NFTs may assist remedy diamond certification fraud

Diamonds could also be a woman’s finest good friend, however sadly, the billion-dollar diamond trade is rife with scandal and fraud. There have been a lot of instances the place lab-grown diamonds have been graded as pure diamonds. An instance of this was seen final 12 months 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. 

It was additionally reported in 2005 that the Gemological Institute of America — which is likely one of the most trusted sources for evaluating gemstone high quality — was accepting bribes to improve its GIA stories. Based on sources, a lawsuit was filed towards GIA in 2005 resulting from funds being accepted to “improve” the standard of diamonds submitted for grading.

As well as, shoppers are in a position to resubmit a diamond for examination at GIA for any cause. 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 shoppers since they is probably not receiving unique diamond certificates upon buy.

NFTs as a single supply of fact

Sadly, diamond certificates fraud is turning into extra widespread. Areas like India have even developed new frameworks to fight fraudulent actions, as seen within the Diamond Constitution drafted final 12 months. Whereas modern, trade specialists have additionally began wanting towards blockchain know-how to assist remedy this rising downside.

Particularly talking, nonfungible tokens (NFTs) could function an answer in terms of stopping diamond certification fraud. Mike Moldawsky, founder and creator of Diamond Daybreak, advised Cointelegraph that diamond certification stories needs 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 shoppers,” he stated.

So as to show this, Moldawsky defined that Diamond Daybreak is a high-level NFT artwork undertaking 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. Based on 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 wise contract will robotically 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. In the end, the collector might want to determine whether or not they need to hold their diamond digital or burn it and remodel it into its bodily type,” 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

Based on Moldawsky, such a course of can also be meant to boost consciousness across the notion that digital NFTs can develop into scarce over time and, subsequently, extra useful. “As extra collectors determine to assert the bodily artwork piece and burn the NFT, it will scale back the whole NFT provide. Because of this, digital NFTs will develop into extra uncommon,” Moldawsky defined. 

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

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

Olivia Landau, a GIA-certified gemologist and co-founder of The Clear Lower — a digitally native diamond engagement ring and advantageous jewellery firm — advised 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, photographs and even their proposal story saved safely on the blockchain for years to return, eliminating the concern of hanging onto hard-to-replace paper copies.”

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

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

Based on Landau, purchasers who buy a diamond ring from The Clear Lower could have the choice to purchase a corresponding NFT for a further $500, which is to be paid in fiat reasonably than in crypto. She famous that present purchasers may even have this selection. 

“Within the beta testing part, over 90% of purchasers expressed preliminary curiosity on this new NFT operate.​ Clients will obtain a tough copy of their GIA certificates and a duplicate of it will likely be saved digitally, making certain its worth for all times,” she stated.

Will NFTs change conventional diamond certificates?

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

As an example, Moldawsky identified that he believes extra schooling round blockchain is required to ensure that conventional organizations to grasp 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, advised Cointelegraph that early subsequent 12 months, GIA will start transitioning all of their gemological laboratory stories to digital kinds. “This needs 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 data on any report may be verified utilizing the safe on-line GIA Report Examine service.

Adoption of NFTs inside the diamond trade can also acquire traction as soon as mainstream retailers start implementing the know-how. As an example, De Beers is at the moment utilizing the Tracr blockchain to hint the origins of its diamonds.

Jason McIntosh, chief product officer for Tracr, advised Cointelegraph that NFTs are prone 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 can be authenticated by way of a blockchain community. Nonetheless, she identified the significance of making certain that buyers don’t have to fret concerning the technical features behind NFTs:

“Clients don’t must have any crypto or blockchain expertise to realize entry to our NFTs. Every part is dealt with for them effortlessly. I consider it will drive mainstream adoption.”