Comparison of different anti-counterfeit measures: the advantages of Digmus.

Whose interests were previously taken into account by the developers of most anti-counterfeit measures? Those of all market participants except for consumers. However, consumers are mostly interested in the purchase of an original item of a well-known brand. Digmus team offers its own solution to fight the forgery industry that is based on direct communication of producers and consumers.

Traditional anti-counterfeit methods

Product counterfeiting is not a novel problem and certain solutions were implemented both on the governmental level and on the level of suppliers and producers.

In France in the XVI century plagiarism was equaled to robbery, a person’s hand was cut off for it and now civilized countries use economic measures to fight counterfeits. Notably, they concern both producers and consumers of counterfeit goods. In France and Italy, legal enforcement agencies and revenue services consider even the ownership of counterfeit luxury brand items a crime and those buying replicas have to pay fines. In the majority of countries, forgery of medication results in criminal liability.

However, in certain countries the law is not so tough in terms of forgeries. For example, in Russia you can just replace one letter in the name… and here you have a new brand — Abibas — that can be registered in order to legally sell clothes in the country.

Another method that is implemented on the governmental level is the control of suppliers by producers themselves (sometimes on the governmental level). For instance, in 2007 the Russian AvtoVAZ announced the program aimed at fighting illegal suppliers of spare parts for cars of their brand. The company created its own service- distribution network of produced spare parts for stores and dealership chains and they also amended contracts with supplier plants.

Consumers have to find a unique product code that needs to be entered on the producer’s official website, holograms, descriptions of differences between original and counterfeit goods on the website — all these actions are undertaken by the brand’s owner in order to generate maximum revenue and to protect customers. However, counterfeit items are still being bought as a huge range of goods on the shelves confuse customers. They don’t remember on which website they need to enter the code, whether the package should feature a hologram, they don’t know what to do with a chip on a wine bottle.

Traditional anti-counterfeit measures may reduce the number of fake goods a little bit but they can’t fully protect the consumer. While analyzing all traditional anti-counterfeit measures, one can make a conclusion that the consumer can only protect himself with his own efforts just by being vigilant. At the same time, the system of forgery detection shouldn’t demand too much from the customer — no more than just to scan the code and to study the information on the smartphone screen.

Methods based on product unique codes: historical background

Digmus team has developed a solution for producers who are concerned with their reputation and for vigilant consumers that will help them avoid counterfeits with the aid of a unique code attributed to each product.

The idea of assigning a product code to protect its authenticity is not new and in the beginning of the 21st century different countries made attempts of introducing a method of detecting forgeries. RFID tags that allow tracking the “plant — warehouse — store” supply chain was seen as most promising.

The USA is one of the innovators in anti-counterfeit technology based on unique codes. Back in 2007, the Food and Drug Administration recommended drug producers to chip medication. Different states in the US, starting from Florida, introduced laws obliging producers to put RFID tags on drugs, however, 10 years later it still didn’t result in overall production of chipped drugs. Over the last years, the idea of putting RFID tags in the USA was put off due to complicated implementation and high cost. However, producers are obliged to place the information on the planned supply chain on each drug. The law on serialization of medication was enacted on January 1, 2015.

European countries refused overall chipization of drugs immediately and started using DataMatrix two-dimensional barcodes instead. Only a number of pharmaceutical companies that produce expensive medication use RFID tags to track their products themselves. The consumer usually doesn’t realize that this chip can be scanned.

In Russia, the technology of unique product codes is strongly associated with the Unified State Automated Information System aimed at monitoring the turnover of alcohol-containing products. It was launched in 2005 and in 2015 it started to be implemented in retail stores. The cost of equipment for participation in the Unified State Automated Information System turned out to be too high for small businesses. It resulted in a shutdown of small stores and also some stores went underground. A more successful case of chips’ implementation is the Russian fur industry — starting from 2016, each fur coat has been marked with a RFID tag. According to different estimates, it allowed reducing the gray market by 30–40%. The cost of a fur coat increased by 10–20% but analytics say that the implementation of chips was successful for all participants of the natural fur market. Generally, Russian authorities enjoy controlling things and impose fines, that is why continuing talks on chipization of all drugs to track supply chain are not surprising. Judging by reaction to the propositions, representatives of pharmaceutical companies and distributors will continue refusing RFID tags. For now, Russian producers are advised to use DataMatrix barcodes like in Europe.

In Russia, the problem of counterfeit drugs is not as acute as in African countries. In 2010, the Nigerian government, after the death of 84 children who had been intoxicated by counterfeit medication, concluded a contract with Sproxil, an American company that verifies product authenticity via mobile technology. The verification mechanism is as follows: the customer buying a drug removes the protective liner on the package, enters the code via an SMS or a mobile app. Then he receives information on the product — confirmation of its authenticity or an indication of suspicious origin. This simple technology allowed Sproxil winning the favor of consumers as well as entering the market of Burkina Faso, Gabon, Ghana, Zambia, Kenya, the Democratic Republic of the Congo, the Republic of the Congo, Madagascar, Malawi, the Niger, Rwanda, Seychelles, Sierra Leone, Tanzania, Uganda and Chad, receiving funds from charity organization and starting operations in India. A similar project, called mPedigree, was launched and gained traction in the following years.

2015–2017 saw an increase in offers of monitoring product supply chain with the help of a blockchain. In 2015, Provenance, a British startup, announced themselves, in 2016 it was followed by a Russian company, Buydentity, in 2017 — by EMC Antifake. Now Provenance specializes in tagging organic eco-food while collaborating with European and Asian farmers. EMC Antifake has been only implemented by Raketa Petrodvorets Watch Factory. Buydentity hasn’t managed to enter the market yet, the latest news on the company date back to May, 2017. Supposedly, similar companies will appear worldwide in the future as well, for example, a team from Slovenia has recently announced a similar technology under Valus brand. Distribution experts think that such systems won’t be able to conquer the market — it’s not profitable for distributors to scan all products in each warehouse, employees waste a lot of time and there are no benefits for them.

Modum and Ambrosus startups both supported in Switzerland were created for unique goods that are sensitive to storage conditions. Their aim is to install sensitive and Internet connected environmental sensors into drugs (Modum) and food (Ambrosus). They monitor storage conditions on all the supply stages. All the data is stored in a blockchain so that records cannot be forged. It is considered that the producer, controlling authorities and sometimes consumers will use this information on goods storage.

Digmus solution

The development of product protection measures demonstrates that one needs to take into account business and consumers’ interests and not be guided by just a desire to control everything and everyone. Different industries and vendors need solutions with different structures. They needn’t all be placed in one Procrustean bed especially when pressure has to be applied to all process participants.

Digmus seeks to provide businesses with a necessary minimum: direct, independent, reliable channel of communication with consumers.

1. Producers can provide customers with the information on the product that they consider necessary. They can tell an individual story on each product to prove its authenticity which is, however, not obligatory. Customers buying not expensive products most often just need to verify the product code via the mobile application, sometimes they need to see the picture of the original package and sometimes they look for information on the package hologram.
2. The Digmus system will be used by different producers while customers need to install just one mobile application
3. Authenticity of vendors’ information is confirmed via a blockchain that contains data on the product producer. The blockchain will guarantee the trust of producers and customers in Digmus.

The history demonstrates that it’s impossible to implement complicated methods to control suppliers in a big market without the pressure by the regulator and very often even exercing this pressure. It is for this reason that Provenance is growing slowly. Buydentity and Valus, if they even go beyond the pitch stage, won’t be able to implement their technology on a large-scale basis. The problem is both the technology of monitoring the supply chain and insufficiently developed software architecture.

Complicated solutions like those proposed by Modum and Ambrosius — and these are excellent projects — will also stay within their niche for a long time. Their technology is priceless in terms of special cargo transportation with high level of responsibility but their implementation is too expensive which prevents them from going beyond this certainly important niche.

Sproxil which is a business that actually operates in this sphere doesn’t try using 100% of opportunities presented by the product unique code, however, it may still surprise us all. Apparently, Sproxil hasn’t paid much attention to the development of technological solutions over the last years but we won’t be shocked if they borrow our vision to become our main competitor.

For those interested, we have drafted several tables that feature detailed differences between Digmus and its competitors using blockchain and based on similar ideas.

Digmus vs EMC Antifake

EMC Antifake is a system for checking goods based on EmerCoin blockchain.

*technology allows implementation but for some reasons it doesn’t happen

**a separate chain can be developed without this problem

EMC Antifake is not sufficiently protected from swindlers who can register a well-known brand without verification as well as print out the product code right from the blockchain that is stored there in an open access.

Compared to our solution, EMC Antifake doesn’t allow a producer to indicate the region or store that will sell the product, it doesn’t demand the installation of a mobile app but plans to continue working in the secondary market.

Digmus vs Buydentity

Buydentity is a Russian startup that hasn’t entered the market yet.

In Buydentity the supplier and the customer need to control the whole chain of suppliers and also it’s hard to implement the system without the participation of the regulator.

Digmus vs Provenance

Provenance is a British startup that started operating in 2015.

Conclusion: in Provenance the producer needs to control the whole chain of suppliers and the system features weak protection from code falsification.

Digmus vs Modum / Ambrosius

We have combined the comparison of these startups on purpose as they share a similar principle. Modum features technology that controls drugs while Ambrosius controls food, nevertheless, they both aim at monitoring goods storage conditions. It will be hard for an ordinary consumer to gain insight into the technology and understand how the drug was stored. Developers haven’t announced their intention to make a mobile app.

Digmus vs Sproxil/mPedigree

Sproxil is a private American company specializing in mobile verification of medication authenticity in Africa and Asia.

Sproxil offers a competitive product, however, they don’t use 100% of opportunities presented by unique codes and they also don’t put sufficient efforts into market expansion. Digmus are able to become equal competitors to Sproxil.

Conclusion

The system proposed by Digmus may be applied in any industry and in any country around the globe. Its implementation doesn’t require interaction with national regulators apart from over-regulated markets like that in North Korea. It needs to be implemented only by the interested producer and requires minimum activity on the part of the consumer. Starting from a certain share of the market, the use of our system or a similar one will become utterly desirable — goods that are more expensive than a pack of toothpicks will arouse reasonable suspicions without an authenticity checkup.

We outperform our competitors either by the clarity of vision, the elaborated technical aspect of the system and understanding of the market (EMC Antifake, Valus, Buydentity) or by wide projected coverage (Provenance, Modum, Ambrosus) or by production effectiveness and readiness to work in any industry (Sproxil).

In the coming days Digmus will start our Pre-ICO. Learn more at: digmus.io.

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