Bitcoin’s rapid expansion over the past decade has propelled blockchain technology to new heights. Today, the tech is still maturing, and companies continue to experiment with other use cases. So, does blockchain provide authenticity of physical products too?
The short answer is no. Blockchain software alone does not suffice as a holistic anti-counterfeit system. Cryptocurrency’s widespread adoption is certainly historical, yet this particular use case was never intended to secure physical goods. Instead, cryptocurrency mainly provides a means to secure digital transactions, but it’s possible to leverage the underlying innovation – blockchain – to verify digital records for counterfeit protection.
Nevertheless, the challenge for brand owners is how to put blockchain in context and implement realistic applications. Whereas cryptocurrency is further along the technology maturity curve, blockchain for digital verification and transactions remains in the early stages. The good news is that businesses can utilize blockchain-based tech in an ecosystem of anti-counterfeit systems for physical products.
Linking the physical world to the digital world
The link between the physical world and the digital world grows stronger with each technological innovation. Blockchain represents a sea change regarding digital security; however, its application in the physical world remains challenging due to the limitations of the technology. If you need a primer on the specifics, this white paper on the practicalities of securing physical assets on the blockchain provides crucial guidance.
The fact remains that physical markings – the printing, engraved IDs, and other overt markings – can be copied or altered by fraudsters. Businesses have significantly invested in tracking and tracing technology in recent times, yet there is no holistic platform that can reference all data associated with a physical item to verify its authenticity. Add the complexities of object recognition technology and biometrics to the equation, and the challenge is clear: creating an immutable, highly secure chain of records with blockchain software to link the digital world to the physical world.
What is blockchain?
The original purpose of blockchain tech was to create a digital currency outside of the traditional financial system, which according to the technology’s creator (person or pseudonym) – Satoshi Nakamoto – relies heavily upon third parties. You can read the landmark 2008 white paper on blockchain’s application for cryptocurrency to delve into the specifics.
Still, the nuances of this kind of peer-to-peer network are complex, yet the general takeaway is easy to grasp: blockchain can create encrypted, highly secure digital ledgers. It’s a misnomer that cryptocurrency is the same as blockchain. Instead, blockchain represents the underlying network that cryptocurrencies like Bitcoin and Ethereum rely upon; however, the innovation is independent of financial use cases.
Blockchain works well whenever you need to secure and verify a “chain” of digital records. Regarding Bitcoin, those records are the creation and exchange of cryptographic digital assets, but a manufacturer could also deploy the tech to verify its chain of custody data with records from international suppliers and distributors. Since each block contains data based on the previous block’s unique signature, it’s incredibly difficult to exploit the ledger and alter or insert fraudulent blocks.
Each data block must coincide with the previous record’s cryptographic signature and provide its own signature for the next block, thus creating a theoretically endless, secure yet decentralized ledger. Indeed, the industries developing creative uses for blockchain include healthcare, pharmaceutical manufacturing, and supply chain logistics. But the reality is that not every company puts blockchain in the same context.
Deloitte’s 2020 Global Blockchain Survey provides a critical look back at where the tech was going before the pandemic stymied global commerce. Out of the 1,488 executives surveyed in 2020, 88 percent agreed that blockchain would eventually become mainstream. But 54 percent also said that the tech is overhyped, and here’s why.
Anti-counterfeit: Pros and cons of blockchain
In short, blockchain itself doesn’t suffice as a reliable anti-counterfeit safeguard, especially when trying to secure physical products. The real benefit of using blockchain is to secure the digital records associated with physical items, yet there are also pros and cons to consider when deciding whether or not to deploy the tech at all.
Digital security is not physical security
The simple fact remains that blockchain was never intended to secure physical products. Instead, as evidenced by Nakamoto’s white paper, the intent was precisely the opposite: to create a digital alternative to physical currency. That principle still applies to any use case, so relying on blockchain for physical security belies a fundamental misunderstanding of where the opportunity truly lies.
Blockchain for physical objects relies on serial numbers or other seeds
Blockchain works best in the digital realm, yet some have tried to use blockchain software with serial numbers or other seeds. Indeed, associating physical goods with a blockchain of serial numbers is missing the point since serial numbers can be copied by counterfeiters, thus circumventing the digital ledger’s security. When it comes to anti-counterfeiting, the idea is to safeguard the physical product.
Blockchain is too complex to put in place for consumable products
Along those lines, another facet to consider when creating an ecosystem of anti-counterfeit solutions based on blockchain technology is the fact that it’s too complex to implement for consumable goods. As Deloitte’s survey explained, business leaders believe that blockchain will eventually become widespread, but the technology has yet to mature. Using blockchain for consumable products would require a ubiquity that the tech simply does have at the time of this writing.
Blockchain cannot tell if products are authentic, only provenance
Blockchain also doesn’t suffice to safeguard physical items because it’s best used to determine the provenance of digital records. A distributed digital ledger shared by all parties would ensure that a product has a consistent, verifiable pedigree across the supply chain, including tracking and tracing data. One possibility is to utilize the blockchain to verify buy-sell transaction history, but this protection doesn’t secure the physical product. That capability requires an anti-counterfeit solution.
Notwithstanding, these pros and cons show why blockchain does not provide enough protection for physical goods. You have to put blockchain in context to use it well, resisting the hype and implementing realistic solutions that provide actual value and thwart counterfeiters. The task is monumental, yet it’s also achievable with a robust ecosystem of counterfeit protections from AlpVision.
AlpVision anti-counterfeit solutions
AlpVision’s anti-counterfeit solutions can provide brand owners with sophisticated tech to identify counterfeits at the product level. Blockchain has a place in this system moving forward, but it must be used for traceability rather than physical safeguards. AlpVision Fingerprint and Cryptoglyph are two solutions that excel at safeguarding physical items. Those systems can identify fraudulent goods by using a smartphone app to verify authenticity quickly and efficiently.
Our anti-counterfeit software uses cutting-edge technology to prevent counterfeits from reaching consumers. But the question remains: where does blockchain fit into the equation? You have to use it properly to yield the greatest value since blockchain still has room to grow.
Implementing AlpVision’s anti-counterfeit solutions can lay the groundwork to verify digital records with blockchain innovations when the time arrives. After all, the tech is still maturing and growing rapidly. The biggest challenge facing companies is using the right technology for a particular business case. With blockchain, arriving at the right answers is critical because early adopters will gain an advantage.
Now that you know that you cannot use blockchain alone,
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