Diamonds may be a girl’s best friend, but unfortunately, the billion dollar diamond industry is riddled with scandals and scams. There have been a number of cases where lab-grown diamonds have been classified as natural. An example of this was seen last year when the International Gemological Institute analyzed and graded a 6.18-carat lab-grown diamond, which was previously claimed to be a natural diamond in a Gemological Institute of America (GIA) report.
It was also reported in 2005 that the Gemological Institute of America – one of the most trusted sources for evaluating gem quality – was accepting bribes to upgrade its GIA reporting. According to sources, a lawsuit was filed against KIA in 2005 for accepting payments to “upgrade” the quality of diamonds submitted for classification.
Additionally, consumers may resubmit diamonds for examination at KIA for any reason. This is known as a follow-up service. As a result, diamonds can be associated with multiple appreciation reports. This can be a problem for consumers because they may not receive genuine diamond certificates upon purchase.
NFTs as the only source of truth
Unfortunately, fake diamond certificates are becoming more and more common. Regions like India have developed new frameworks to combat fraudulent activities, as we saw with the Diamond Charter drafted last year. While the industry experts are innovative, they are also starting to look into blockchain technology to help solve this growing problem.
Specifically, non-fungible tokens (NFTs) may act as a solution when it comes to preventing fraud in diamond certificates. Diamond Dawn co-founder and founder Mike Moldowsky told Cointelegraph that reports of diamond certificates must be placed on a public blockchain network to ensure that the documents cannot be tampered with. “Having a diamond certificate as an NFT certificate on the Ethereum blockchain can ensure immutability, proof of ownership, and visibility for both retailers and consumers,” he said.
In order to prove this, Moldawsky explained that Diamond Dawn is a high-tech NFT project that will place 333 GIA-certified diamonds on the Ethereum blockchain as ERC-721 tokens. The invited private participants will then be able to purchase these diamonds as NFTs. According to Moldawsky, participants will be able to purchase a maximum of one NFT diamond, weighing between 0.4-0.8 carats, at a price of 4.44 ether.
ETH
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. Once an NFT is purchased, the smart contract will automatically send the GIA Diamond Certificate to the Ethereum blockchain as proof of ownership and verification.
With the advent of NFTs linked to their physical counterparts, Moldawsky also noted 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 digital rough diamonds and develop the NFT on the blockchain (on-chain) through a process that accurately mimics the process of real-world natural diamonds. Ultimately, the collector will need to decide whether they want to keep the diamonds digitally or burn and convert them to their physical form.”
Example of a Diamond Dawn material piece of art – Box comes with a GIA certified diamond. Source: Diamond Dawn
According to Moldowski, this process is also intended to raise awareness around the idea that digital NFT technologies can become scarce over time, and therefore more valuable. “As more collectors decide to claim physical art and burn NFTs, this will reduce the total NFT supply. As a result, digital NFTs will become more scarce,” explained Moldowsky.
He added that all of the digital diamond artworks were created by artist David Ario, who recently sold his first artwork at the Sotheby’s Contemporary Art Evening for $224,000, along with well-known artists such as Banksy and Basquiat.
Either way, though, Moldawsky made it clear that Diamond Dawn’s diamond certificates will remain on the Ethereum blockchain. “If a user chooses to create a diamond art piece, they will receive a paper GIA certificate in addition to the certificate on the blockchain network. The aim of the project is to establish the ownership, transparency and immutability of diamond certificates.”
