New research by the Organisation for International Cooperation and Development and the Intellectual Property Office of the European Union showed that in 2016, imported counterfeit products accounted for in $509 billion, about 3.3% of all imports for that year. To fight back against the rising tide of knockoffs threatening brands and build consumer trust in a product, companies are turning to the blockchain with smart contract development to create more transparent supply chains and tools for product authentication.
In reality, however, this is impossible to do since all parties involved in the life cycle of the product, from production to final distribution to the end customer, have to provide a device of this kind.
Product Authentication without Blockchain
In addition to high-value luxury items such as designer clothes, boots, watches, and jewelry, traditional products being counterfeited include a wide variety of more generic products. Market electronics, other electrical components, meats, alcohol, tobacco, agricultural goods, toiletries, and pharmaceuticals can be added to the list.
In the case of prescription products, the effects are more serious than monetary: the best active ingredients might not be found in imitation products and thus may be useless or dangerous. People are dying after being treated with fake medication, especially in developed countries. Bogus pharmaceuticals is an alarming problem in developed countries, as more than 34 million counterfeit drugs were intercepted in two months in 2009, according to the World Health Organisation (WHO).
It is not shocking, given the potentially lethal and financial implications, that there are global attempts to eliminate counterfeiting. However, there is no evidence that the amount has been diminished in the last few years.
Blockchain systems are considered transparent, permanent, and deployed internationally. The concern emerges as to how this technology should be used to tackle piracy, what features are useful, and how to introduce a possible solution
Can Blockchain Help
A network of participants is established, all of whom preserve a version of a shared database comprising detailed data of all phases of the life cycle of a commodity. A few specified participants are assigned to report the details to the blockchain at each point. Once added to blockchain, records cannot be removed or falsified, since all adjustments can be noticed by other participants.
Using a web or smartphone app, consumers will be able to independently review all product details, including date and place of manufacture, expiry date, content, and compliance with standard certificates, and verify its validity, thanks to this approach. The customer will be able to notify the manufacturer and regulators promptly if a counterfeit product is found. Similarly, producers will be able to manage and track all phases of the life cycle of a commodity.
