Five Ways Blockchain Can Keep Mineral Supply Chains Conflict-Free

Jennifer Scholze

Conflict minerals – those extracted in conflict zones and sold to fund the conflict – are a challenge in the mining industry and throughout the world. Time Magazine reports that international efforts to stop the sales of “blood diamonds” and other conflict minerals are facing problems. Loopholes in the current system allow these products to get onto the market and reach consumers. Using a blockchain lowers the risk of conflict mineral purchases for individuals and businesses.

Verifying the origin of a mineral

Individuals selling a mineral in the blockchain must show proof of ownership. Since the information about the product is public, users in the chain can verify the data by tracing previous trades for the mineral. Verifying a mineral’s owner prevents the sale of stolen minerals through the online system.

Users must meet specific standards to use the online system or tool. They are required to provide appropriate documentation to confirm ownership, country of origin, and other details related to the mineral. A document of authenticity gives the buyer peace of mind and provides a greater level of comfort in purchasing the mineral.

According to The Economist, a blockchain’s key benefit is the updated and amended ledger of information. Since no individual controls the chain, everyone has access to information about the mineral’s origins. Users in the chain keep the information up to date. The peer to peer sharing with open transparency and clear standards of documentation limit the risk of obtaining conflict minerals.

Data transparency

Transparency is an important aspect of preventing the sale of conflict minerals. The World Economic Forum states that a full transaction history of an item sold through a blockchain allows for greater transparency. It limits the risk of purchasing from deceptive sellers. The public access element of a blockchain allows individuals to clarify and verify information. The individual purchasing an item can audit through the online tools and system.

Security for transactions

When a sale does not have proper security solutions, individuals and companies have a higher risk of purchasing conflict minerals. They may accidentally buy the mineral if a third party interferes with the sale. Alternatively, poor security may suggest an underlying problem with the system.

The Economist reports that a blockchain ledger prevents double-spending and creates a unique signature for different users within the system. While the system offers a reasonable level of anonymity in relation to an individual’s personal identity, the public nature of the transaction allows buyers to purchase with confidence. The ledger requires a digital signature, which limits the security risks when making or receiving a payment through a blockchain.

Reducing loopholes in the system

While international authorities, systems, and laws limit the sale of conflict minerals, loopholes allow these minerals to enter the market. A blockchain reduces the risk of conflict mineral purchases by verifying data and setting specific standards for a sale. The seller provides the proper documentation, which becomes a public record. Items must be supported by a document of authenticity, proof of origins, and proof of ownership. Third parties have access to the information and digital miners provide an online service to audit the data. The implementation of a blockchain is an effective method of preventing the purchase of conflict minerals.

Learn how to bring new technologies and services together to power digital transformation by downloading The IoT Imperative for Energy and Natural Resource Companies. Explore how to bring Industry 4.0 insights into your business today by reading Industry 4.0: What’s Next?

About Jennifer Scholze

Jennifer Scholze is the Global Lead for Industry Marketing for the Mill Products and Mining Industries at SAP. She has over 20 years of technology marketing, communications and venture capital experience and lives in the Boston area with her husband and two children.