By Mohit Chug, Lex Maven

BLOCKCHAIN AGAINST COUNTERFEITING

INTRODUCTION

The counterfeiting business is ever-growing, and in today’s times, it is wildly blooming. Accelerating business in the counterfeiting industry risks the safety of customers and companies’ sustainability. Undercut prices steal sales of originals. Originals are left to deal with counterfeit fallout products. Sources have to spend time and money battling counterfeits, and their reputation, trust, and goodwill are endangered in the market and the customers. The disruption caused by counterfeiting goes beyond businesses. It drains the economy and denies the government of tax revenues. Counterfeits are not limited to but also include apparels, airbags, batteries, pharmaceuticals, baby products, etc., which also threaten the customer’s safety. Blockchain technology has recently begun to emerge as a disruptive tool against the infiltration of counterfeits into the market. This also highlights the use of blockchain that goes beyond cryptocurrency. Companies imbibe blockchain identification technology through intelligent tags.

The invasion of counterfeits in the market is becoming the nightmare of businesses, the government, and in some cases, customers. Blockchain technology now identifies provenance or proof of origin by providing a secured tracking system from the first to the last stages of the supply chain. Because of the nature of blockchain, where it can identify proof of origin, it has become easier to identify counterfeits. The use of intelligent tags herein is prominent. When attached to a commodity, they will record everything, from its location to its place of manufacturing, and relevant information of each stage during the supply chain.

Commonly used smart tags are[1]–

1. QR (Quick Response) codes- They are barcodes made to be easily scanned and read by smartphones or scanners in other devices to encode information.

2. RFID (Radio Frequency Identification) tags- Use radio waves. Readers emit radio waves for the RFID tags to communicate information.

3. Signatures- These are engraved on metallic or ceramic surfaces. These are nothing but barcodes imprinted on ceramic or metallic surfaces with the help of a laser. When a user attaches an intelligent tag to a product, the smart tag uploads data for every new transaction in the blockchain, along with immutable time stamps.

As a result, a supply chain partner can trace a product back through the supply chain to know where and when such a product was created. Scammers may attempt to copy an intelligent tag, but it would be highly tricky and even complicated practically. Scanning that counterfeit identification, however, would provide the history of the actual item, allowing a client to determine whether or not the scanned tag is a fake.

Use of Blockchain in various Industries

• Fashion[2]

High-value products that can be quickly replicated and sold at a premium are prone to counterfeiting. To protect themselves from counterfeiting, LVMH Group, house to Louis Vuitton and Bulgari, partnered up with other brands, and Prada and Cartier developed the Aura Blockchain Consortium. The blockchain is touted to be the first of its kind in the world, a private blockchain engineered by Consensys. The blockchain aims to give customers the ability to trace a product through any stage of its life cycle. Because customers can check product authenticity without needing expert assistance, blockchains can help sustain or increase product value over time. Luxury brand companies can create products that consumers can validate without relying on the luxury company’s internal resources if they employ an appropriate blockchain construct. Smart contracts included in the blockchain can also conduct downstream transactions and compensate producers and previous owners for reselling the product.

• Pharmaceuticals[3]

Counterfeiting drugs to look like originals might be easy as it is dangerous. Companies such as Pfizer and two dozen others, including drug makers, retailers, distributors, etc., have come together to develop MediLedger Network. Now what this blockchain does is that it traces prescription drugs around the whole world in an attempt to combat counterfeits.

• Electronic[4]

Because counterfeiters package fakes to appear natural and counterfeit products often function effectively for some time at least, identifying counterfeit products in a supply chain can be difficult, also identifying fakes from the internal parts becomes difficult for a customer. If left undetected, counterfeit products might cause malfunctions, injuries, or even death in some more severe cases. Honeywell, iTrace, and Secure Marketing partnered to use blockchain to protect the e-commerce market from counterfeiting. Honeywell’s new process involves laser-etching a data matrix on the identification plate for a part and then adding a high-security invisible ink on top of the container. Honeywell’s digital blockchain ledger records the digital authenticity record for the role, allowing Honeywell to secure, track, trace, and authenticate any part submitted to Honeywell’s blockchain process anywhere in the world.

Thus, by employing blockchain technology, businesses could gain benefits. Fraud products would not be sold. However, blockchain might not be the ideal solution for counterfeiting in every industry. The value of the target product, the size and complexity of the supply base and the extent of counterfeiting occurring concerning the product at issue are all factors to consider before deploying a blockchain solution. Companies considering launching a blockchain system to combat counterfeiting should conduct a thorough study to see if the financial benefits of monitoring using blockchain outweigh the expenses and problems of putting the technology in place.

• Food Safety[5]

The food industry uses blockchain to avoid issues such as infections and poisoning that can be caused because of spoiled food and beverages. Walmart and IBM partnered in 2018 with other food organizations to develop a blockchain-driven food traceability network that used open-source technology. The idea was to enable the retailers to track a product right from the starting point to the last step within just 2.2 seconds, a task that would otherwise take up to seven days.

There are also various Comments by the Experts supporting the same: –

• Blockchain is the biggest opportunity set we can think of over the next decade or so.”[6]
• Anything that can be conceived of as a supply chain, blockchain can vastly improve its efficiency- it doesn’t matter if its people, numbers, data, money.”[7]

[1] www.metalmarkermfg.com

[2] Banking is only the beginning: 65 big industries blockchain could transform https://www.cbinsights.com/research/industries-disrupted-blockchain, Last accessed 29/06/2022.

[3] Id.

[4] Id.

[5] https://talentsprint.com/blog/xp/top-5-most-practical-blockchain-use-cases-for-2021/

[6] Bob Greifeld, CEO, Nasdaq

[7] Ginni Rometty, CEO IBM