Tips for efficiency
Using the Gauntlet Smash will be "cheap", but will transform much less Nodes than throwing Fire Bombs or Flaming Skulls. Either an Iron Mining Cell, a Diamond Mining Cell or a Lumite Mining Cell can be used.
The AOE ground smash can only be performed with 75% Stamina or more of the possible maximum Stamina, and a melee Weapon must be drawn - this can be the default Twig too, since the weapon doesn't make any difference if it's about the transformation abilities of the Gauntlet Smash.
The Gauntlet Smash will be performed on the block directly in front of your player character even if you point your cursor at any spot farther away. This point of impact will then be the center of a star-shaped area of transformation of 3 blocks to all 4 sides on the ground, 2 blocks diagonally to all 4 sides, 3 blocks downwards at maximum and 1 block upwards.
The tips of the "star" (the third block to all 4 sides) outside the central 3x3 area of effect will be affected a little less by the Gauntlet Smash.
Using Fire Bombs or Flaming Skulls will be most efficient if you at first have placed a bunch of Coal Nodes together by creating deep lakes or cataracts from Tar and have thrown Freeze Bombs at/into those. (See: Making Coal.)
One Freeze Bomb can turn up to 7x7x7 units of Tar (maximum) placed closely together into Coal Nodes, and similar to that, one Fire Bomb (or one Flaming Skull) can turn up to 7x7x7 Coal Nodes that are placed next to each other into Diamond Nodes at max. This maximum is rather hard to achieve though, usually only 7x7x3 or 7x7x4 blocks will be transformed at a time.
The most efficient method to use your Explosives would probably be to make Tar flow downwards in a group of 7x7 "pillars" altogether, without leaving spaces in between, and then to throw the Explosives into the middle of this arrangement from above. If you used a "ceiling" to stick the Tar onto, you should remove this auxiliary construction for this method.
With only 2 of each type of bombs used to convert two layers of Tar "pillars", you can create 196x2 Diamond Nodes at max.
The effect of Fire Bombs and Flaming Skulls can be completely negated by either activating "Disable Fire Spread" on a game world, and/or deactivating the advanced claim option "Fire Sim Enabled" on the according player claim.
Since Diamonds can be made in "infinite" amounts with these procedures, the balance of this transformation system was changed several times by Playful during game development.
Since update R34 in September 2016 the crafting recipe for Fire Bomb has now to be unlocked first by collecting Warmworm Teeth and crafting Diamond Mining Cells (as well as Armor-Piercing Bombs exactly like for Freeze Bombs) for example, so only players that have progressed rather far into the game would be able to craft them.
However, a "cheaper" alternative would be using seasonal Flaming Skulls instead of Fire Bombs. Flaming Skulls have been introduced to Creativerse were implemented during Pumpkiru's Candy Campaign, the Halloween event 2017.
Flaming Skulls could be found in three types of Pumpkin Treasure Chests that could only be traded for Pumpkiru Candy from Pumpkirus (either The Great Pumpkiru or Pumpkiru Jr.) that appeared during this event from October 18th 2017 to November 15th 2017.
The rare crafting Recipe for Flaming Skulls could only be found (rarely) in Royal Pumpkin Treasure chests or Pumpkiru's King Treasure chests by chance that could be traded for 100 Pumpkiru Candy from Pumpkirus. Only players who have received this rare recipe can craft Flaming Skulls, but players who have surplus duplicates of this rare recipe might be willing to give it to other players too.
Naturally Tar will not turn into Diamond directly when set on fire; it will just burn away, since Tar is highly flammable. Actually, Tar is so easily inflammable (yes, "inflammable" means the exact same as "flammable", just check your dictionary) that it can start to burn immediately by simply being placed into hot environments that make a heat gauge pop up.