Our readers may be familiar with a few blockchain initiatives that emerged in the diamond industry over the past few years, when cryptocurrencies and NFTs were the buzz word of the day. Among them was Everledger, an ambitious blockchain project that was born in 2015 and came into spotlight somewhere in 2019, aimed at proving the provenance of every commodity - from diamonds and fine artworks to lithium and EV batteries.
Fast forward a few years, the landscape changed drastically. Cryptocurrencies are stuck in a bear market, NFTs are… well, we can just disregard them at this point. And Everledger is just a huge bust. According to some recent reports, the company only survived on government grants and investment money.
That is, while money was flowing.
The bust
Eveledger was an Australian-based blockchain startup with a goal to bring traceability and transparency into supply chains worldwide, encompassing every kind of asset from whiskey to nickel and diamonds. It made headlines in 2019 when Tencent, a notorious Chinese tech giant, pledged a $20 million funding to the project. Growing fame led many other industry players into the cause, including Ford automotive corporation that planned to track EV battery recycling on this chain, and, more importantly for us, such prominent diamond and jewellery companies and organizations as Chow Tai Fook, Gemological Institute of America (GIA) and Brilliant Earth among others.
Such big names among Everledger's partners led many to believe that the company secured its future in technology sector's major leagues. As it turns out, things were not going great.
In late April this year, the company filed for bankruptcy and was put under administration. This was due to one of the investors pulling out of the project, according to Leanne Kemp, the CEO of Everledger. Back in May she was still optimistic about the future.
“Everledger is here,” Kemp said. “I am the largest shareholder, and I’m not going anywhere. We have seven entities in five countries, and some are being wound up and others are being restructured.”
But despite all attempts to save the provenance-tracing company, it has been placed in liquidation with unsecured creditors totaling AUD$19 million. Its parent company, a UK-based Foreverhold Ltd, of which Kemp is also a director, is also being liquidated.
The voluntary administrators published a notice on the Australian Securities and Investments Commission (ASIC) website on 12 July confirming that a special resolution to wind up the company had been passed.
According to a report lodged to ASIC by administrator Steven Staatz, Everledger did not generate sufficient revenue to satisfy its expenses and over the past two years more than 80 per cent of its income came from grants. It raised AUD$1.32m in grants in 2021 and a further state funding in 2022. Staatz says the Australian company, which had about AUD$15,000 in its bank account, owes the Australian Taxation Office more than AUD$368,000. The parent entity Foreverhold owes creditors AUD$14.1 million, including AUD$6.3 million to a Tencent's subsidiary.
It is pretty safe to say that Everledger's story has come to an end over a span of just a few months.
The cryptobros
Everledger's collapse is just one of the recent additions in a line of blockchain and crypto projects that were plagued by mismanagement and misappropriation of funds which subsequently led to their demise. An online tracker of crypto project exploits, hacks and scams estimates the total losses incurred at $67.5 billion. The FTX cryptocurrency exchange collapse alone led to a loss of at least $8 billion.
Sensationalism and big promises (that no one was ever going to deliver upon) in a bull market made headlines, and investors who believed the line would only go up were eager to bank on risky projects. The same goes for government bodies who did not want to be left behind in a technology that would, in theory, promote traceability and reduce paperwork.
This was further exacerbated by the so-called "cryptobro" culture, a term used for people who strongly advocate crypto projects without a deep understanding of the inherent technology, in other words, bullish investors in a crypto market whose only goal is to make as much quick buck as possible – the ends justifying the means. In a bullish market, when one crypto project disappears without a trace (usually along with all funds), another few are already there to take its place, raking in even more investments. And nobody seems to care. But when things go south, the collapse of such 'bubbles' is inevitably rapid.
“It appears that the company does not hold any intellectual property that may be commercially realised,” the liquidator of Everledger reported.
Despite the fact that Kemp's company collapsed with no assets, her LinkedIn profile has no mention of any issues that have plagued Everledger for months. Instead, she reposts tech and industry news up to this day in late July, and speaks about traceability, sustainability and 'best practices' in a variety in industries. Now that's a sign of a true visionary.
When approached by The Australian on 24 May regarding the collapse of Everledger, Kemp declined to comment on the reasons for the company’s demise.
“This is quite an old story. Why now? It’s such old, old news,” she reportedly said.
The survivors
Let's forget about Everledger's collapse for a moment (it is yesterday's news for the crypto market anyway) and look at a few other projects in diamond blockchain technology. Are they doing great?
There are not many examples of those, to be honest. The most notable is Tracr by De Beers. The other is HB Antwerp's initiatives (HB Ledger and HB Capsule) that seem to be in early stages of development. Then there is the Diamond Standard, although it is not a traceability project per se but a diamond investment solution. Others, like Provenance Proof, have strong ties with Everledger tech and their future is now questionable. Lastly, there is Aura blockchain created by LVMH, Richemont and Prada for their luxury products but not diamonds specifically.
Just recently, De Beers spokesperson David Johnson told Rough&Polished that the Tracr blockchain platform is now open to the wider diamond industry, citing Brilliant Earth and GIA as members. I guess now we know the reason why they decided to join De Beers' platform.
Still, it is far from being perfect. Johnson said that Tracr is currently focused on registering rough diamonds above a certain minimum size, but the company is working at pace on expanding the range of sizes that can be registered on the chain. Presumably, it will take quite some time to scale the blockchain to the needs of the diamond industry as a whole, if ever this goal is achievable or even worthwhile for De Beers.
What does the future hold for diamond blockchains?
The blockchain technology is still in early stages of development but it is considered one of the key methods to promote consumer confidence in the sector. Gemstones can be traced from the mine to the consumer and every step in between, being verifiably ethical, transparent and sustainable.
But can we really achieve this goal when one of the existing diamond blockchains collapsed, and the other has no real alternatives? The downfall of Everledger will surely leave a mark on the traceability in the diamond industry. A big black stain.
The issue with projects like Everledger lies in their desire to encompass everything while achieving very little in the end (if you disregard misappropriation of funds of course - they are usually competent enough for that). It may be a better play to just focus on a specific market or a commodity, precisely like De Beers did with their own Tracr project, or HB Antwerp did with their blockchain-linked diamond boxes. But does anyone in the diamond pipeline have a comparably sizeable market share and leverage as De Beers to create an alternative? Probably not at the moment.
Which means that De Beers de-facto becomes a monopoly in the diamond blockchain sector, for better or worse.
Theodor Lisovoy, Editor in Chief of the European bureau, Rough&Polished
