for Joey to see the stakeholders involved in bringing the ring to him and to check if the wedding ring is authentic.

Provenance is not just applicable to precious metals. As the consumers become conscious of their choices, use-cases are emerging for tracking food items, fashion and handicraft among others. And, if there is a genuine audit trail backing a purchase, the re-sale value is higher.

Provenance is something that companies are incorporating through their Responsible Sourcing Programs. Some of the leading global IT companies have been instrumental in helping them strengthen the audit trail via blockchain.

Way forward

Now, blockchain has solved only a part of the problem. While no one can deny the genuine information on blockchain, blockchain alone will not be able to guarantee that the products are authentic. Someone can easily swap the original with a duplicate without getting noticed. Hence, the area of counterfeiting remains unaddressed, but is gaining popularity. The use of RFID/ NFC chips is gaining popularity, but the costs are prohibitive except if being used for luxury/ expensive goods. The idea is to put NFC chips in the product, read the chip via a device (could be a simple smartphone) and check the authenticity of the product. Once we can protect for counterfeiting, the data to identify the item uniquely can be stored on to blockchain, and this will be a single source of truth.

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