NFTs could help solve diamond certification fraud

Diamonds could also be a woman’s finest pal, however sadly, the billion-dollar diamond trade is rife with scandal and fraud. There have been quite a few 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. 

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 studies. In accordance with 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 purpose. This is called a follow-up service. Because of this, diamonds could be related to a number of grading studies. This may be problematic for shoppers since they is probably not receiving unique diamond certificates upon buy.

NFTs as a single supply of reality

Sadly, diamond certificates fraud is changing 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, trade specialists have additionally began wanting towards blockchain expertise to assist resolve this rising drawback.

Particularly talking, nonfungible tokens (NFTs) might function an answer in relation to stopping diamond certification fraud. Mike Moldawsky, founder and creator of Diamond Daybreak, informed Cointelegraph that diamond certification studies 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 shoppers,” he mentioned.

So as to display this, Moldawsky defined that Diamond Daybreak is a high-level NFT artwork challenge that can place 333 GIA-certified diamonds on the Ethereum blockchain as ERC-721 tokens. Privately invited members will then be capable to buy these diamonds as NFTs. In accordance with Moldawsky, members will be capable to buy a restrict of 1 diamond NFT, with weight various between 0.4-0.8 carats, for the value 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 can 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 resolve whether or not they wish to maintain their diamond digital or burn it and remodel it into its bodily kind,” he elaborated.

In accordance with Moldawsky, such a course of can be meant to lift consciousness across the notion that digital NFTs can develop into scarce over time and, due to this fact, extra useful. “As extra collectors resolve to say the bodily artwork piece and burn the NFT, this can scale back the overall 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 not too long ago offered his first artwork at Sotheby’s Up to date Artwork Night for $224,000, alongside well-known artists reminiscent of Banksy and Basquiat.

My collaboration piece with Jia Aili, “The Street Forward” simply offered for $224,000 within the @Sothebys Up to date Night Public sale! I’m puzzled. Thanks a lot to @triple_x_space and a large congrats to @raoulmarks as effectively! You guys are unimaginable!! pic.twitter.com/oeff7zUuku

— David Ariew (@DavidAriew) April 27, 2022

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 are going to obtain the paper GIA certificates along with the certification on the blockchain community. The objective of the challenge 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 effective jewellery firm — informed Cointelegraph that her agency can be utilizing NFTs for diamond certification after launching an NFT platform on the Genuine blockchain community in January. She mentioned:

“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 return, eliminating the concern of hanging onto hard-to-replace paper copies.”

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

In accordance with Landau, shoppers who buy a diamond ring from The Clear Reduce can have the choice to purchase a corresponding NFT for an extra $500, which is to be paid in fiat relatively than in crypto. She famous that current shoppers will even have this selection. 

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

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 schooling 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 will clarify why blockchain expertise is transformative,” he mentioned.

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 studies to digital kinds. “This ought to be accomplished that by 2025,” he remarked. Morisseau added that every one of GIA’s printed studies have a number of security measures, noting that the data on any report could be verified utilizing the safe on-line GIA Report Check service.

Adoption of NFTs inside the diamond trade might also achieve traction as soon as mainstream retailers start implementing the expertise. For example, De Beers is at present utilizing the Tracr blockchain to hint the origins of its diamonds.

Jason McIntosh, chief product officer for Tracr, informed 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 mentioned.

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 customers don’t have to fret in regards to the technical features behind NFTs:

“Prospects don’t have to have any crypto or blockchain expertise to realize entry to our NFTs. The whole lot is dealt with for them effortlessly. I imagine this can drive mainstream adoption.”