by Eloisa Marchesoni
With the advent of blockchain technology, many in the commodity market have thought about exploiting it to allow the sector not only to strengthen itself but also to be able to eliminate some of its complexity. In parallel to that, proprietary blockchain, as a foundation of Bitcoin (BTC), has been seen in recent months as a possible direct opponent of gold. Over time, however, it has taken on the new role of support base for the entire world of commodities.
The gold market could be using the technology behind cryptocurrencies to guarantee the sustainability and traceability of a supply chain valued circa USD 200-billion.
The London Bullion Market Association (LBMA), the body that oversees the London physical gold market, has already adopted systems to monitor gold from the mine to the caves in order to stop fraud and money laundering. The most famous one, approved about a year ago, is the Royal Mint Gold (RMG®). On its official website, RMG calls itself “The New Digital Gold Standard”, but that might be misleading: it is no payment system or currency, much less a cryptocurrency. It is instead, as stated elsewhere, “an investment product” and “a new, cost-effective, convenient and secure way to trade physical gold” with online access and distributed-ledger transparency, thus using blockchain technology. RMG partners The Royal Mint (TRM), owned by the UK government, with the Chicago Mercantile Exchange (CME), in a collaboration scheme where TRM will manage the gold vault, and the CME Group will provide the trading platform for electronic warehouse claims to allocate gold in the vault. While a proprietary blockchain will be used to record and track whose gold is in the Royal Mint vault, “live, transparent pricing” will be guaranteed by the CME trading platform. Management and storage fees are kept down to 0%, but it is a system running on transaction fees even for internal transfers. In fact, RMG must not be compared to E-gold, as there is no way of passing your gold onto another RMG holder at a zero transaction fee.
Emergent Technology Holdings LP has already developed a platform, regarded as the only permissioned blockchain that tracks responsibly sourced gold from its origin to vault. Miners and other supply chain actors will use a special mobile app that scans smart chips in tamper-proof seals and tracks transfer of custody, along with other data, on the Responsible Gold blockchain. Emergent Technology has also launched G-Coin, a cryptocurrency that is meant to a means of exchange and a new investment class, 100% backed by responsible gold. Yamana Gold Inc., a global precious metals mining company, has been the first to license Emergent’s supply chain solution, in order to trace the provenance of Conflict-Free Gold from mines to refineries, to vaults. The solution uses blockchain technology to administer smart contracts among the parties involved in the delivery of gold-bearing material, including miners, refineries, logistics providers and insurance companies. Yamana also invested in G-Coin, hoping that it will consolidate the credibility of such a sustainable supply chain and make it more interesting for outside investors.
The diamond market also started using blockchain to track ownership, prevent money laundering and maintain security in a completely innovative way, introduced by a project called TrustChain. It involves precious metal suppliers, refiners and manufacturers working with the US retail jeweller Helzberg Diamonds. TrustChain will use IBM blockchain tools to allow anyone in the supply chain—and eventually the customer—to verify the provenance of the rings. The process relies on the creation of shared records on a blockchain ledger, which is transparent, tamper-proof and distributed across multiple nodes (computers). There are other similar initiatives working with diamond supply chains, but none of them track gold and finished pieces of jewelry along with just diamonds, as TrustChain does.
The application of blockchain in the gold and jewellery markets is just an example of how almost all industries are turning to such a technology, in order to improve transparency and supply chains. People have started caring about what they buy and are now willing to pay for a premium, when given the opportunity to check on how the product was made and brought to them as they see it in their hands or in their plates. Ensuring the authenticity of data along the supply chain will allow companies to make the difference.
This is the problem that the project Genuino is solving. After a year and a half of research and development, it became a tech start-up registered in the United States, as Genuino Blockchain Technologies, Inc. Genuino is a decentralized certification protocol built as a cost-effective layer for smart supply chains, that brings transparency, creates trust and authenticity and strengthens brand-consumer relationships. Powered by IOTA Tangle distributed ledger tech, open-source hardware and software, and smart-contract protocol layers, Genuino leverages open hardware IoT sensors, that are univocally identified through crypto-tags integrated into the sensors. The sensors gather data, the crypto-tag sign it and the same sensors execute the script on the IOTA Tangle.
Finally, solutions like the ones presented above should all align incentives between brands, producers, transformers, distributors, re-sellers and consumers, who will be economically incentivized to provide authentic data. No matter which market it is that we are looking at, the aim is always just one: to drastically reduce data manipulation along the supply chain and increase the authenticity of data captured, thus delivering a unique added value to the final customer and increasing financial performance of the industries.