Battling Counterfeits With Blockchain

Want to learn how blockchain can help your business? Join one of our free sessions or request a blockchain workshop!

Chances are that you’re familiar with counterfeit goods, especially if you like to travel. Wherever you go around the globe, especially China, Turkey or Southeast-Asia, you’ve got a chance to pick up a nice luxury purse or jersey of your favourite sports team at knock-down prices. Should you feel bad now? No not at all! Likely, you wouldn’t have bought the real thing anyway, so Louis Vuitton isn’t going broke anytime soon. More importantly, you were deliberately buying a knock-off.

The true problem occurs when the consumer has no idea he’s buying counterfeits. The rise of e-commerce giants like Amazon, AliExpress and eBay have opened the door for a new wave of counterfeit goods. Big players like Amazon deny responsibility for the sellers on their platform, law enforcement points the finger to the industries to ensure more preventive measures, who are pointing it right back at the others.

While the big boys squabble it out, problems continue to mount in certain industries. Let’s look at the pharmaceutical industry for example, where internet sales account for $75 billion of the counterfeit pharma market ($200 billion total). In developed countries we’re privileged to have good healthcare, the chances that we’ll get a counterfeit from our pharmacist is small, still even in these most secure markets at least 1% of drugs are counterfeit. In developing countries that number quickly rises to 10%-30%, with 16% of counterfeit drugs containing wrong ingredients. In western countries more than 30% of the consumers are concerned about the issues regarding product origin (in any industry) but struggle to act.

At Design is Dead, we truly believe blockchain got its part to play in this story. Blockchain enables businesses to build trust in their goods, production process and supply chain. Provenance data helps consumers make better choices regarding product quality, authenticity, sustainability, …. Consumer awareness regarding corporate social responsibility has risen dramatically, our infrastructure should follow suit. But why exactly is blockchain a great fit for provenance?

A blockchain is a chronological, historical list of transactions (ledger), these transactions are grouped together in blocks and linked together using cryptography, hence the word blockchain. The information stored on the blockchain is shared and continually reconciled by the participants.

Blockchain blocks

To abstract this, imagine you have a list on a piece of paper with 5 friends. Your 5 friends have the exact same list on their own piece of paper. No one in the group can add to or remove items from the list without the agreement of all group members. When a change is agreed upon everyone in the group writes the change down on his paper in the exact same way. If someone tried to cheat, his paper could easily be verified against the other papers in the group.

To imagine provenance on a blockchain, try placing our abstraction from above into a supply chain context. Likewise, we have a group of participants (e.g. Manufacturer, distributer, pharmacist, patient, … ) and we’ve got items to add to a list: the data of produced pharmaceuticals and its point in the supply chain (Product #, batch #, manufacturer, plant, current owner, …). Whenever a change occurs, all participants must agree. This entails a couple of things:

  • A participant cannot send the same drug to two recipients, the others would not agree as they can easily check that the drug is being ‘double spent’.
  • A participant or hacker cannot change the data (manufacturer, owner, …) of an item, he would have to hack a majority of participants on the network so that they would all agree on the change. When a change is submitted and agreed it is sent on the blockchain with a timestamp; making it easy to track historical ownership.

To concretize everything we’ve talked about we created a quick proof of concept using Hyperledger Composer, a permissioned blockchain solution. We created a network that consists out of four types of participants: manufacturers, distributers, pharmacists and patients. When a participant receives a pharmaceutical (the asset on our blockchain) (s)he can verify the authenticity of the data and origin. When a pharmaceutical is deemed invalid, it is placed in quarantine.

Feel free to check it out on our GitHub. There’s plenty more to come about blockchain on our blog so stay tuned!