FinTechCyber Security & FraudBattling counterfeiters with the blockchain

Battling counterfeiters with the blockchain

Blockchain can be an important tool for businesses to combat outside threats, argues Adrian Clarke

For any manufacturer, the supply chain is a crucial operation. Manufacturers need to know where their supplies are coming from and how they fit into the various stages of the manufacturing process. Increasingly, outside entities are also interested in the origins of a company’s supplies or where and when an item was manufactured — from consumers interested in buying goods that are environmentally friendly or non-exploitive to government entities enforcing standards.

In the current state of manufacturing, however, it is not easy to find the kind of supply chain transparency that allows interested parties to have their questions about provenance – or origins of the product – answered.

Provenance can be an important point when a company is making claims about where or how its products are made; for example, if a company claims that its products are 100% made in a particular country or are held to certain standards of sustainability. Provenance can also be important in fighting counterfeiting, a growing, expensive and potentially dangerous problem for manufacturers.

The value of international trade in counterfeit and pirated goods, estimated at $461bn in 2013, is forecast to rise to $999bn by 2022, according to a report from the International Chamber of Commerce’s Business Action to Stop Counterfeiting and Piracy and the International Trademark Association.

Not only that, but counterfeit goods can pose a risk to human health and safety. Counterfeit food products or food production components can pose health risks, toxins in counterfeit goods such as cosmetics or children’s toys can expose users to health hazards, and counterfeiting in electrical appliances or automotive components can be a threat to users’ safety.

In these cases, manufacturing businesses need a way to prove data about their supply chain. Increasingly, they need to have ready evidence of operational details that are trusted and verified enough to help them in case of a lawsuit or questions about authenticity.

Vulnerable data

Right now, most manufacturers store data about provenance and other supply-chain transactions on their own databases. But this data is extremely vulnerable to hacking and cyberattack. In fact, nearly half of UK manufacturers report that they have been the victim of cybercrime, and a quarter have suffered some financial loss or disruption to business as a result, according to a recent report published by AIG and EEF, the manufacturers’ organisation. And in its 2017 Threat Intelligence Index, IBM identified manufacturing as the third most attacked sector after government and finance.

Those figures are probably low, because many businesses don’t report cyber attacks, with many not even realising and they’ve been hacked. With manufacturers’ data so open to manipulation, its veracity can come into question in cases when absolute proof of authenticity is needed.

Bring on the blockchain

Manufacturers need a better way to fight the financial threat that outside questions about provenance can pose — and blockchain technology can provide a solution. The blockchain’s foundation of ‘trusted, distributed consensus’ offers a way to turn data into immutable proof of evidence that cannot be destroyed or hacked.

When data is added to the blockchain, it becomes part of a permanent record that cannot be changed. This is because blockchain stores data across a huge network of computers that constantly verify information with each other, unlike traditional databases that record data on a central server. Everyone on the blockchain network has a copy of the exact same data, so it cannot be retrospectively altered.

In order to falsify information or otherwise compromise data, a hacker would need to breach a majority of the computers in the network simultaneously, a practically impossible feat.

In the case of a manufacturer dealing with counterfeit goods in its supply chain, for example, the company could record on the blockchain when a genuine product was made and follow it through the supply chain. This way, the company could prove that a counterfeit item was not manufactured by that company. If a serial number was copied, for instance, the company could show where the genuine product is and prove that the counterfeit product is, indeed, a fake.

A matter of trust

As the financial and healthcare industries have already seen, the blockchain can provide a solution wherever trust is needed. The blockchain network provides that trust, meaning that data can be verified independently, without relying on any one party for the truth. For manufacturers, this systemic trust can provide them with a way to prove the authenticity of their data beyond the shadow of a doubt.

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