Diamond fraud is an alarming and growing trend that has caused significant financial loss to consumers worldwide. With diamond prices continuing to rise in response to global demand, unfortunately, so have the number of fraudulent activities related to diamonds. This post will explore how leveraging blockchain technology and Non-Fungible Tokens (NFTs) can help combat this costly problem by providing transparency and security within the diamond industry’s supply chain.
We’ll also examine how organizations like De Beers Group have begun advancing their anti-fraud efforts through initiatives designed explicitly around these two innovative technologies.
Before being utilized in exquisite jewelry, gemstones go through a lengthy process that includes mining, polishing, and cutting. The most recent diamond or pearl business lacks enough openness and traceability. Customers have the right to know the mining source of a diamond they have purchased since they are becoming less tolerant of ensuring their fine jewelry is obtained ethically.
Also, through diamond certifications, fraud and misconduct can be fraudulently perpetrated. Due to the variety of diamond authentication certificates available, fraudsters have seized an opportunity to commit fraudulent activities, portraying false certificates for marked-up prices. A laboratory-grown diamond with a fake inscription demonstrates how close the measurements of the man-made stone are to the information in the original report.
Traditional approaches that lack transparency can be remedied by using a blockchain-based ledger. The blockchain ledger’s immutability aids in keeping unmodified traces of the complete process flow in the fine jewelry business and restricts fraudulent actions. Customers and entities may use blockchain to track every stage and process of purchasing jewelry, generating a more traceable record and encouraging ethical sourcing of its gemstones and metals.
NFTs can be a solution to help ensure that only legitimate diamonds receive certification. By tracking detailed information about each diamond from its source to the final sale point, NFTs create immutable records of provenance. These are shielded from malicious actors and enable faster transaction speeds for buyers and sellers alike.
NFTs and blockchain being used in diamond certification
De Beers: NFT adoption within the diamond industry may also gain traction once mainstream retailers implement the technology. For example, De Beers is currently using the Trakr blockchain to trace the origin of its diamonds. Tracr promises to be the only diamond blockchain that delivers tamper-proof records of diamond provenance at scale, with the ability to register 1 million gems every week on its network.
Cartier: Cartier’s parent firm, with LVMH and Prada Group, has launched the Aura Blockchain Consortium, which uses blockchain to trace the product history and provenance of luxury goods. On the Aura blockchain, an NFT is generated to aid in tracking a specific luxury commodity. However, an Aura NFT is not yet tradeable on the open market – it was designed to track information.