Anti-counterfeit blockchain with IoT can stop fake products

12 Oct, 2021

Counterfeited goods are a serious concern in the global supply chain. Not only do they dilute brand value and divert revenue from legitimate brands and manufacturers, but they also put customers at risk. Many counterfeit goods are of inferior quality with some being downright dangerous. This problem is particularly severe in the food and wine industry. In 2020, a story emerged in which police arrested fraudsters for allegedly counterfeiting more than one million liters of Italian wine. Now, though, a solution is on the horizon. The combination of anti-counterfeit blockchain with IoT may be able to stamp out fake products once and for all.

What is anti-counterfeit?

wine counterfeiting and anti-counterfeiting technologyAnti-counterfeiting solutions are any technology designed to minimize counterfeiting or brand infringement. In many cases, firms apply anti-counterfeiting technology to exterior packaging designed to make it harder for fraudsters to replace legitimate boxed goods with inferior products. 

The International Chamber of Commerce estimates that the total cost of piracy and counterfeiting to the global economy will hit $2.3 trillion in 2022. Because of this, the popularity of anti-counterfeiting solutions is rising. Firms are looking for powerful platforms that can protect their products, brand and customers from harm.

How can Blockchain prevent counterfeit goods from entering the market?

Blockchain is a powerful network technology that allows food and wine companies (or anyone else for that matter) to create immutable digital records. Experts often describe it as a “permanent ledger,” meaning that any data you store in the network stays there for all time. Blockchain prevents counterfeit products from entering the market by increasing firms’ monitoring abilities.

The difference between the blockchain and prior technologies is stark. Historically, food and wine companies would try to monitor and audit their suppliers and put quality control procedures in place throughout the supply chain. However, despite these efforts, it was still hard to protect against criminal activity. Fake food and wine are still a real issue. Estimates suggest that illegal alcohol may comprise more than 20 percent of the market in some jurisdictions. 

Blockchain technology has the potential to correct this. Whenever anyone in the supply chain uploads data about a product, it gets stored in the blockchain network permanently. Critically, unlike traditional software-based tracking systems, nobody controls the blockchain network. Instead, information sits in a decentralized database shared by hundreds or thousands of nodes. Each piece of information is encrypted individually. So, if anyone wants to make a change, they have to convince the rest of the nodes in the network to agree – something that fraudsters will find impossible to do. 

On a practical level, blockchain technology makes it easier for firms to detect instances of fraud. Once they have a permanent record of food and wine products as they move through the supply chain, they can compare real-world goods to their digital twins. Any discrepancies immediately alert companies to issues. 

Does Blockchain prove authenticity?

The application of the blockchain makes it possible for firms and end-users to verify the authenticity of foods and wines in their possession. By scanning the product label or QR code, they could gain access to the entire product journey, from raw materials to the retail shelf.

However, blockchain isn’t sufficient to prove authenticity. Easily-compromised product identification methods such as QR codes, remain a weak link. (Fraudsters could simply replace the contents of a QR-coded package with false products and pass them off as real). But when combined with tamper-proof near-field communication (NFC) tags on the ground, it might. The blockchain would provide a permanent data repository while NFC tags prevent tampering with the physical products themselves. 

A label on the product allowing verification and identification

How do you handle counterfeit goods?

Throughout history, firms have tried many methods to handle and prevent counterfeit products from diluting their brands. The first step is usually legal. Companies apply to various governments for intellectual protection to prevent other brands from copying their processes and selling imitation products. 

Next, companies invest heavily in tools that allow them to monitor the market. These software solutions crawl online dealers to detect any suspicious activities (such as impossibly low prices). They also verify that only authorized vendors are selling the firm’s goods. 

Brands can also launch programs that make it easy for their customers to report counterfeit products and cheap knock-offs. Many leading companies have special phone lines customers can call if they suspect fakes. These provide critical information on where the product was bought and how much it cost. 

Blockchain as an emerging tool to fight counterfeiting

blockchain to combat counterfeitingHowever, all these methods have been around for a long time, yet food and wine counterfeiting remains a billion-dollar problem. Fraudsters have found many ways to circumvent anti-counterfeiting practices. 

Blockchain is an emerging tool that promises to form part of the solution. Data on the blockchain is stored in blocks and time stamped before being sent to memory. When combined with IoT and NFC tags, it provides stakeholders with the ability to view a product’s entire history and prevents virtually all conventional fraudulent practices.

Brands are already making use of blockchain to prevent counterfeits. The idea is to give each product a unique identifier. As the product moves through the supply chain, operators read the identifier (an NFC tag in this case) and then upload information to the blockchain about its current status. All signatures are cryptographic, allowing the system to offer full security and transparency. However, for blockchain to work well, it requires every party in the supply chain to participate.

Startups provide their own solutions to the problem

Large distribution companies are not solving security issues in the supply chain, but startups, such as Authena, are. Authena has already developed a platform that allows brands to protect their products, reputation and customers. The platform combines blockchain and IoT to deliver an unprecedented level of security for food and wine distribution

The way the system works is actually quite intuitive. Companies worried about counterfeiting begin by applying NFC tags to products during manufacturing. As goods enter the supply chain, the NFC tags communicate information to operators who can read them and then store details immutably on the blockchain. 

Tags are tamper proof and will issue a warning if they detect any foul play. Operators further along in the supply chain can then check tag integrity to verify the condition of the product. If there is a problem, they can take action to prevent it from entering circulation. 

blockchain technology to protect products and consumers