In gold mining industry in USA regulatory compliance is a serious issue and is subject to multiple environmental and labor regulations. Financial institutions have to conduct a “background check” on every gold bar they are offered as, for example, a credit collateral, however, there is no secure and convenient way to conduct such investigations and make sure that:
- the gold comes from certified gold mine;
- the gold mine was certified at the time the gold was mined;
- all the refineries and other supply chain participants have required certifications.
Such long-standing problems in the industry motivated open-minded entrepreneurs to found a disruptive startup with an idea to solve the aforementioned problems once and for all. The goal was to create a supply chain transparency platform capable of tracking each piece of gold electronically and in a secure manner. At the time there already were similar successful cases in other industries, for example, jewellery and medical implant tracking, which were Blockchain based solutions, which gave us insight regarding the technical solution in this case.
The basic technical complexity was that existing platforms track the origin of one product, for example, an implant. With gold, it is more difficult – the mine produces large ingots of unrefined gold, further refineries clean it and one unrefined gold ingot produces several bars of a smaller size of high-grade gold, then other institutions can melt these slivers into smaller ones, so the original “product” is crushed into components and it is necessary to track the way of each component back to that big ingot from which it went. Thus, the ready solutions were inapplicable in this case.
The problem was solved by applying the QR code to each ingot and to the derivatives of ingots and creating a custom system for registering all operations of the type in blockage (ingot A was turned into ingots B, C, D by X LTD, ingot A itself no longer exists) and all displacements (ingot B is moved from companies X to company Y with the help of transport company Z).
The system is realized with the help of Ethereum, and the logic of operations with ingots is programmed in the form of smart contracts.
At the moment the system is in the MVP stage. After having received first feedback from future users, we have added features that not only solve the task of regulating the gold market, but also automate the work between suppliers and recipients of gold. So the future product will solve 2 tasks:
- Primary: tracking the origin of gold
- New: automation of document circulation between gold mines, refineries and other participants of this market.
The MVP was approved by the National Mining Association and (most likely) will receive investments from this organization.