How Blockchain Helps the Fight Against Counterfeit Goods

CoreLedger
Dec 9, 2019 · 5 min read

The easy availability of counterfeit goods is a worldwide problem, estimated to cost the global economy a staggering $300 billion each year. A report issued by the EU Commission showed that in 2018 alone, more than 27 million articles were suspected of breaching intellectual property rights, and there were 70,000 cases of detention at customs.

Cigarettes were the most common item, with toys running a close second. However, the list runs the gamut of clothing, cosmetics, electrical goods, household goods, and jewelry.

Often, there’s a perception that counterfeiting is a “victimless” crime, one where nobody gets hurt. However, aside from the economic impact, there are serious implications resulting from black market trades. Counterfeited goods are often poorly made, failing to comply with even the most basic safety standards. Merchants selling illegally copied goods are a high risk for credit card fraud. Often, the same groups involved in illegal goods trading are involved in other criminal activities such as human or drug trafficking.

However, the highest human costs can be felt in the pharmaceutical sector. In 2017, the World Health Organization released the results of a meta-analysis that estimated tens of thousands of people each year are dying as a result of taking fake medication.

It’s challenging to quantify the issue with any precision because counterfeit drugs could contain diluted active ingredients or no active ingredients. However, the analysis indicated that up to 169,000 childhood deaths could be attributable to the use of fake pneumonia antibiotics alone. Antimalarials are another common target for counterfeiters, causing a further 72,000 fatalities.

The Fight Against Counterfeiting

Manufacturers and brands employ various methods to help the fight against counterfeit goods. Some include holographic stickers, chemical tracing agents, or barcodes. However, these solutions aren’t foolproof, and many of them are easily counterfeited themselves. Online marketplace Alibaba offers over 14,000 holographic stickers for sale, so it’s hard to believe these items are impervious to being copied.

Furthermore, it’s impossible for an end consumer to know if a holographic sticker was applied by a manufacturer or by a counterfeiter along the supply chain route.

However, blockchain technology offers new avenues of protection for brands and manufacturers against their goods being duplicated by counterfeiters. Combining a physical tag such as an RFID chip with blockchain-based proofs creates an unalterable record of the object since the chip was applied. If there’s an app or other interface made available, consumers have the opportunity to check for themselves whether or not the item is genuine.

Industry Implications

Many companies and industry sectors are already exploring blockchain as an anti-counterfeiting tool. For instance, The Guardian news outlet reported earlier this year how blockchain and artificial intelligence solutions are helping to identify counterfeit drugs in Africa.

US-based Mediledger is another example, teaming up with US pharmaceutical companies to help them implement blockchain-based track-and-trace technologies into their supply chains.

In the luxury goods sector, Louis Vuitton has previously teamed up with ConsenSys to implement a track-and-trace solution for its high-end clothing and accessories. Louis Vuitton is part of a group that also includes Christian Dior and Dom Pérignon. The system is called Aura, and it enables customers to check the authenticity of their product, but also to gain information about the origin and components of the product.

Of course, blockchain works best in a multi-party environment. Therefore, it’s also interesting to note that there are some players in the space offering an open-source solution for fighting counterfeiting. Riktig is one such example. It provides brands and manufacturers with RFID tags and comes with a smartphone app that customers can use to authenticate their purchases.

The RFID tags use a secure private memory that cannot be extracted, meaning that counterfeiters cannot clone or manipulate them. Authenticity proofs are stored on publicly accessible blockchains, like Bitcoin, making them globally available forever. Because all of the verification procedures are open source, there is no third party risk in the ability to read the proofs in the future.

A Global Solution?

A global solution may be more desirable for manufacturers and customers alike. For manufacturers, it means that they don’t have to worry about building a custom solution that could end up being costly and take time to set up. For a customer, the opportunity to authenticate many different types of purchases using only a single point of reference is sure to be more practical than having many different apps for a single item. The point of reference can also be audited or verified by authorities to make sure that it is a trusty source or method.

Furthermore, manufacturers operating their own blockchain track-and-trace solutions don’t offer much scope for global adoption. Using globally available and reliable platforms could also be more easily integrated into border checkpoints for use by customs officials. This would go a lot further to help tackle the problem of counterfeiting, as it could help officials seize more goods before they even enter a country for sale to end consumers.

Blockchain won’t necessarily make the problem of counterfeiting disappear — at least not in the short term. However, it offers the intriguing potential to help clean up the world’s black markets over the coming years. Such an effort could ultimately help to save lives while putting billions of dollars back into the global economy.

This article is brought to you by CoreLedger.

As a prominent blockchain infrastructure provider, CoreLedger is making blockchain technology simple for businesses to use. With CoreLedger’s offerings, clients can readily tokenize their offerings with fast-to-implement resources that will allow them to modernize their services. Thanks to our in-house developed software solutions and experienced blockchain specialists, CoreLedger is ready to help you make your next move with blockchain technology.

Industry insights are provided by Riktig.

Riktig tackles the issue of counterfeited products and have developed an open source solution that lets anyone issue or verify products by linking RFID tags to manufacturers on various blockchains.

CoreLedger

CoreLedger is a tokenization and P2P infrastructure provider

CoreLedger

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Asset tokenization | Blockchain documentation | Token transaction

CoreLedger

CoreLedger is a tokenization and P2P infrastructure provider

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