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Stamping out counterfeiting with the blockchain

Counterfeit goods are big business. The value of international trade in counterfeit and pirated goods, estimated at $461 billion in 2013, is forecast to rise to $999 billion by 2022, according to a report from the International Chamber of Commerce’s Business Action to Stop Counterfeiting and Piracy and the International Trademark Association. This means that counterfeiting is also a big business risk for manufacturers and retailers who deal in authentic goods.

The issue is not limited to economic loss alone. Counterfeit products can actually pose safety and health risks to consumers — for example, through the presence of toxins in goods such as children’s toys or cosmetics, or substandard appliance or automotive components.

Adrian Clarke
Adrian Clarke

It is becoming increasingly important for anyone dealing with authentic goods, from the manufacturer to the consumer, to have a way to be certain that they are dealing with authentic goods. This is easier said than done, and current solutions leave something to be desired.

Questionable proof

Traditionally, manufacturers have stored data about their supply chain and the provenance of their goods on their own individual databases. This is far from a secure way to store proof of provenance.

Nearly half of UK manufacturers report that they have experienced cybercrime, and a quarter have had some financial loss or disruption to business as a result, according to a recent report published by AIG and EEF, the manufacturers’ organisation. Manufacturing was identified as the third-most attacked sector after government and finance in IBM’s 2017 Threat Intelligence Index. Many businesses never report cybercrime, so the actual incidence of cyber attacks on manufacturers is probably higher than the official figures would suggest.

When manufacturers’ data is so vulnerable to attack and manipulation, its ability to prove provenance can come into question.

The potential of the blockchain

The blockchain has great potential to help solve counterfeiting issues because it offers a better way to store and prove data. For one thing, a blockchain is an immutable record. This means that any data added to it becomes a permanent part of the record that cannot be altered.

Unlike traditional databases that record data on a central server, a blockchain stores data across a huge network of computers that constantly verify information with each other. Each computer on the blockchain network has a copy of the exact same data, so it cannot be altered after the fact.

This offers far more security than traditional databases.  A hacker would need to breach a majority of the computers in the network at the same time in order to falsify information or otherwise compromise data — which is practically impossible to do.

A weapon against counterfeiting

Due to its immutability and security, blockchain technology can offer a way to produce a verified record so that the provenance of a product can be definitively proven.

For example, a manufacturer could use a blockchain to record all the various points along the way of a particular product’s journey through the supply chain, creating a permanent record of each product’s provenance. Using this type of record, a company could prove that it did not make a counterfeit item. If a serial number were copied, for instance, the company could show a product’s past and current status and prove that the counterfeit product is, indeed, a fake.

In addition to fighting counterfeiting, blockchain technology can also help manufacturers with other provenance issues — basically, anytime an interested party wants to know the history of a product’s manufacture. This can range from consumers with questions on the national origin of goods or components or a product’s environmental footprint, to government agencies enforcing standards.

A better solution

The financial and healthcare industries are already exploring the capability of blockchain technology to provide solutions in situations where inherent trust is needed — meaning that data can be verified independently without relying on any one party. Industry players affected by counterfeiting can also benefit from the solutions that blockchain technology can offer.

About the Author

Adrian Clarke, Founder of tech startup Evident Proof and CEO of Berkshire Cloud & former Microsoft CTO and Innovation director. Adrian has more than 20 years’ experience in enterprise cloud computing and app development, most recently as co-founder and CEO of Berkshire Cloud. Evident Proof uses blockchain technology to bring ‘trusted, distributed consensus’ to supply chain management.