A Global Problem: Counterfeiting
Counterfeit goods have become a trillion dollar market worldwide. Everything from luxury handbags to pharmaceuticals to even toys are being counterfeited and sold to consumers every day.
The most obvious impacts of global counterfeiting include the reduction in revenues and jobs for legitimate channels, along with the erosion of brand reputation when the bad quality of a fake is associated with a reputable brand.
But there are more insidious effects of the counterfeit industry.
Counterfeiters tend to use cheap materials and don’t have to comply with safety, labour, or environmental standards, posing a serious health hazard for consumers, heightening the risk of abusive working conditions, and further degrading depleting natural resources. Counterfeit profits can also be linked to funding of other illegal activities, such as terrorism.
Tackling counterfeiting is a huge challenge for brands and regulators alike. With counterfeiting operations becoming ever-more sophisticated, brands have developed and deployed various anti-counterfeiting measures, including tamper-evident packaging, holograms, imprinted logos on things like zippers, and wireless identification technologies such as RFID tags.
Despite these efforts, the counterfeit market continues to grow, which can be attributed to several factors. First, due to the sheer size of global supply chains, comprehensive tracking and reporting of goods at each point in the supply chain is extremely difficult. This opens the opportunity for bad actors to inject fake products into the supply chain undetected. Another huge issue is that customers and even unwitting retailers can’t readily verify the authenticity of a product.
Moving towards a different solution
If brands want to have a fighting chance at protecting their brands and customers from counterfeiting, they first need to be able to effectively manage, track, and record every action along the supply chain. An audit trail of these actions needs to be transparent and accessible, not only so that actors in supply chains can be held accountable, but also so that customers have the ability to check a product’s history.
This is where distributed ledger technology (DLT) can play a role
Tracking and tracing supply chains with blockchain and other DLTs enable brands to capture and immutably store information at every point in the chain, from sourcing to manufacturing to transport to distribution. This creates a permanent, immutable record of a product’s origin, movements, and, potentially, ownership.
But that’s only one part of the picture
After all, a brand may be able to track the journey of its top-selling shoe along a global supply chain, but when a customer finally opens the shoe box, how do they know that the pair is authentic? To truly address counterfeiting issues, brands need to implement a tagging solution that inextricably links an authentic, physical product to a unique, non-replicable and unbreakable unique digital identity that is stored in a distributed ledger. This link bridges the tangibility of an authentic product to the digital proof of its provenance.
As mentioned earlier, RFID tags have become a popular option for brands looking to connect the physical and digital aspects of their global supply chains. However, the improved security that RFID tags provide in comparison to, say, barcodes or holographic labels, is still not enough to slow the growth of counterfeits. Indeed, RFID tags have been found to be prone to basic cloning and counterfeiting security attacks.
A genuinely secure anti-counterfeiting tag that ties an authentic product to a blockchain-based supply chain would need to be completely unique and, more important, resistant to hacking, replication, and simulation. With such a tag fixed to a product during the manufacturing process, the proof of that product’s authenticity would be stored on the blockchain and verifiable by anybody with the appropriate tag reader.
Is such a solution possible?
Breakthroughs in quantum physics have enabled the development of “quantum secure” identification, a technology situated to become the premier standard in anti-counterfeiting solutions.
Although a technology that promises “quantum security” may sound a bit complicated, the basic concept is fairly simple. An identity that is secure at the quantum level has unique, distinguishable attributes at the atomic level. Attempting to replicate this identity would require so much effort on the part of the counterfeiter that it would no longer be economically worth it.
Quantum Base, a spin-off from Lancaster University’s Quantum Technology Center, has developed such a solution. Their quantum fingerprint technology makes use of atomic-level imperfections present in the quantum material Graphene. Because these imperfections alter how Graphene responds to light, any given section of graphene will elicit a completely unique light response. When the material is applied to the surface of a tag or even a product itself, a quantum fingerprint is created. Quantum Base has also managed to make their patented breakthrough in quantum security customer-friendly—each fingerprint can be read and verified with a standard smartphone.
Bridging the Physical and Digital worlds
Linking tamper-proof, non-replicable fingerprinting solutions to an immutable blockchain platform could solve a long-standing problem within the DLT space around connecting the physical and digital worlds. In doing so, the potential to secure supply chains and truly fight global counterfeiting would be unprecedented.
iov42 is the ideal blockchain solution for such an integrated anti-counterfeiting solution, not only because it is secure, scalable, interoperable, and regulatory-compliant, but also because the iov42 platform comes preloaded with identity, asset, and certification tools. With these out-of-the box tools, a company can get straight to work securing their supply chains against counterfeiting and enhancing their brand, instead of having to invest the time and resources to develop the appropriate, blockchain-based solution from scratch. Additionally, iov42’s decentralized infrastructure would make it easy to modularly expand the anti-counterfeiting tool to include other functionalities, such as complete supply chain management and tracking, which would create a clear production history and record of ownership.
What steps go into creating a quantum-secure, blockchain based proof of authenticity?
The future of anti-counterfeiting technology
Despite anti-counterfeiting measures continuously evolving to keep up with increasingly sophisticated and globalized counterfeit operations, counterfeiting has continued to thrive. To tackle a problem as seemingly insurmountable as global counterfeiting, a new, aptly robust approach is needed. This is where advances in emerging technologies, such as quantum security and blockchain, can play a role in developing tools that can finally deter counterfeits.
For the growing field of quantum security technologies, the use case of proving authenticity could serve as the first steps in a long journey of developing these technologies for other real world applications, such as tracking and tracing in healthcare, cybersecurity, and more.
Proving product authenticity can also set the stage for blockchain technology to finally demonstrate its widespread applicability for generating real-world value by introducing trust; in this case between brands and their consumers. Blockchains that have been designed for enterprises are particularly well-suited to take on this challenge, because they must take into account the needs of businesses, their supply chains, and governance needs.
The idea that one day there will not be a market for counterfeit goods is definitely motivating, but counterfeiting won’t go away overnight—time and resources will need to be invested to engage the numerous industries affected by counterfeiting, to modernize supply chains, to retrofit manufacturing processes, and to raise awareness about the the negative impacts of counterfeiting.