CEO Jim Duffy envisions a system that connects the whole market
As a tech guy, Jim Duffy spends much of his time on the road explaining technical terms in a way laymen can understand. He has his work cut out for him as CEO of Tracr, De Beers’ blockchain project — especially in the traditionally low-tech diamond industry, which, he notes, is a conglomeration of family-owned businesses.
Duffy’s immediate agenda, beyond developing the platform, is clear: educate the trade and break the many misconceptions about the project, which is now ready to expand.
Tracr is neither just about blockchain nor meant to be solely a De Beers program, Duffy tells Rapaport News. It was “bootstrapped by De Beers because it had to start somewhere,” he explains. “But the idea is to be a platform for the industry, by the industry.”
The mining company launched Tracr in January 2018 — initially calling it the Diamond Blockchain Initiative — to provide a single, tamper-proof digital record for diamonds. De Beers first worked with manufacturers Diacore, Diarough, Rosy Blue, KGK Group and Venus Jewel to register stones, before fellow miner Alrosa and retail heavyweights Signet Jewelers and Chow Tai Fook joined the pilot.
Less than two years later, Duffy is overseeing the rollout of the Tracr Community, which launched in May as an educational resource for businesses getting involved in the program. In the last few months, another 12 unnamed companies have joined, and Duffy hopes to have about 30 entities on board by year’s end.
The industry’s road network
Working with a core group of early adopters, Duffy expects Tracr will gather momentum to become an industry-wide platform that processes millions of carats worth billions of dollars.
But achieving that goal requires the trade to understand what Tracr is — and just as importantly, what it is not. Duffy quickly dismisses the misconception that it gives users access to information about all transactions. “That would break the industry,” he declares. “You see what you would see in a normal transaction. It’s the digital equivalent.”
The data for a given transaction will be available to the parties involved, or upon request — for example, if a lender or insurer requires information about a company’s inventory or invoices. Duffy draws an analogy to a cell phone user. When you download an app, it asks you for permission to access information such as your location or your contacts. With Tracr, a manufacturer, for instance, can allow select data to be visible to a user who is interested in that part of the supply chain.
‘Internet of value’
The program has three goals: to provide a reliable record of a diamond’s origin, to verify if it’s a natural stone, and to make it traceable throughout the pipeline.
Duffy describes Tracr as a “horizontal digital infrastructure,” likening it to a road system that connects things and people in an urban area: Without the roads, it doesn’t work very well. Similarly, he explains, Tracr creates a digital representation of connectivity in the diamond marketplace.
In fact, he will correct you if you refer to Tracr as a blockchain; he prefers to call it an “internet-of-value platform.” Blockchain is the distributed ledger that holds the data, and it is an essential component of the platform, but stopping there would exclude many other important properties, he clarifies.
One of those is the artificial intelligence that enables automated decision-making and the processing of millions of diamonds within the system. Tracr also utilizes the “internet of things,” gathering data from scanning devices and other machines that the industry is already using. The final property is security and privacy — ensuring the right controls are in place to let users share data safely on the platform.
From mine to market
The Tracr team had to consider two types of diamonds when building the system: new production from the mining industry, and the millions of polished diamonds already on the market.
For the new production, a Tracr ID is created when the miner uploads the stone’s information to the platform. From there, the diamond’s movement is registered every time it changes shape — e.g., at various stages of the cutting and polishing process — or changes hands, as when the miner sells it to the manufacturer.
Participating in the system does not require new equipment or time-consuming steps, stresses Duffy. “We’re very mindful not to burden the industry from an economic or an operational standpoint,” he says, noting that the goods are being scanned throughout the manufacturing process anyway, so it’s just a matter of Tracr plugging into those scans.
When dealing with polished stones already on the market, Tracr obviously enters the picture at a later point in the pipeline. That means Tracr can’t show the provenance component of the diamond’s journey, Duffy acknowledges, but the stone can be verified for authenticity and is eligible for traceability moving forward.
Once the diamonds are in the system, it’s up to the trade to use that fact in its marketing. While Tracr is a business-to-business (B2B) platform, retailers can draw on the stored data to tell the stones’ stories to consumers, says Duffy.
As such, he suggests, a Tracr diamond may very well sell at a premium to a non-Tracr diamond — though he insists that’s not his role. “For us, it’s not about driving a premium. It’s about establishing infrastructure for the industry. We’ve seen the impact that diamonds have brought to countries such as Botswana. Now we have the digital infrastructure to make an impact. This is the next chapter of the diamond industry story.”
Tracr Association in the Works
As it recruits new members, Tracr still needs to iron out its requirements for participation, something CEO Jim Duffy insists is beyond his mandate. That will be left to the Tracr Association, which is being established.
Presumably, member companies would need to demonstrate responsible sourcing practices, though De Beers has yet to release any specific criteria.
The Tracr Association is being formed as a board of sorts to deal with governance issues, De Beers spokesperson David Johnson explained earlier this year. De Beers is likely to play a significant role in the association, but the focus will be on establishing a shared industry model with a range of participants that span the diamond value chain and multiple locations, Johnson added.
While the threshold for joining the program is still up in the air, Duffy says Tracr will likely tap into already-established best-practice standards.
This article first appeared in the September edition of Rapaport Magazine.
Image: Jim Duffy (Tracr)