Everledger’s Leanne Kemp on How to Enable Marketplaces with Fair Pricing
This interview has been edited and condensed.
Leanne Kemp is the founder of blockchain platform Everledger, which tracks high-class assets like diamonds in order to reduce fraud and promote more viable marketplaces.
Cointelegraph spoke to Kemp about how the service’s role as a global digital registry can help ensure ethical trade across a variety of assets.
In the interview, Kemp explains how she considers Everledger’s role to be an anchor between the crypto space and the “real world,” providing a provenance platform to develop sustainable practices across the diamond industry.
Molly Jane: As a first question, why did you guys choose to track diamonds specifically out of all the high-class assets?
Leanne Kemp: Everledger started in 2015. And we believe that there's not a platform provenance in the world. We've seen applications come into the marketplace for procurement systems, but there is no platform provenance. Then, when you imagine what a provenance platform would entail, we have to go deep within understanding the material science of an object.
We've seen a lot of activity in this space with provenance now, from tracking fish to avocados and pigs, but diamonds have some underlying constructs that are really important.
Firstly, every diamond is unique in the world, and to be able to capture the uniqueness of that diamond in a digital twin was able to be done not purely from a blockchain perspective, but a combination of other technologies.
The ability to track a diamond that might start at a rough of 10 million dollars in wholeness of a stone through to a diamond in the marketplace, where that's still in the thousands or tens of thousands— it's a very different economic proposition to tracking it tomorrow.
MJ: Who is the target audience for buying diamonds? Are millennials still buying diamonds?
LK: I think it's aimed at the same set of people that it's been aimed at generations ago. There are certain life events that want to be celebrated. Whether it's a marriage, or whether it's the birth of a child, these types of life events are often celebrated with diamonds or something that's precious and memorable. These events are still happening — people are still being getting married and people are still having babies. That's certainly one part of the consumer market.
Millennials are asking themselves a lot of different questions. They are involved heavily in conversational commerce, so they are making certain aspirational choices. They're really looking now around sustainability and where do items come from. Hence, the reason why Everledger is providing the service that it provides to the market.
Certainly, we are seeing synthetic stones being manufactured and, of course, there are other life events that might be as memorable as a one time marriage or birth of a child. I don't think it's all or nothing, the light switch isn't going to be just turned on or turned off on one day. We still have healthy growth within the industry.
MJ: How is Everledger a part of the Hyperledger and IBM communities?
LK: Hyperledger, in the first instance, is open source and we make contributions into that community. It's a very important construct. The relationship that we hold with IBM at an enterprise-partnership level serves two roles for us.
The first role is clearly from a secured cloud deployment environment, with the HSBN [High Security Business Network] they called it in the first instance. So that's one part — the opportunity for our customers, the big names within the industry, to choose whether they wanted to host it within an IBM infrastructure or an AWS infrastructure sits well within the constructs of what we do.
The second part is we work very deeply with the R&D team, and I'm appointed as a board advisor for the blockchain advisory group for IBM. So helping to lead and understand from a perspective of fabric, where that needs to grow, where the engineering could be placed to suit certain market applications.
But from a perspective of service offerings, we service the industry directly because we've all come from industry — we know and understand the diamond industry and the jewelry industry intimately well from a technology standpoint.
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MJ: What other industries did you work in before you began your work with Everledger and blockchain?
LK: I'm a software engineer, so I've spent 25 years working in and around software. In fact, in the mid-90s, I worked in RFID, which is radio frequency identification — at the silicon chip and inline level — so I understood the constructs of that technology and did a fair bit of work on scatter devices, which is remote connections on machines.
I've had a couple of companies and been okay — I've never had to ask dad for money, so I've sold them at the right price.
But for me, I invested some money in a jewelry business and that gave me some intimate learning of industry, generally, more than just the experience of a consumer to buy a diamond.
When you have world experience, you get to understand that when technologies come together like this, it's not necessarily just about the technology and how cool it is: it's about addressing a particular type or set of challenges within the industry.
And that's what we did differently very early in the stage than maybe in a couple of others in the industry. We knew exactly what problems were to be solved, the challenges in the economic pain points, and then the economic benefit to applying it. The rest is history.
You see where we are now in the market, and we have seven locations, we service the largest names within the industry, and we've extended well beyond diamond — so colored gemstones, emeralds, rubies sapphires, tanzanites are important to us. We look deeply at wine and wine authentication.
So, how can we apply all of the geniuses that we've built in terms of our engines with machine vision, how can we apply it in wine?
Last week we were awarded the 2018 Tech Pioneer for the World Economic Forum, particularly around the work that we're doing in sustainability. So, it’s not just about tipping the grower for the coffee that we've drunk, but more deep constructs on how do we enable actual artisanal, small-scale mining communities? How can we enable that so that marketplaces can be built with fair pricing? And that's the big work that you'll start to see start seeing coming out of Everledger in the next 12 months to two years.
MJ: How did you get started tracking wine? Are there any new asset classes you are considering adding?
LK: When we were first tapped on the shoulder with a wine expert — her name is Maureen Downey, she's the Sherlock Holmes of wine. There are certain types of knowledge, when you’re a wine expert like Maureen, that you can gain from just being within the industry for 30 years.
But the reality is there's no underlying system or construct to capture each of those methodologies or systems or insight. That's a part of the work that we've been doing from a technical standpoint. But, for us, we're really interested in physical assets — how can we digitize those at a material science level, and some objects won't be able to easily or affordably — and then we're interested in rising asset classes.
So when you look at our portfolio — diamonds, jewelry, watches, wine, collected automotive cars, maybe even helicopters — I guess it's motivated by me, the things I like to eat, to drink, to fly, to wear — handbags — selfishly, why not be motivated by that?
MJ: Could you explain how exactly a diamond is tracked from the mine to the store on the blockchain?
LK: To understand the process is actually a highly complicated supply chain, but it's also relatively consolidated geographically and within each part of the process.
Diamonds are mined within a number of countries in the world, and there are sort of 10 to 12 major mining companies globally. Diamonds will be extracted out of the ground, it will go through a certain set of washing, bay processes, and sorting.
The diamonds, as they cross borders, are then attracted with a certificate called a Kimberley certificate, which is also recorded as a part of the chain as well as the invoice for the commercial construct of the pricing.
Then a diamond will actually go through to the next stage, which is where it's cut and polished.
We're a quite IoT-enablement company, where we connect not only the opinion of experts but actual machines across the network. It's all this forensic layer that we get involved with, and the forensic layer is already captured within the industry within laboratories, particularly if they're certified diamonds.
Then diamonds will eventuate out into the retail network, and then the retailers will again check the diamonds through machines that are connected and then sold to a consumer. And the entire story is captured and told to the consumer.
MJ: It looks like there is really no room for fraud in the process you just described.
LK: There's always room for fraud. Of course, there is.
MJ: How would that look?
LK: I mean, you can see diamonds literally go off stream. So not all diamonds are going to be captured on a blockchain. There'll be some diamonds that might start on the blockchain and then, all of a sudden, they do not eventuate into the retail network. The history will not be persuasive.
We will see the same thing happen in other types of assets. There're always ways to defraud systems, and there're always ways to subvert certain constructs. But there's a value reason why people would be deterred away from doing that.
There's always going to be black markets, and there's always going to be fraud, and there's always going to be crime, and there's always going to be anti-money laundering. It's up to the governance controls to help to reduce that, not eliminate it.
MJ: I'm just curious because blockchain and cryptocurrencies are so connected, what do you think about Bitcoin (BTC)? Do you invest in Bitcoin? Do you think that cryptocurrency use will become more widespread in the future?
LK: I was fortunate enough in 2010 to buy Bitcoin, and so that was — believe me — it wasn't an educated decision, it was just one that felt like a risk at the time, so why not buy some?
So, yes. I certainly believe that in a cryptocurrency sense that Bitcoin, of course, is the grandfather of the industry and has been there since day one.
At its inception, I think that it has survival and longevity beyond just today's current competition that may be staying between Ethereum (ETH) and Bitcoin.
Where the entire future goes for that is not really for me to say. We do not see ourselves as a crypto company — and, to be honest with you, we don't even see ourselves as a blockchain company. We're building a platform of provenance to help with transparency, and conflict, and opaque markets. And we want to build an ethical trade platform.
At the end of the day, we still need to have a good anchor between the crypto and the real world. And that's where we sit, and we will probably forever sit.
I think it's an exciting space to be in. We just chose to pick the boring end of the exciting space.
MJ: Since you mentioned Ethereum, do you have an opinion about other altcoins out there?
LK: I certainly didn't make the comment about Bitcoin being the grandfather to the exclusion of everybody else. But undeniably Bitcoin was the first white paper with peer-to-peer that came out. We always must recognize where this came from. I think it's important.
Ethereum is a very powerful, powerful network that's being built with some incredibly talented engineers. I don't believe it's only a two horse or a three horse race. We'll start to see some changes happen within the next couple of years, I think, in the crypto world, as each of the economics — the macroeconomics — of cryptos start to become more scrutinized and looked at globally.
We have a real world that we live in here. We're still breathing oxygen, and we have an amazing view across the lake, and crypto needs to find its place between digital and physical. That is where we'll start to see it play out in the next few years.
MJ: Thank you!
LK: Alright. I hope that was helpful.