NFTs could help solve diamond certification fraud

Diamonds may be a girl’s best friend, but unfortunately, the billion-dollar diamond industry is rife with scandal and fraud. There have been a number of cases where lab-grown diamonds have been graded as natural diamonds. An example of this was seen last year when the International Gemological Institute analyzed and graded a 6.18ct lab-grown diamond, which was previously claimed to be a natural diamond on its Gemological Institute of America (GIA) report. 

It was also reported in 2005 that the Gemological Institute of America — which is one of the most trusted sources for evaluating gemstone quality — was accepting bribes to upgrade its GIA reports. According to sources, a lawsuit was filed against GIA in 2005 due to payments being accepted to “upgrade” the quality of diamonds submitted for grading.

In addition, consumers are able to resubmit a diamond for examination at GIA for any reason. This is known as a follow-up service. As a result, diamonds can be associated with multiple grading reports. This can be problematic for consumers since they may not be receiving original diamond certificates upon purchase.

NFTs as a single source of truth

Unfortunately, diamond certificate fraud is becoming more common. Regions like India have even developed new frameworks to combat fraudulent activities, as seen in the Diamond Charter drafted last year. While innovative, industry experts have also started looking toward blockchain technology to help solve this growing problem.

Specifically speaking, nonfungible tokens (NFTs) may serve as a solution when it comes to preventing diamond certification fraud. Mike Moldawsky, founder and creator of Diamond Dawn, told Cointelegraph that diamond certification reports should be placed on a public blockchain network to ensure that documents can’t be manipulated. “Having a diamond certificate as an NFT on the Ethereum blockchain can ensure immutability, proof-of-ownership and visibility for both retailers and consumers,” he said.

In order to demonstrate this, Moldawsky explained that Diamond Dawn is a high-level NFT art project that will place 333 GIA-certified diamonds on the Ethereum blockchain as ERC-721 tokens. Privately invited participants will then be able to purchase these diamonds as NFTs. According to Moldawsky, participants will be able to purchase a limit of one diamond NFT, with weight varying between 0.4-0.8 carats, for the price of 4.44 Ether (ETH). Once an NFT is bought, a smart contract will automatically send the diamond’s GIA certificate to the Ethereum blockchain, serving as proof of ownership and verification.

Given the rise of NFTs tied to physical counterparts, Moldawsky further remarked that NFT holders will have the option to create a tangible art piece containing a GIA-certified diamond via the Diamond Dawn website.

“NFT holders will start with a digital rough diamond and evolve their NFT on the blockchain (on-chain) with a process that mimics precisely the in-real life natural diamond process. Ultimately, the collector will need to decide whether they want to keep their diamond digital or burn it and transform it into its physical form,” he elaborated.

According to Moldawsky, such a process is also meant to raise awareness around the notion that digital NFTs can become scarce over time and, therefore, more valuable. “As more collectors decide to claim the physical art piece and burn the NFT, this will reduce the total NFT supply. As a result, digital NFTs will become more rare,” Moldawsky explained. 

He added that the digital diamond artworks have all been created by artist David Ariew, who recently sold his first artwork at Sotheby’s Contemporary Art Evening for $224,000, alongside famous artists such as Banksy and Basquiat.

My collaboration piece with Jia Aili, “The Road Ahead” just sold for $224,000 in the @Sothebys Contemporary Evening Auction! I’m at a loss for words. Thank you so much to @triple_x_space and a massive congrats to @raoulmarks as 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 will remain on the Ethereum blockchain. “If a user chooses to create a physical diamond art piece, they will receive the paper GIA certificate in addition to the certification on the blockchain network. The goal of the project is to demonstrate proof-of-ownership, transparency and immutability of diamond certificates,” he remarked. 

Olivia Landau, a GIA-certified gemologist and co-founder of The Clear Cut — a digitally native diamond engagement ring and fine jewelry company — told Cointelegraph that her firm is also using NFTs for diamond certification after launching an NFT platform on the Authentic blockchain network in January. She said:

“NFTs give…