NFTs could help solve diamond certification fraud

Diamonds whitethorn beryllium a girl’s champion friend, but unfortunately, the billion-dollar diamond manufacture is rife with ungraded and fraud. There person been a fig of cases wherever lab-grown diamonds person been graded arsenic earthy diamonds. An illustration of this was seen past twelvemonth erstwhile the International Gemological Institute analyzed and graded a 6.18ct lab-grown diamond, which was antecedently claimed to beryllium a earthy diamond connected its Gemological Institute of America (GIA) report. 

It was besides reported successful 2005 that the Gemological Institute of America — which is 1 of the astir trusted sources for evaluating gemstone prime — was accepting bribes to upgrade its GIA reports. According to sources, a suit was filed against GIA successful 2005 owed to payments being accepted to “upgrade” the prime of diamonds submitted for grading.

In addition, consumers are capable to resubmit a diamond for introspection astatine GIA for immoderate reason. This is known arsenic a follow-up service. As a result, diamonds tin beryllium associated with aggregate grading reports. This tin beryllium problematic for consumers since they whitethorn not beryllium receiving archetypal diamond certificates upon purchase.

NFTs arsenic a azygous root of truth

Unfortunately, diamond certificate fraud is becoming much common. Regions similar India person adjacent developed caller frameworks to combat fraudulent activities, arsenic seen successful the Diamond Charter drafted past year. While innovative, manufacture experts person besides started looking toward blockchain exertion to assistance lick this increasing problem.

Specifically speaking, nonfungible tokens (NFTs) whitethorn service arsenic a solution erstwhile it comes to preventing diamond certification fraud. Mike Moldawsky, laminitis and creator of Diamond Dawn, told Cointelegraph that diamond certification reports should beryllium placed connected a nationalist blockchain web to guarantee that documents can’t beryllium manipulated. “Having a diamond certificate arsenic an NFT connected the Ethereum blockchain tin guarantee immutability, proof-of-ownership and visibility for some retailers and consumers,” helium said.

In bid to show this, Moldawsky explained that Diamond Dawn is simply a high-level NFT creation task that volition spot 333 GIA-certified diamonds connected the Ethereum blockchain arsenic ERC-721 tokens. Privately invited participants volition past beryllium capable to acquisition these diamonds arsenic NFTs. According to Moldawsky, participants volition beryllium capable to acquisition a bounds of 1 diamond NFT, with value varying betwixt 0.4-0.8 carats, for the terms of 4.44 Ether (ETH). Once an NFT is bought, a astute declaration volition automatically nonstop the diamond’s GIA certificate to the Ethereum blockchain, serving arsenic impervious of ownership and verification.

Given the emergence of NFTs tied to carnal counterparts, Moldawsky further remarked that NFT holders volition person the enactment to make a tangible creation portion containing a GIA-certified diamond via the Diamond Dawn website.

“NFT holders volition commencement with a integer unsmooth diamond and germinate their NFT connected the blockchain (on-chain) with a process that mimics precisely the in-real beingness earthy diamond process. Ultimately, the collector volition request to determine whether they privation to support their diamond integer oregon pain it and alteration it into its carnal form,” helium elaborated.

An illustration of Diamond Dawn's carnal creation portion - a lawsuit which volition travel with a GIA certified diamond. Source: Diamond Dawn

According to Moldawsky, specified a process is besides meant to rise consciousness astir the conception that integer NFTs tin go scarce implicit clip and, therefore, much valuable. “As much collectors determine to assertion the carnal creation portion and pain the NFT, this volition trim the full NFT supply. As a result, integer NFTs volition go much rare,” Moldawsky explained. 

He added that the integer diamond artworks person each been created by creator David Ariew, who precocious sold his first artwork astatine Sotheby’s Contemporary Art Evening for $224,000, alongside celebrated artists specified arsenic Banksy and Basquiat.

My collaboration portion with Jia Aili, “The Road Ahead” conscionable sold for $224,000 successful the @Sothebys Contemporary Evening Auction! I’m astatine a nonaccomplishment for words. Thank you truthful overmuch to @triple_x_space and a monolithic congrats to @raoulmarks arsenic well! You guys are incredible!! pic.twitter.com/oeff7zUuku

— David Ariew (@DavidAriew) April 27, 2022

In either case, though, Moldawsky explained that Diamond Dawn’s diamond certificates volition stay connected the Ethereum blockchain. “If a idiosyncratic chooses to make a carnal diamond creation piece, they volition person the insubstantial GIA certificate successful summation to the certification connected the blockchain network. The extremity of the task is to show proof-of-ownership, transparency and immutability of diamond certificates,” helium remarked. 

Olivia Landau, a GIA-certified gemologist and co-founder of The Clear Cut — a digitally autochthonal diamond engagement ringing and good jewelry institution — told Cointelegraph that her steadfast is besides utilizing NFTs for diamond certification aft launching an NFT level connected the Authentic blockchain web successful January. She said:

“NFTs springiness couples purchasing an engagement ringing the enactment to person each of the diamond’s certificates, insurances, images and adjacent their connection communicative stored safely connected the blockchain for years to come, eliminating the interest of hanging onto hard-to-replace insubstantial copies.”

Landau added that the intent down the NFTs offered by The Clear Cut is to digitize and authenticate a diamond’s GIA study and security documents. “The Clear Cut’s NFTs are not intended to beryllium resold connected secondary marketplaces,” she said.

An illustration of The Clear Cut's NFT portal. Source: The Clear Cut

According to Landau, clients who acquisition a diamond ringing from The Clear Cut volition person the enactment to bargain a corresponding NFT for an further $500, which is to beryllium paid successful fiat alternatively than successful crypto. She noted that existing clients volition besides person this option. 

“In the beta investigating phase, implicit 90% of clients expressed archetypal involvement successful this caller NFT function.​ Customers volition person a hard transcript of their GIA certificate and a transcript of it volition beryllium stored digitally, ensuring its worth for life,” she said.

Will NFTs regenerate accepted diamond certificates?

NFTs arsenic integer diamond certificates whitethorn beryllium innovative, yet it remains questionable if this conception resonates with the mainstream.

For instance, Moldawsky pointed retired that helium believes much acquisition astir blockchain is needed successful bid for accepted organizations to recognize the imaginable down NFTs. “We request to inquire GIA wherefore they haven’t gone integer yet. Once that speech is initiated, we tin explicate wherefore blockchain exertion is transformative,” helium said.

While this whitethorn be, it’s notable that GIA is unfastened to integer transformation. Stephen Morisseau, manager of communications for GIA, told Cointelegraph that aboriginal adjacent year, GIA volition statesman transitioning each of their gemological laboratory reports to integer forms. “This should beryllium completed that by 2025,” helium remarked. Morisseau added that each of GIA’s printed reports person respective information features, noting that the accusation connected immoderate study tin beryllium verified utilizing the unafraid online GIA Report Check service.

Adoption of NFTs wrong the diamond manufacture whitethorn besides summation traction erstwhile mainstream retailers statesman implementing the technology. For instance, De Beers is presently utilizing the Tracr blockchain to trace the origins of its diamonds.

Jason McIntosh, main merchandise serviceman for Tracr, told Cointelegraph that NFTs are apt to beryllium portion of the platform’s solution successful the future. “Diamonds connected the Tracr level are ‘NFT-ready’ successful the consciousness that the Tracr diamond grounds tin easy beryllium incorporated wrong an NFT wrapper,” helium said.

Given this level of innovation, Landau believes that successful the future, each diamonds volition beryllium authenticated via a blockchain network. However, she pointed retired the value of ensuring that consumers don’t person to interest astir the method aspects down NFTs:

“Customers don’t request to person immoderate crypto oregon blockchain acquisition to summation entree to our NFTs. Everything is handled for them effortlessly. I judge this volition thrust mainstream adoption.”