Blockchain-based digital assets, like non-fungible tokens (NFT), bring new opportunities for your brand, but you must put this evolving tech in context to yield maximum value. Otherwise, you risk investing in a physical NFT that doesn’t safeguard products.


Indeed, you can use blockchain-based software to secure digital records tied to real-world products, but how? The answer is to create a highly secure cryptographic token to verify the authenticity and ownership. The catch is that using NFT software for digital verification presents challenges you may not anticipate. For example, you can create cryptographic assets, but will the new technology integrate with your current anti-counterfeit solutions for physical items?


Whereas cryptocurrency is a more mature technology, blockchain-based NFTs for digital verification and provenance are still in the early development stages. The art world has already seen NFTs sell for extraordinary sums, such as Jack Dorsey’s original tweet, which earned Twitter’s Founder and former CEO over $2.9 million. Another NFT work by the artist Pak merited over $91 million at auction.


Still, the marketplace for “crypto assets” keeps expanding, with many software platforms in development to enable the secure and verifiable exchange of NFTs. The good news is that businesses can leverage NFT tech in an ecosystem of anti-counterfeit defenses, and here’s where you can begin the journey.


What is an NFT?

The essential definition of an NFT is simple despite the complexity of the underlying tech. For the purposes of anti-counterfeiting, you can create NFTs as digital certificates of authenticity, which derive their value from the non-fungibility of cryptographic assets. Thus, the next question is this: can you apply blockchain technology as a physical NFT? If you need a primer on the subject, this paper on the practicalities of securing physical assets on the blockchain provides the foundation.


The overarching concept involves leveraging blockchain’s distributed data structure to determine a physical product’s origin within an encrypted, immutable digital record. A counterfeiter can’t alter the time-stamped data, add false information, or delete the record because each “block” in the blockchain contains cryptographic data about the previous changes to the ledger. The system only appends data so that you can track the product’s entire digital history.


. Crypto assets like NFTs represent a sea change for digital security; however, their application to anti-counterfeiting remains challenging due to the boundaries of the technology and a fragmented market.


Why are people buying NFT?

The meteoric popularity of NFTs remains a bit of a mystery because the online marketplaces where they are exchanged have yet to fully mature. People purchase NFTs for luxury goods and works of art to ensure the chain of ownership for the items. The reason is that speculation about NFTs’ viability as investments is rampant.


The assumption is that NFTs – and all cryptographic tokens – will continue to gain value as the next evolution of the internet comes to fruition: Web3. But there’s absolutely no guarantee of such a boom, although many consumers assume it’s inevitable. Nevertheless, the takeaway for brand owners is this: approach the crypto world cautiously regarding NFTs because the tech is still in its infancy. The concept of a physical NFT is a prime example.


What is a physical NFT?

The relationship between the digital world and the physical world is fundamentally changing. We use biometrics to unlock our smartphones, command AI-based software with our voices, and spend an incredible amount of time engaging with peers online. The gap is narrowing, and the rise of artwork NFTs suggests that it’s only the beginning. The challenge we face is linking the two worlds, and the software platforms that will perform such a feat are rapidly developing.


Ultimately, cryptographic tokens like NFTs can be the link to physical items in the digital world. The actual benefit of using NFTs is to secure the digital records associated with goods, but it’s crucial to keep the technology in context and resist the temptation to rely upon crypto assets too much. We touched upon how the art world has popularized buying and selling physical NFTs, but brand owners need to understand how digital tokens are related to the product.


The bottom line is that cryptographic digital tokens don’t ensure the product is genuine. Instead, they only mark ownership of the item, including all previous transactions and other information that can affect the value. There is no global tech standard for the type and amount of data you need to encrypt. The landscape is confusing for brands considering using NFTs, and the Nike vs. StockX lawsuit should give you pause.


The fact remains that no standard exists for how to best use digital tokens tied to products. Luxury watchmakers are adding RFIDs to their products, which link to an NFT of some kind to verify the authenticity, so it begs the question: what happens when a counterfeiter forges the RFID protection? And therein lies the problem.


The underlying NFT can’t tell whether or not the watch is authentic because the token hasn’t been tampered with or altered. The consumer trusts the security measure because it sounds like the brand is doing its part to ensure authenticity, yet that belies a fundamental misunderstanding of how to create anti-counterfeit physical NFTs best.


Digital security is not physical security

Few technologies can create covert protections that a fraudster can’t mimic. Holograms can be forged or removed, and a sophisticated criminal can also remove physical engravings and markings. They ply their trade with impunity as long as there is no covert measure in place. Blockchain technology was never intended to protect and authenticate goods.


Regarding the creation of NFTs, they work well for buying and selling digital assets in the metaverse. Think of a virtual world with branded clothing and accessories that match genuine items. Yet, an out-of-the-box, public NFT platform can’t be used as a reliable anti-counterfeit measure. Leveraging blockchain tech for physical goods would require widespread adoption by entire industries. Today, NFT minting still has plenty of room to evolve.


Blockchain-based NFTs won’t suffice to safeguard physical goods because the tech is best used to track the provenance of digital records. At this time, many blockchain-based distributed ledgers are open to the public, which is a non-starter from an anti-counterfeiting perspective where security and privacy are paramount. Your brand can develop private blockchains with manufacturers and distributors and use NFTs to verify authenticity, but there still have to be markings that fraudsters can neither see nor recreate. Blockchain assets like NFTs work best when securing digital records, so you need a different anti-counterfeit tech for the product itself.


AlpVision anti-counterfeit solutions

AlpVision’s anti-counterfeit solutions can give brand owners sophisticated capabilities to identify fake goods at the product level. Blockchain has a place in our system moving forward, but it must be used for traceability rather than physical safeguards. AlpVision Fingerprint fits along those lines well.


As an example, you could create an NFT for a pair of designer sneakers and make use of AlpVision Fingerprint on the sole. There is no need to imprint a visible mark because the technology uses the one-of-a-kind textures already present on the sole to verify that a particular item is real. The covert marking will be invisible and unbeknownst to counterfeiters, and they certainly can’t copy them. The tricky part is creating an ecosystem of robust anti-counterfeit solutions that can accommodate both technologies.


Our anti-counterfeit software uses state-of-the-art tech to thwart counterfeits before fake items reach consumers. Implementing AlpVision’s anti-counterfeit solutions can lay the groundwork to verify digital records with NFTs, so you can create a more assertive security posture and stop counterfeiting.


Still, the biggest challenge facing businesses is how to use NFTs correctly to yield maximum value. With blockchain-based tech, arriving at the correct answers is critical because early adopters will gain an advantage.

Now that you know that you cannot use blockchain alone for physical NFTs download our whitepaper to select the appropriate solution from AlpVision.


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