The real deal: Blockchain as anti-knockoff tool
By Edward W. Mandel
IOU.io is predicated on trust. Most obviously, I’m referring to the trust the seller has for the buyer, or else the whole structure breaks down. If you really need a card issuer, a gateway, an acquirer and a credit rating agency to tell you whether or not someone’s promise to pay is any good, then this isn’t the space you should be playing in.
But trust runs both ways. Consumers need to know that the goods they’re buying are the goods that’ll be delivered — not knockoffs, not fakes, not “just as good as”. The size, shape, color, pattern and perhaps most importantly brand are exactly what they paid for.
Fortunately, IOU is coming along at a time when the same underlying technology being used to determine creditworthiness is also being used to guard against counterfeit merchandise.
A huge problem
If you live in a big city, you know what you’re getting if you’re buying something from a street-corner vendor. Sorry, Michael Kors doesn’t sell handbags for $50. The shoulder strap alone is $100. What you’re buying from the shady operator is a knockoff. I’m not much for brand merchandise myself, but I understand the appeal: Aside from being a status symbol, it’s a promise of tasteful style and lasting quality. That assurance doesn’t come cheap.
Unless it’s stolen. Maybe you really are buying a Michael Kors product for $50, but exactly $0 is going to the designer because it “fell off a truck” or “got lost at sea”.
And there have been street-corner vendors since streets had corners. What’s different now is that, when these guys go home, they start checking for orders on their websites.
Not that you ever needed to go to New York’s Times Square to get ripped off (although there’s no better place for it). According to the Organization for Economic Cooperation and Development, “trade in counterfeit and pirated goods amounted to 2.5% of world trade in 2013.” Put another way, that’s almost half a trillion dollars. Ledger Insightscites a more recent IBM studythat puts the figure even higher: $600 billion. One reportgoes as far as to say that the world’s formal economy loses $1.2 trillion per year . But just going with the more conservative figure, that’s the combined economies of Ireland and the Czech Republic.
The OECD further noted that, in the European Union, roughly 5% of all imports are fakes. This means that people who worked to design and manufacture the goods didn’t get paid. The governments that had the right to levy duties on these imports and collect an income tax on the vendors probably weren’t able to get their taste of it either.
Digesting new tools
Distributed ledger technology might represent a true paradigm shift in how data is organized and how value is transferred, but it can’t solve dishonesty. Still, it is a powerful enabler of technologies designed to prevent fakes. (Hairsplitting note: I prefer the straightforward term “fakes” to refer to knockoffs and pirated goods. Many writers on this topic use “counterfeits” which, although perfectly correct, invites misinterpretation because, to most people, “counterfeits” refer to money that isn’t real. Working this closely to cryptocurrency markets, it’s a word the folks in Marketing would have us avoid.)
The Ledger Insightsarticle references two very different ways that blockchain is being weaponized against fakes. The first is by America’s biggest patent whore, IBM. Let’s be clear, IBM has a way of failing to commercialize its own developments, but it does develop a heck of a lot of gee-whiz technology.
Anyway, Big Blue is working on a nano-computer so small it can be embedded in magnetic ink. It is also so powerful that it deploys hundreds of thousands of transistors toward monitoring, communicating and acting on data, functioning as a crypto-anchor to ensure the legitimacy of products that are manufactured by the millions every day. And it is so inexpensive that each nano-computer costs less than 10 cents to make. It’s also edible. That last part is perhaps the most important.
The aforementioned magnetic ink “could be used to dye a malaria pill,” according to the unsigned article. “The code could become active and visible from a drop of water letting a consumer know it is authentic and safe to swallow.”
The article reports that IBM “plans to start testing them with clients in 18 months”. That was a year ago, and I haven’t heard anything about it since. So maybe this will end up in IBM’s overstuffed bin of failed rollouts. But that just means that someone else can come in and eat its lunch. Like Amazon did with cloud. Or Microsoft did with operating systems. Or …
Of course, not all innovation comes out of companies like IBM that are Too Big To Fail No Matter How Hard They Try.
Across the technological aisle
I was found myself in a conversation cluster at an industry meetup in which we acknowledged, with regret, that there’s a huge split in the tech world. Although there are plenty of blockchain projects out there and plenty of artificial intelligence projects as well, there are few that combine both. But why not? It’s a natural fit. There isn’t a single problem on earth that couldn’t be ameliorated by a tool that requires both machine learning and distributed ledgers? I’m not suggesting that we produce such a tool and then find a use for it, but maybe we could all sit down together, pour some beer and think of something that would help make the real world a better place in a very specific way.
I’m likely to find myself shedding the same tears at the next meetup, but I did stumble across this one ray of hope. It’s called UCOT, an Australian startup that connects blockchain with two other promising technologies: IoT and 5G.
Of course, this is an easier lift. The Internet of Things and the Internet of Value are a natural fit and, if your data is going to be disseminated on a distributed ledger, you’ll want the speed and reliability of the latest networking technology.
UCOT’s play, again according toLedger Insights, is to combat fake merchandise “by embedding a unique digital identification microchip and sensor into product packaging. The next generation IoT device will communicate with a blockchain using 5G communication.” Just like the IBM initiative, UCOT’s project is still several months if not years from fruition according to its own developers. Also just like IBM, UCOT has no shortage of money being thrown at it, having completed a $4 million token sale. And it’s just as likely to come to nothing in and of itself, but someone is bound to commercialize this before long.
Real IOU
There’s plenty else happening in blockchain’s anti-fake space. Transactions that occur via blockchain accessible only by private keys are eminently more traceable and easier to verify. This technology could be integrated further into brands’ supply chains so that only those goods for which someone is prepared to pay the retail price are actually manufactured.
And very recently, no less an august personage than Cardano founder Charles Hoskinson released the Atala private blockchain. While Atala’s initial use case is to facilitate payment of electricity bills in Ethiopia, parent company IOHK intends to expand the platform in both geographic and functional terms. Not only is it expected to spread throughout Africa, it’s also, according to Unhashed, going to “work with private enterprises [and] that Atala has partnered with a major shoemaker in order to produce anti-counterfeiting solutions.”
At IOU.io, we will continue to work on ensuring that those who buy goods on our platform get what they pay for, and we urge our merchants to work with us. We’ll never solve this possibly trillion-dollar problem ourselves, but we can carve out a space where this kind of fraud just doesn’t happen. As we determine what kind of safeguards our available to us — and what we might be able to cook up in our own labs — we’ll let you know what we’re doing to ensure that what you get on your doorstep is exactly what you clicked into your cart.
Edward W. Mandel is a strategic advisor for IOU.io , he is an Ernst and Young Entrepreneur of the Year Finalist, Blockchain Enthusiast and visionary behind many successful organizations. An avid entrepreneur, Edward has a knack for designing distinctive business models complemented with superior technology to deliver unparalleled service and profitability. Edward also has been advising and consulting for various successful Blockchain technology and ICO projects and recently launched his own BQT.io P2P Hedge Exchange helping traders connect with each other to leverage their crypto assets.
IOU is a blockchain-based peer-to-peer platform designed to unify ecommerce transaction and customer retention processes, incorporating trade-able IOUs. It is currently raising capital through ICO. The platform can be found online at IOU.io and its community on Telegram at https://t.me/IOUCommunity.
