Blockchain Technology: The New Counterfeit Police with Enhanced Traceability

Beginner’s Guide / 18.03.2020

One of the biggest problems facing the manufacturing and supply industry is counterfeiting. Counterfeit goods are a global problem with an estimated worth of half a trillion dollars a year, representing 2.5% of global imports. Years back, counterfeits were a small-time illegal business but have since grown immensely to have profound impacts on companies behind original brands. 

The counterfeiting industry has, in fact, risen to be complex business having devastating effects not only on numerous businesses across the globe but also on human life. The World Health Organization estimates that up to 30% of all drugs in circulation are counterfeit and are responsible for a million deaths annually. 

While it’s possible to combat counterfeit, one of the biggest hindrances to this war is that consumers cannot easily tell apart a genuine and fake product and also the unavailability of effective anti-counterfeit tools. 

The current technologies used in combating counterfeits such as authentication methods, Track and Trace systems, and smart packaging have also proven to be ineffective. With a rapid solution needed to save the industry, blockchain technology seems to be a viable solution to fight counterfeits, as discussed in this piece. 

What’s Blockchain?

For starters, blockchain simply refers to a decentralized, distributed ledger controlled by smart contracts and regulated by a consensus protocol. The ledger automatically records every transaction on the network in a way that it cannot be altered. This means that one “block” of information cannot be altered without simultaneously altering all subsequent blocks in the chain. A block is essentially a series of transactions bundled together.

A new block is created by nodes (users) ascertaining the legitimacy of the added transaction or information. When a second block is added, it will contain all the information in the first block plus the new information. The same applies to the third block meaning that the blocks are interlinked to form something sort of a chain. Blockchain is immutable in nature, meaning that you can’t pull out or alter information in a single block without disrupting the entire chain. 

The unique features of blockchain notably decentralized, peer-to-peer network, and immutable to alteration of information or cyberattacks makes it an ideal option to combat the menace of counterfeiting and achieve traceability effectively.

Blockchain plus IoT-A Viable Solution to Counterfeiting

Blockchain technology paired with the Internet of Things (IoT) offers a viable solution to fight counterfeiting by creating a shared, distributed ledger. This ledger can record the origin, location, as well as ownership of raw materials and products at each stage of the value chain, in turn, providing manufacturers, customers, and other players in the supply chain the transparency the require. In this correlation, IoT provides unique identification and traceability while the blockchain offers an unalterable, tamper-proof flow and storage of information.  

Blockchain, combined with IoT, has an unmatched capability to impede counterfeiting using means not seen in the current traditional technologies used to combat the vice. The technology can effectively inhibit counterfeiting thanks to its ability to immutably track products in the supply chain and share genealogy or movement with the stakeholders, including manufactures and government, in real-time. 

How Blockchain Detects and Prevents Counterfeiting

To prevent counterfeiting, product manufacturers and suppliers can join a single blockchain platform and employ “smart tags” (cryptographic identifiers) to track and confirm the provenance and location of each product in the supply chain. The tags can assume a variety of forms, including security labels with unique QR codes, RFID, and digital tags that contain an individualized software component. 

Faint, deliberate physical alterations on metallic or ceramic surfaces can also function as smart tags. The known smart tags or related marks attached to a single product or a batch is then entered in the blockchain network. Care should be taken to ensure that only genuine and verified smart tags or products are entered onto the blockchain to ensure a high level of authenticity. With the unique mark or product already on the blockchain, individual items or the entire batch can be tracked at every stage along with the manufacturing, shipping, distribution, and sales. 

Smart tags capture the entire journey of each product, and it’s impossible to replicate or alter the data logs. For the case of counterfeit products, the smart tags won’t be visible on the blockchain, thus making it easy to separate genuine products from counterfeit ones. Also, it’s possible to establish where a genuine product was manufactured and sold by looking up at the blockchain. 

Similarly, when products are recalled or are brought back for repair based on the warranty terms, the manufacturer or the support teams can use the smart tag to confirm the authenticity, origin, and legitimacy of the product and its parts. 

Blockchain Can Improve Traceability in Product Life Cycle

Blockchain can be employed to enhance traceability at the three main stages of the typical product life cycle. The blockchain, accompanied by IoT, can enhance traceability and operation performance in the following stages of the product life cycle. 

  • Raw Material Sourcing– Blockchain can be employed in raw material sourcing to prevent loses or defects in the final product due to fake raw materials. Additionally, the technology can cut down on the labor spent validating materials and satisfying regulatory requirements. Manufacturers, as well as raw material suppliers, can leverage the blockchain technology to authenticate items, flag deviations from agreed-upon sourcing arrangements, and prevent defective and inferior components from entering the production system. 
  • Supply chain– In supply chain, blockchain will enable manufacturers, suppliers, third-party retailers, customers, and regulators to verify a product’s authenticity as it moves through the value chain. This will make it harder for counterfeit goods to escape detection. 
  • After Sell Services– Blockchain platform with front-end applications will enable companies to verify whether a servicing or repair claim is genuine. With faster and accurate claim authentication, companies will be able to save time and resources and also improve customer satisfaction. 

Blockchain-Based Anti-Counterfeit Solutions

Despite blockchain being a novel technology, it has already been implemented in the supply chain industry to combat counterfeiting. Below are some of the blockchain based anti-counterfeit solutions. 

  • Blockverify – Blockverify is an anti-counterfeit blockchain solution developed by Venture Proxy Ltd. The platform uses blockchain technology to prevent duplicates and allows companies themselves to create products and monitor supply chains. 
  • Chronicled – Chronicled Inc. is based in San Francisco based company the provides “identity inlays and tamper-evident cryptographic seal”, which allow linking physical goods with the blockchain. They offer both BLE and NFC cryptographic chips, which sign all transactions before they are stored in a public blockchain. 
  • Everledger – Based in London, Everledger employs blockchain, specifically smart contracts, to ensure data authenticity. The platform combines private blockchains with public blockchains to ensure the immutability of the transaction history.    
  • VeChain – VeChain is perhaps the leading blockchain company in the supply chain industry thanks to its numerous partnerships with established brands. The company uses NFC chips (stores private/public key pair) to enable customers to validate the authenticity of a product.

Authors Thoughts

With the counterfeiting menace costing economies and governments billions and even risking consumer’s lives, blockchain technology offers a viable anti-counterfeit solution. The technology can be employed in the various stages of the supply chain, including raw material sourcing, supply, sales, inventory management, and after-sale services. Manufacturers, as well as suppliers, implement the technology to avert the problems that come with fake products.  

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Wayne is a Blockchain enthusiast and expert in crypto trading. Currently, he covers trendy issues on digital currencies.