Q&A: Deciphering De Beers’ Blockchain Platform
David Prager virtually sat down with Editor-in-Chief Michelle Graff to answer questions about the rollout of Tracr at scale.
The week following the announcement, De Beers Executive Vice President and Chief Brand Officer David Prager virtually sat down with National Jeweler to talk at length about what the rollout of the platform means for the company, its sightholders, and the industry at large.
This interview has been edited for length and clarity.
On Blockchain and ‘At Scale’
National Jeweler: For those who still might be struggling to understand blockchain or do better with a visual aid of sorts, myself included, what exactly will companies see when they log onto Tracr, both as a sightholder and as a retailer?
David Prager: Sightholders will have what’s called an instance. The sightholder is an instance of Tracr, which means they’re like a node within this wider blockchain.
That instance allows them to upload all the information they want to upload about a diamond that’s come from us, all the things that will distinguish that diamond as unique: the 4Cs, its specs when it’s in the rough stage, in the split stage, in the polished stage, and its unique Tracr ID. They can [also] upload its grading report.
Retailers will have their Tracr ID number. They’ll be able to go online to a secure website to say, “All right, let me take this number on the diamond I have and look it up … Yes, this number matches this diamond. I can see all the details of the diamond. I can see where it came from, and I can see who manufactured it. And now I have confidence that if somebody walks into my store, I can tell them where it’s from.’”
NJ: What exactly does it mean that De Beers is rolling out Tracr “at scale”? What’s the big change here?
DP: For the first time, starting at the source, we have the ability to list the source of the diamond in an immutable fashion. It is unchangeable once it’s loaded.
And we’re doing it at scale for the majority of our diamonds with all of our sightholders, doing it at speed on a format that works and can take volume at speed and securely.
Why is it important now? Obviously, the environment in which we’re operating, you know, has changed, and people are really focused on provenance.
People want to make sure that they’re compliant with U.S. regulations and sanctions. The American retailer, I think, wants to ensure their future business and future inventory is proofed against potential sanctions to come. They want to make sure that they can provide assurance to the client who walks through their door about where their diamond comes from.
And importantly—we shouldn’t discount this—they want to be able to look themselves in the mirror. They want to run businesses that are a force for good.
[Tracr is] a tool for sightholders to use to demonstrate to their retail partners where the diamond they have comes from. It will include a lookup with the details of the diamond they’re selling to the retailer, a unique Tracr ID that is attached to that diamond throughout its manufacturing process, and information about the fact that it’s come from De Beers and the diamond’s recorded from the source.
“The American retailer, I think, wants to ensure their future business and future inventory is proofed against potential sanctions to come.”
NJ: Does the at-scale launch of Tracr mean it’s now available to all sightholders?
DP: Yes, it’s available to all sightholders.
We were bringing this to market and what we’ve done is accelerate it, given the needs of the industry.
But we had started bringing sightholders on board already. Ten were on-boarded in the first three sights of this year, with about a quarter of our production by value, on the platform.
From our announcement now going forward, the task is to stand up as many sightholders as we can, as quickly as we can, onto the platform. And it’s a relatively straightforward process. There are a few back-end logistics they have to work through, but basically the instance of Tracr for a sightholder can be set up in about 10 minutes.
As we move through this year, more and more sightholders will be on the platform. It is available to all of them, equally. And more and more of our production, as more and more of our sightholders come on board, will be loaded onto Tracr.
On Who Can Use Tracr
NJ: Is it just for sightholders?
DP: Yes, so right now it’s just for sightholders. Why? One, because there’s value in a De Beers sightholder you know; they’re our customer. We want to provide them with that value. But also because we’re focused right now on our production. Obviously, the only way we sell our production, at least through long-term contracts, is through sightholders. And so our focus right now is on providing assurance at scale to our production.
We said a year, a year and a half ago, well before the current situation [with Russian goods], that our focus is on our production—making the platform more at scale for our production, providing assurance that we believe is our responsibility to provide for our production. And then let’s see where the future takes us.
On Timing & Sanctions
NJ: You mentioned earlier that De Beers accelerated the rollout of the Tracr process, given the needs of the industry. So May 22 (the date Tracr was formally launched) wasn’t your original deadline to launch this at scale. Was the war in Ukraine the reason De Beers moved this forward more quickly?
DP: Yes, you are right. [The original launch date] wasn’t May 22. It was [supposed to be] a progressive rollout through this year.
The urgent issue was to be able to enable our sightholders to provide assurance to their retail partners that they could know with confidence where their diamonds come from.
That’s the objective of this first rollout of Tracr. And then we will build on the technology. The technology is so forward, so advanced, that it will allow us to build services for our sightholders, for retailers, and ultimately for end clients that reshapes how we sell diamonds.
NJ: Yes, it’s really interesting. We did a webinar a couple of weeks ago, talking with Tiffany Stevens from JVC and she made this point—the situation with Russia is not going to change in the near future.
The need to know where diamonds come from and to separate goods of certain origins is going to be something that is not just ethically desirable, but it’s going to be legally necessary going forward for quite a while.
DP: I think that’s the key, what you’ve just said. I don’t have to tell you—you know, and we’ve talked about it before—that we’ve said for quite some time that we think provenance and purpose is really important. More and more end clients want to know where the products they buy come from and what the impact those products make on the world is.
NJ: And I think Gen Z-ers even more than millennials. The younger people get, the more this matters.
DP: I totally agree with you. And so this, the rollout of Tracr here, is really a first step. It’s a first step to say we believe that it is important. It’s important if you're buying anything, but particularly if you’re buying a product meant to represent your deepest emotions and you’re spending a lot of money on it.
On Tracr’s Capabilities
NJ: When you say sightholders will be able to tell the customer, “this diamond came from here,” does that mean they are going to be able to say, specifically, “this diamond is from Namibia, South Africa, Canada?”
DP: Right now, we’re saying it comes from us and that we’ve mined it in our four countries of operation: Botswana, Canada, Namibia and South Africa. We’re working hard on the technological solution to enable us to go further back in the value chain to identify even more specifically its country of origin. So that takes significant capital investment and some time to get there.
But the fact of the matter is, that specific information really doesn’t change the spirit of what we’re communicating, which is, this comes from De Beers. And in coming from De Beers, you know it comes from one of these four countries, and this is our record of operation in these countries. That’s the key.
The really exciting thing about Tracr is it gives us this ability to build on the technology, to build on it, to make it deep, to make the value chain extend further, and to provide more and more information about where a diamond comes from over time.
NJ: You mentioned earlier that the blockchain is immutable. So, what if sightholders make a mistake when entering a diamond’s information or if they want to go back in later and add information, such as the diamond’s grading report information?
DP: You can make corrections, but you can see the trail of the mistake in the correction.
NJ: Meaning people will see that it was corrected?
DP: Exactly. [You can correct things] without rewriting the block chain. That’s what you can’t do. It’s immutable.
On Costs & Requirements
NJ: How is the cost associated with developing Tracr going to factor in the price of De Beers’ diamonds?
DP: It doesn’t impact the pricing of our rough—the rough is priced very simply against the demand in the market.
The loading of diamonds on Tracr puts a small nominal fee on it per diamond, which is a really simple, we think very good value, and reflective of the speed of trying to get this to market. There’s not a complicated pricing mechanism. It’s a small-dollar fee per diamond to make sure that it’s clear, understandable, very reasonable, and can come to market. But obviously there’s a cost incurred in scaling it up that we want to make sure we cover.
NJ: Do sightholders have to load their diamonds onto Tracr?
DP: No. But we strongly encourage them to do it. Provenance obviously in the current context has become more of an issue. It’s a service that’s available to them. It’s easy, it’s straightforward and as we said, it’s scalable. The reaction we’ve had so far has been very positive and we think we’ll see broad pickup across our sightholders.
NJ: What’s the current size requirement for diamonds to be on Tracr?
DP: Four grainer (1 carat) in rough, and above. But that’s not purely down to its capability; that’s just down to speed of scaling. We’re focusing on four grainers and above as we scale up with sightholders. Then as we go, as more come on board and as we scale up the machines and the technology, we’ll progressively push that size limit down and down and down. But we wanted to start by covering obviously the majority of value as we build up the volume.
Melee diamonds are a big issue. You know, Alrosa is a very large producer of melee, larger than us, frankly. It’s very technologically difficult for Tracr to track these really tiny, tiny diamonds, like grains of sand. And so there are pipeline integrity requirements in factories required to make sure that sightholders can provide assurance down to the retail level.
[In the future] we think even for things like melee, there will be a Tracr-based solution that we can provide at least for a third of the world’s diamonds that we provide.
As we roll this out, as we stand up sightholders, as we put more and more production on the platform at scale, as we push down the size levels of the diamonds that we’re putting on to expand the universe, the team is also kind of working on the technology to make sure it can handle even melee diamonds at speed. It’s a really exciting moment for us.
NJ: I know blockchain along with cryptocurrency are part of what’s being called Web 3.0 or Web3. Does De Beers have any plans to move further into Web3 by, for example, taking De Beers into the metaverse via a virtual tour of a diamond mine?
DP: Very possibly. We’re exploring what the metaverse means to us, but more importantly how the end client can engage with the De Beers brand and get value from it in the metaverse. We won’t be in the metaverse just to be in the metaverse; we’ll be in the metaverse because it provides value to a diamond-purchasing client.
We think there are really interesting ways to help clients engage with the brand in totally new ways that are engaging and that speak to, as we’ve been talking about, where their diamond comes from and the impact it has made in the world. We have a kind of cliché within De Beers, which is if only we could bring 300 million people to our operations, they’d understand the impact they make on the world.
“We won’t be in the metaverse just to be in the metaverse; we’ll be in the metaverse because it provides value to a diamond-purchasing client.”
NJ: Yes, it’s very interesting. To some people the metaverse might sound crazy but for a lot of younger consumers, like kids today who play Roblox, it’s just going to be how they interact with the world and it’s part of their life.
DP: I totally agree. If we expect to reach the consumer of the future, we’ve got to go to where they are and increasingly, they’re going to be there.
We’ve been studying the space, trying to learn a lot of lessons from others. The keys we’ve distilled there are: we’ve got to be authentic, it has to be true to your brand. It has to deliver value to the end client. And it has to be consistent.
You can’t just be in and out, one and done, trying to experiment. If you’re in, just like if you’re in a store on Madison Avenue, it’s got to provide that consistent experience.
As the space takes shape, as people are trying to figure it out, we’re trying to prudently learn lessons from others and talk to experts to figure out how we can work in this space.
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