In spite of the critical handicap from the thermodynamic point of view, the atomic hydrogen hypothesis is strongly supported by experimental observations of diamond deposition with simultaneous graphite etching. Thermodynamic analysis of the C H system showed that at ∼ 1500 K, carbon solubility in the gas phase is minimal and thus, the equilibrium fraction of solid carbon is maximal. Depending on whether gas phase nucleation takes place or not, the driving force is for deposition or for etching of solid carbon below ∼ 1500 K for the input gas of the typical mixture of 1% CH 4 -99% H 2 . The previous observation of etching of the graphite substrate is not expected unless solid carbon precipitated in the gas phase. By rigorous thermodynamic analysis of the previous experimental observations of diamond deposition with simultaneous graphite etching, we suggested that the previous implicit assumption that diamond deposits by an atomic unit should be the weakest point leading to the thermodynamic paradox. The experimental observations could be successfully explained without violating thermodynamics by assuming that the diamond phase had nucleated in the gas phase as fine clusters.