So say if someone would send me 1 diamond at 1 carat, i would then receive that 1 diamond which is automatically then transferred back to Bitgem?
How would i attach a contract to that, if it cancels the diamond back to btg?
If sender cancels tx, diamond will go on forged as before. If tx goes on, you would receive the same diamond refunded into bitgems, ready for being forged again. This is the trick, it can be re-forged as often as desired. Somehow, refund-forge process provides the malleability of gems not present in physical gemstones.