NFTs could help solve diamond certification fraud


Diamonds could also be a woman’s greatest buddy, however sadly, the billion-dollar diamond business is rife with scandal and fraud. There have been numerous circumstances the place lab-grown diamonds have been graded as pure diamonds. An instance of this was seen final yr when the Worldwide Gemological Institute analyzed and graded a 6.18ct lab-grown diamond, which was beforehand claimed to be a pure diamond on its Gemological Institute of America (GIA) report. 

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It was additionally reported in 2005 that the Gemological Institute of America — which is without doubt one of the most trusted sources for evaluating gemstone high quality — was accepting bribes to improve its GIA stories. In accordance with sources, a lawsuit was filed in opposition to GIA in 2005 attributable to funds being accepted to “improve” the standard of diamonds submitted for grading.

As well as, customers are capable of resubmit a diamond for examination at GIA for any purpose. This is called a follow-up service. Because of this, diamonds may be related to a number of grading stories. This may be problematic for customers since they is probably not receiving authentic diamond certificates upon buy.

NFTs as a single supply of fact

Sadly, diamond certificates fraud is turning into extra frequent. Areas like India have even developed new frameworks to fight fraudulent actions, as seen within the Diamond Constitution drafted final yr. Whereas modern, business consultants have additionally began wanting towards blockchain know-how to assist remedy this rising downside.

Particularly talking, nonfungible tokens (NFTs) might function an answer relating to stopping diamond certification fraud. Mike Moldawsky, founder and creator of Diamond Daybreak, informed Cointelegraph that diamond certification stories ought to be positioned on a public blockchain community to make sure that paperwork can’t be manipulated. “Having a diamond certificates as an NFT on the Ethereum blockchain can guarantee immutability, proof-of-ownership and visibility for each retailers and customers,” he stated.

As a way to display this, Moldawsky defined that Diamond Daybreak is a high-level NFT artwork mission that can place 333 GIA-certified diamonds on the Ethereum blockchain as ERC-721 tokens. Privately invited individuals will then be capable of buy these diamonds as NFTs. In accordance with Moldawsky, individuals will be capable of buy a restrict of 1 diamond NFT, with weight various between 0.4-0.8 carats, for the worth of 4.44 Ether (ETH). As soon as an NFT is purchased, a sensible contract will routinely ship the diamond’s GIA certificates to the Ethereum blockchain, serving as proof of possession and verification.

Given the rise of NFTs tied to bodily counterparts, Moldawsky additional remarked that NFT holders could have the choice to create a tangible artwork piece containing a GIA-certified diamond by way of the Diamond Daybreak web site.

“NFT holders will begin with a digital tough diamond and evolve their NFT on the blockchain (on-chain) with a course of that mimics exactly the in-real life pure diamond course of. Finally, the collector might want to resolve whether or not they need to hold their diamond digital or burn it and rework it into its bodily kind,” he elaborated.

An instance of Diamond Daybreak’s bodily artwork piece – a case which is able to include a GIA licensed diamond. Supply: Diamond Daybreak

In accordance with Moldawsky, such a course of can also be meant to lift consciousness across the notion that digital NFTs can change into scarce over time and, due to this fact, extra beneficial. “As extra collectors resolve to say the bodily artwork piece and burn the NFT, this may cut back the full NFT provide. Because of this, digital NFTs will change into extra uncommon,” Moldawsky defined. 

He added that the digital diamond artworks have all been created by artist David Ariew, who just lately offered his first artwork at Sotheby’s Modern Artwork Night for $224,000, alongside well-known artists equivalent to Banksy and Basquiat.

In both case, although, Moldawsky defined that Diamond Daybreak’s diamond certificates will stay on the Ethereum blockchain. “If a person chooses to create a bodily diamond artwork piece, they’ll obtain the paper GIA certificates along with the certification on the blockchain community. The aim of the mission is to display proof-of-ownership, transparency and immutability of diamond certificates,” he remarked. 

Olivia Landau, a GIA-certified gemologist and co-founder of The Clear Reduce — a digitally native diamond engagement ring and advantageous jewellery firm — informed Cointelegraph that her agency can also be utilizing NFTs for diamond certification after launching an NFT platform on the Genuine blockchain community in January. She stated:

“NFTs give {couples} buying an engagement ring the choice to have the entire diamond’s certificates, insurances, pictures and even their proposal story saved safely on the blockchain for years to come back, eliminating the concern of hanging onto hard-to-replace paper copies.”

Landau added that the aim behind the NFTs supplied by The Clear Reduce is to digitize and authenticate a diamond’s GIA report and insurance coverage paperwork. “The Clear Reduce’s NFTs are usually not supposed to be resold on secondary marketplaces,” she stated.

An instance of The Clear Reduce’s NFT portal. Supply: The Clear Reduce

In accordance with Landau, shoppers who buy a diamond ring from The Clear Reduce could have the choice to purchase a corresponding NFT for a further $500, which is to be paid in fiat moderately than in crypto. She famous that present shoppers may also have this feature. 

“Within the beta testing section, over 90% of shoppers expressed preliminary curiosity on this new NFT perform.​ Clients will obtain a tough copy of their GIA certificates and a replica of it will likely be saved digitally, guaranteeing its worth for all times,” she stated.

Will NFTs substitute conventional diamond certificates?

NFTs as digital diamond certificates could also be modern, but it stays questionable if this idea resonates with the mainstream.

For example, Moldawsky identified that he believes extra training round blockchain is required to ensure that conventional organizations to know the potential behind NFTs. “We have to ask GIA why they haven’t gone digital but. As soon as that dialog is initiated, we are able to clarify why blockchain know-how is transformative,” he stated.

Whereas this can be, it’s notable that GIA is open to digital transformation. Stephen Morisseau, director of communications for GIA, informed Cointelegraph that early subsequent yr, GIA will start transitioning all of their gemological laboratory stories to digital types. “This ought to be accomplished that by 2025,” he remarked. Morisseau added that each one of GIA’s printed stories have a number of security measures, noting that the knowledge on any report may be verified utilizing the safe on-line GIA Report Check service.

Adoption of NFTs throughout the diamond business may additionally achieve traction as soon as mainstream retailers start implementing the know-how. For example, De Beers is presently utilizing the Tracr blockchain to hint the origins of its diamonds.

Jason McIntosh, chief product officer for Tracr, informed Cointelegraph that NFTs are more likely to be a part of the platform’s answer sooner or later. “Diamonds on the Tracr platform are ‘NFT-ready’ within the sense that the Tracr diamond report can simply be integrated inside an NFT wrapper,” he stated.

Given this degree of innovation, Landau believes that sooner or later, all diamonds will likely be authenticated by way of a blockchain community. Nevertheless, she identified the significance of guaranteeing that buyers don’t have to fret concerning the technical elements behind NFTs:

“Clients don’t must have any crypto or blockchain expertise to achieve entry to our NFTs. The whole lot is dealt with for them effortlessly. I consider this may drive mainstream adoption.”

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