The diamond trade is a notoriously dirty business fraught with theft, fraud and even blood. It’s not the first use case that springs to mind, but NFTs might be about to fix this industry.
The problem with diamonds
Most of the problems associated with the diamond trade can be traced back to one singular issue: provenance. Not being able to trace a diamond’s complete history opens the way for fraud. This is how “blood diamonds” (diamonds mined in war zones to fund activities including terrorism and insurgency) can find their way onto the market. Blood diamonds are illegal, but and only part of the problem. The wider trade is rife with scandal! Lab-grown diamonds are often passed off as natural and the Gemological Institute of America was caught taking bribes to upgrade the quality of individual diamonds in their certification.
Unregulated diamond mining is associated with human rights abuses and colossal environmental damage. Unfortunately, without correct certification, as diamonds pass through countless hands, provenance is lost and it becomes increasingly difficult to determine “ethical” diamonds from their unethical counterparts. The trade is based at least in part on trust, which is easily abused.
Blockchain provides solutions
Mike Moldawsky is head of the Diamond Dawn project and he thinks he has the answer: storing information on the Ethereum blockchain. Diamond Dawn will offer 333 certified diamonds minted on ERC-721 contracts for 4.44 ETH. As soon as one of the NFTs is purchased (or subsequently traded) its certification is stored on the blockchain. This acts as much more than just proof of ownership.
Having the information on the blockchain ensures that it’s untouchable and can’t be fraudulently altered at a later date. It also means that a diamond’s trading history is fully traceable from transaction to transaction, preserving provenance and providing a level of transparency and immutability that’s often absent from the trade. Diamond Dawn has a few other tricks up its sleeve too, including allowing collectors to create irl works of art incorporating their diamonds.
It’s not the only diamond-centric blockchain project, either. Diamonds4Crypto offers blockchain certified diamonds and accepts payment in ETH, BTC and Doge. All their diamonds are ethically sourced, with provenance guaranteed via smart contract. As the link between virtual and physical goods grows ever stronger, expect to see plenty more jewellers using smart contracts to sanitise the diamond trade.