By Alexia Palmer
A teacher I had at the Gemological Institute of America once likened gemology to an arms race. Dishonest individuals, he told us, are constantly inventing new synthetics, treatments, and substitutes while gemologists must constantly devise new ways to detect them without causing physical damage to a stone. We, as gemology students, were training to help fight these international forces of evil!
Heroics aside, the jewelry industry is one that has always been heavily dependent on expertise and trust. In a world where most consumers lack the training to verify the identity and quality of the gemstones they buy, grading agencies, jewelers, and trade organizations have provided the consumer confidence necessary to keep the industry running. As the public grows increasingly concerned about questions of provenance and sustainability, reliance on these authorities has also grown.
Over the last several years, more and more grading agencies and gemstone companies have announced forays into the realm of blockchain technology. The Gemological Institute of America now offers blockchain-enabled diamond grading reports, De Beers has unveiled a blockchain called Tracr, Everledger has partnered with Gübelin Gem Lab to create the Provenance Proof Blockchain and IBM has introduced the TrustChain Initiative with cooperation from Rio Tinto. How does blockchain technology apply to gemstone tracing? Does it promise decentralization in the same way it does for the banking industry?
Over the last several years, more and more grading agencies and gemstone companies have announced forays into the realm of blockchain technology.
Gem laboratories such as those run by GIA and Gübelin take submitted gemstones and subject them to testing and inspection. They then issue gem reports that include features such as gem identification, weight, dimensions, shape, cut and clarity grades, color, fluorescence, geographical origin, and plots of internal features. Each report has a unique number, and this number can be laser inscribed into a stone to aid in future identification. In the case of the GIA, gem reports are available to the public upon request as PDFs on the institute’s website for verification purposes.
Other grading agencies may require identity verification before releasing this information. A customer can bring a stone to a trained gemologist to confirm whether its features match those in its designated gem report. A laser inscription number is helpful but can be faked, removed by polishing or obscured by a jewelry mounting, so it is best to confirm a match using a number of different features. The internal plot is the most distinctive and reliable of these in the case of diamonds. Customers have learned to ask for gem reports when they buy gemstones, and the practice of using independent grading laboratories is widespread throughout the industry.
The blockchain solutions currently being applied to gemstone tracing use ledgers that are proprietary to a particular company or consortium to indelibly record an individual stone’s history as it changes hands, starting from the time it is first entered. The ledger can accommodate changes to a stone over time, such as cutting or the use of color or clarity treatments. As long as these alterations are faithfully recorded they will remain part of a stone’s history. The technology’s potential for tracing a stone from the mine through dealers, processors, retailers, end consumers and eventual resale is highly promising.
This extends to items that may be stolen or fraudulently represented. The Kimberley Process Certification Scheme, a protocol introduced in 2003 to document the country of origin for gemstones in an attempt to prevent the trafficking of stones from conflict regions, depends on a large volume of physical paperwork; as a result, it has been widely criticized for its vulnerability to fraud and forgery. The Scheme could benefit greatly from the use of fixed electronic record-keeping, and it was widely reported to be exploring blockchain technology as early as 2016.
The technology’s potential for tracing a stone from the mine through dealers, processors, retailers, end consumers, and eventual resale is highly promising.
Will blockchain technology disrupt the gem industry? While distributed ledgers provide real potential for improved transparency and record-keeping they are not on the verge of toppling existing structures or making gemologists obsolete. Since gemstones are physical objects it will always be necessary to perform physical examinations, first, before they are entered into the blockchain and, subsequently, whenever they need to be matched back to the blockchain data. The fungibility of currency, commodities and equities makes it possible to cut out the middleman and transfer them directly from person to person in a trustless manner. With assets such as gemstones, physical works of art, cars or real estate the digital object corresponds with or “mirrors” a physical object.
For the latter use case, it is necessary to use a permissioned ledger in which some authority will always be needed to ensure that information added to the blockchain matches the real object. A governing consortium (such as the GIA) would run the blockchain, experts (such as professional gemologists) would be required to enter new data, and lesser experts (such as trained gemologists) would be required to help end users verify that their gemstones correspond to the digital versions. In light of this, it is not surprising that most companies applying blockchain technology to the gem industry are established players. The technology is a supplemental innovation rather than a disruptive one.
Recent innovations in marking gemstones include RFID tags inside cultured pearl nuclei, laser inscribed QR codes, and even DNA technology-based emerald “Paternity Tests,” but these all require microscopes or other specialized equipment to work. Unless a foolproof way is found for a layperson to uniquely identify a gemstone, gemology students like me and my classmates will continue to play an important role in preventing fraud.
Alexia Palmer (’22) is currently an MBA student at Columbia Business School. Previously she worked in the jewelry industry for eight years as a gemologist, jewelry appraiser, and jewelry historian. She has a Masters degree in Visual Culture: Costume Studies from NYU Steinhardt, a Graduate Gemologist degree from the Gemological Institute of America, and a certificate in Appraisal Studies from the Appraisers Association of America.