The OECD estimates that the international trade volume of counterfeited products was up to $200 billion in 2005 . This does not include counterfeit products which were sold in the same country as produced nor Internet piracy. The number is alarming, as this does not only lead to lost revenue for manufacturers, but also tax losses and thereby a reduction of general welfare. Typical products being counterfeited do not only include high-value luxury goods such as designer clothing, footwear, watches and jewellery, but a wide range of more common products. The list can be expanded to consumer electronics, other electrical components, food, drinks, tobacco, agricultural products, toiletry products and pharmaceuticals.
In case of pharmaceutical products, the implications are more severe than monetary: counterfeit products might not contain the right active ingredients and therefore can be useless to harmful. Especially in developing countries, people are dying after being treated with fake medicine. Fake pharmaceuticals are however not only a threat in developing countries, according to the World Health Organization (WHO) over 34 million counterfeited pills were seized in two months in 2009.
Considering the potentially fatal and financial consequences, it is not surprising that global efforts to reduce counterfeit are in place. However, there is no evidence that the number was reduced in the last few years. Blockchain technologies are considered trust-less, immutable and globally distributed. The question arises, how this technology can be used in the fight against piracy, what characteristics are helpful and how a potential solution can be implemented.
Anti-counterfeiting solutions should protect organizations from financial and reputation losses, and, especially in the case of pharmaceutical products, customer safety. A good anti-counterfeiting techniques should generally be simple to apply, but difficult to imitate and have four main features: They should be difficult to duplicate, it should be possible to identify them without special equipment, it should be difficult to re-use them, and it should be visible if they where tampered with.
From a product perspective, there are three general technologies to reduce counterfeits:
Overt technologies include all packaging technologies which are visible in the product itself. This includes holograms, color shifting inks, security threads, water marks etc. The advantage of overt technologies is that they can be checked by the end consumer.
Covert technologies are also applied on the product itself, but are not identifiable without special equipment. This includes UV, bi-fluorescent and pen-reactive ink, as well as digital watermarks and hidden printed messages. Covert technologies help to identify counterfeits in the supply-chain and are especially efficient combined with overt technologies.
Track and trace:
The final category is track and trace. This includes Radio Frequency Identification (RFID) tags, Electronic Product Codes (EPCs) and barcodes. Track and trace technologies allow for simpler tracing of products, thereby enabling the reduction of counterfeits, as the history of a product is available. The tag or barcode is included by the manufacturer. Distributors scan the identification, enabling them to check the authenticity of the product and update the status. Finally, retailers can also scan the product, to check the history and authenticity of the product. This approach does not only tackle the counterfeit problem, but also enables track and trace through the whole product lifecycle.
Method 1: Using a DTAG
Each product which is tracked will have a tag and is tracked along the supply chain. It is up to the customer to define how transparent the supply chain is. Retailers can check that received goods are genuine. Once a product is sold, the consumer can also verify if it is authentic and activate the ownership of the product. As the transactions are stored in the blockchain, it cannot be corrupted, even by the manufacturers themselves. DApp can provide “verified history” of each product in its system.
Method 2: Using Unique Transaction ID
Organizations can sign up with DApp, add products and the stories of the products and company, and issue batches of items. Each physical product is to be identified with a unique transaction ID (created for each entry to the blockchain), which allows customers to check the story and digital history of the product. ID can be hidden behind a substance that can be scratched to reveal it. The ID can only be verified once to make sure that it is not used by fraudsters.
Method 3: Using NFC Chips
An NFC (Near field communication) chip operates as one part of a wireless link. Once it’s activated by another chip, small amounts of data between the two devices can be transferred when held a few centimeters from each other.No pairing code is necessary to link up and because it uses chips that run on very low amounts of power (or passively, using even less), it’s much more power-efficient than other wireless communication types. In our application NFC chips stores a private/public key pair, while the public key is also stored in the blockchain. Each product will be embedded with a chip which contains different private/public key pair. We can use a dApp to connect with blockchain to verify the public key.
- Use of proof of stake blockchains like Algorand or Solana rather than Ethereum will make sure transaction costs are predictable. This will also give more protection towards DOS (Denial of Service) attacks which are common with Ethereum based applications.
- We can use private blockchains like Hyperledger along with public blockchains to have more control over the information stored in blockchain.