Blockchain and Geoethics
(IAPG-UK coordinator)
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| David C. Ovadia |
In this blog I want to explore the possible value of blockchain technology in ensuring better Geoethics. What is the connection, I can hear you thinking. Well – like most people reading this, the whole concept of blockchain is new to me, and I know very little about how it actually works, but I have noticed it being mentioned increasingly in the context of minerals traceability, and hence as a potential tool to avoid some of the worst excesses of unethical mining. So here goes.
Firstly, what is the problem that this might help to solve? Let us admit that some mining activities have a very murky reputation, even today. You might remember the 2006 film ‘Blood Diamonds’ starring Leonardo DiCaprio, Jennifer Connelly and Djimon Hounsou. The film refers to diamonds mined in war zones and sold to finance conflicts, and thereby profit war lords and other undesirables. Although these problems eventually led to an international agreement, the Kimberley Process Certification Scheme, which sought to certify the origin of rough diamonds in order to curb the trade in conflict diamonds, its effectiveness is doubted because of the technical difficulties of identifying individual diamonds and the enormous political challenges of dealing with any irregularities.
So do these activities still go on? Probably, and not just with diamonds; gem stones, gold and other commodities are bought and sold across national and regulatory boundaries with some degree of impunity with, often, unpleasant consequences to countless people. Small wonder that mining is perceived by many, including governments and investors, to include some unethical dimensions that no amount of pronouncements about the need for standards and good behaviour will dispel.
So where does blockchain fit in? Describing blockchain, and how it works, is well beyond the scope of this blog, but very briefly blockchain is a process in which as each transaction occurs – and the parties agree to its details – it is encoded into a block of digital data and uniquely signed or identified. Each block is connected to the one before and after it — creating an irreversible, immutable chain. Blocks are chained together, preventing any block from being altered or a block being inserted between two existing blocks. Blockchain creates a shared system of record among business network members, eliminating the need to reconcile disparate ledgers. Each member of the network must have access privileges. Information is shared only on a need-to-know basis. Consensus is required from all members and all validated transactions are permanently recorded. Even a system administrator can’t delete a transaction (If you want to know more, a good starting point is published by IBM at www.ibm.com/blockchain/what-is-blockchain).
So blockchain is a business process – not to be confused with bitcoin, which is a digital currency that happens to use blockchain for its underlying transmission mechanism. As a business process, blockchain lends itself well to the complex paths taken by minerals as they flow from stage to stage, from place to place and from owner to owner in the value chain. As pointed out by IBM -in the diamond industry, for example, each party can access high-resolution photos, immutable payment records and certificates of authenticity. It is virtually impossible to manipulate documents or to insert false bills of lading or payment receipts. It doesn’t stop illegal mining, or money laundering, but it does provide the market and, importantly, ethical investors such as pension funds, with the ability to check that what they are putting their money into has, to a high degree of confidence, not been tampered with for nefarious purposes.
To what extent is blockchain being adopted in the mining sector? I think it is fair to say that we are only at the very beginning of this and, to date, the take up is so far very limited. However, there are encouraging signs of interest, such as by Cobalt Blockchain Inc., a Canadian resource company currently focused on exploring and developing high-grade cobalt assets in the Democratic Republic of Congo (DRC). They are implementing a model that uses an innovative blockchain platform for mineral traceability, ensuring the ethical sourcing of materials. Further details are published at https://investingnews.com/company-profiles/cobalt-blockchain-strategic-cobalt-mining-congo/ which makes for interesting reading and points to various possibilities for improving the ethical basis of mining generally. In addition, a number of listed companies specialising in investing in the natural resources sector are also showing interest in helping to build blockchain, and other e-commerce, based businesses. This cannot be coincidence.
It seems to me that we will see more use of blockchain technology in mining businesses in the coming years. This is to be greatly encouraged given that a key benefit will be to facilitate better Geoethics in the sector, and is something that IAPG should remain interested in, and support.
Firstly, what is the problem that this might help to solve? Let us admit that some mining activities have a very murky reputation, even today. You might remember the 2006 film ‘Blood Diamonds’ starring Leonardo DiCaprio, Jennifer Connelly and Djimon Hounsou. The film refers to diamonds mined in war zones and sold to finance conflicts, and thereby profit war lords and other undesirables. Although these problems eventually led to an international agreement, the Kimberley Process Certification Scheme, which sought to certify the origin of rough diamonds in order to curb the trade in conflict diamonds, its effectiveness is doubted because of the technical difficulties of identifying individual diamonds and the enormous political challenges of dealing with any irregularities.
So do these activities still go on? Probably, and not just with diamonds; gem stones, gold and other commodities are bought and sold across national and regulatory boundaries with some degree of impunity with, often, unpleasant consequences to countless people. Small wonder that mining is perceived by many, including governments and investors, to include some unethical dimensions that no amount of pronouncements about the need for standards and good behaviour will dispel.
So where does blockchain fit in? Describing blockchain, and how it works, is well beyond the scope of this blog, but very briefly blockchain is a process in which as each transaction occurs – and the parties agree to its details – it is encoded into a block of digital data and uniquely signed or identified. Each block is connected to the one before and after it — creating an irreversible, immutable chain. Blocks are chained together, preventing any block from being altered or a block being inserted between two existing blocks. Blockchain creates a shared system of record among business network members, eliminating the need to reconcile disparate ledgers. Each member of the network must have access privileges. Information is shared only on a need-to-know basis. Consensus is required from all members and all validated transactions are permanently recorded. Even a system administrator can’t delete a transaction (If you want to know more, a good starting point is published by IBM at www.ibm.com/blockchain/what-is-blockchain).
So blockchain is a business process – not to be confused with bitcoin, which is a digital currency that happens to use blockchain for its underlying transmission mechanism. As a business process, blockchain lends itself well to the complex paths taken by minerals as they flow from stage to stage, from place to place and from owner to owner in the value chain. As pointed out by IBM -in the diamond industry, for example, each party can access high-resolution photos, immutable payment records and certificates of authenticity. It is virtually impossible to manipulate documents or to insert false bills of lading or payment receipts. It doesn’t stop illegal mining, or money laundering, but it does provide the market and, importantly, ethical investors such as pension funds, with the ability to check that what they are putting their money into has, to a high degree of confidence, not been tampered with for nefarious purposes.
To what extent is blockchain being adopted in the mining sector? I think it is fair to say that we are only at the very beginning of this and, to date, the take up is so far very limited. However, there are encouraging signs of interest, such as by Cobalt Blockchain Inc., a Canadian resource company currently focused on exploring and developing high-grade cobalt assets in the Democratic Republic of Congo (DRC). They are implementing a model that uses an innovative blockchain platform for mineral traceability, ensuring the ethical sourcing of materials. Further details are published at https://investingnews.com/company-profiles/cobalt-blockchain-strategic-cobalt-mining-congo/ which makes for interesting reading and points to various possibilities for improving the ethical basis of mining generally. In addition, a number of listed companies specialising in investing in the natural resources sector are also showing interest in helping to build blockchain, and other e-commerce, based businesses. This cannot be coincidence.
It seems to me that we will see more use of blockchain technology in mining businesses in the coming years. This is to be greatly encouraged given that a key benefit will be to facilitate better Geoethics in the sector, and is something that IAPG should remain interested in, and support.
BIOS
David C. Ovadia is a British geoscientist who was in charge of the International Division of the British Geological Survey from 2000 until 2011, since when he has focussed on a number of directorships at exploration and mining companies as well as maintaining links with academia and several EU Horizon 2020 projects. He is the UK coordinator of IAPG, and can be contacted by email at davidovadia@outlook.com.
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IAPG - International Association for Promoting Geoethics
