The End of Fake Goods: Certification and Originality on the Blockchain
There’s a lot more to the fake goods market than knock-off shoes and sunglasses. Established black markets exist all over the world to peddle anything from counterfeit medicine to fraudulent vehicle parts and illicit blood diamonds. The truth is these fake, reproduced or illegitimate goods harm both the buyer and the seller, as neither consumer nor company benefit from faked goods and their inferior quality.
A lack of transparency on the supply chain allows trillions of dollars every year to flow into the hands of this global black market. However, the rapid rise of blockchain offers a solution. Blockchain has the ability to create seamless and instant transactions as well as verify the authenticity of any given object as it passes through numerous points along the supply chain. These blockchain breadcrumbs present a surefire way to confirm the good received is the same as the good sent. Could this signal the end of fake goods as we know it?
Faked, forged or otherwise falsified The fashion industry will surely hope blockchain signals a respite from fake goods. The Global Brand Counterfeiting Report 2018 estimates the losses suffered due to global online counterfeiting amounts to $323 billion in 2017, with online sales of fake goods accounting for 31 percent of total counterfeiting-related losses. Across the international fashion industry, total losses from counterfeiting are estimated around $1.2 trillion and expected to hit $1.82 trillion by 2020. This is a problem that is only growing, and not limited to high-end fashion.
Medicinal products are also prime targets for black market forgers. The World Health Organization notes that an estimated 1 in 10 medical products circulating in low and middle-income countries is either substandard or falsified. This means that people are taking medicines that fail to treat or prevent disease. “Not only is this a waste of money for individuals and health systems that purchase these products, but substandard or falsified medical products can cause serious illness or even death,” the organization says.
Another impacted trade is that of precious stones and jewels. While steps have been made to prevent conflict diamonds from entering the free market, reports suggest regulation has done little to stem the flow of unethically sourced precious stones. An investigation by Global Witness in 2017uncovered Zimbabwe’s links with the Antwerp diamond trading hub in Belgium, in likely violation of EU sanctions against the country. Despite the best efforts of regulatory and governmental bodies, fake goods or unethically sourced materials continue to flow through established networks and into the consumer market. This is where blockchain is poised to make a significant impact.
Blockchain breadcrumbs Blockchain allows information to be unalterable and decentralized — making it the perfect conduit for recording transactions along a supply chain and stopping fraudulent goods in their tracks. Almost like a trail of breadcrumbs, blockchain technology is proving its ability to trace the journey of any given product back to its source of origin. This could be useful for goods of any type and any industry, an ideal mechanism for preventing fake products, fraudulent goods or unethical trade from taking place. After all, customers and companies are able to pinpoint the product’s exact history through exchanges on the ledger.
The food industry is a good example of blockchain tracking in action. Food manufacturers around the world are concerned that their products could be falsified, with as many as 39 percent worried that their products could be counterfeited and 40 percent reporting food fraud is hard to detect. Blockchain methods, however, can actively track individual food items as they move from farm to table, like the tracing of Latin American mangoes, Chinese pork or African coffee. In some cases, blockchain data on a food’s origin can be accessed within two seconds — a vast improvement on data which previously took weeks to compile.
Certification of goods should be paramount for industries like medicine, luxury fashion, trade and manufacturing. The problem is that industries have tried before to create checks and balances for goods and ensure end-to-end legitimacy — only to find that those certifications can be faked and systems infiltrated. Blockchain, on the other hand, makes this much more difficult. The ledger can be created through serialization, smart contracts and even smart dust — which consists of wireless devices, as small as a grain of salt, with sensors, cameras and communication mechanisms to transmit data. These elements are much harder to remove or fake and correspond back to an immutable blockchain record.
Fixing the fraud Blockchain applications like these should be very worrying for the fraudsters of the world. For the first time, technology is ensuring the end-to-end security of supply chains for any industry, including medicine manufacturers. In November, The Drug Supply Chain Security Act mandate became law to make every drug package uniquely serialized or barcoded. This provides a unique product identifier and allows the verification of every product sold. Every transaction is recorded as the drug changes hands over time and thereby provides a distributed provenance ledger, allowing all parties to track drugs through the entire supply chain life-cycle.
The world of aerospace is also embracing blockchain to ensure supply chain infallibility. Startup 3IPK is using the technology to trace parts from aerospace manufacturers and suppliers. Every part of an aircraft is critical to its functionality but there remains no reliable, immutable and secure certification data across the global supply chain in aerospace. It is therefore not possible to guarantee originality of parts and equipment throughout the product lifecycle to make the process transparent. Tracking via blockchain again offers peace of mind through certification and legitimacy control.
And what about precious stones? At the beginning of 2018, as reported by Forbes, famed diamond company, De Beers, announced that it would create the first blockchain ledger for tracing stones from the point they are mined right up to when they are sold to consumers. This is a big move forward for the industry as De Beers mines, trades and markets more than 30 percent of the world’s supply of diamonds.
These examples only scratch the surface. Supply chains for food, agriculture, fashion, technology and more could utilize blockchain to prove the legitimacy of goods. This offers every stakeholder an overview of their product — in real-time — as it moves around the world. In this way, blockchain is helping to create a defense against fraud and fakes for the benefit of consumers and companies. This ensures parts are right and real, medicine is legitimate, fashion garments are quality and goods are produced ethically. Even better — more blockchain advantages will become apparent as further industries adopt it to secure their supply chain.