Arman Sarhaddar, the CEO and founder of Vault Security Systems AG was invited to write guest articles for Industry of Things, a German online platform for expert insights on topics we are all interested in like Internet of Things (IoT), Artificial Intelligence (AI) and Blockchain technologies.
This blog entry is giving you a translation of what Arman is talking about in his first guest article which is available in German here.
In short, Arman explains, that Amazon’s transparency program is still not the ultimate answer to the problem of counterfeit products. But the fact that one of the world’s largest online retailers is announcing that it will provide more transparency when it comes to product authenticity shows the urgent need for action.
The struggle with counterfeit products
A few weeks ago, the e-commerce giant Amazon announced that it was rolling out its transparency program in Europe. Manufacturers can then provide their authentic products with a QR code that provides retailers and customers with unambiguous proof of authenticity. In this way Amazon wants to counteract the flood of fake products and create more trust among its customers. The approach is basically welcome – but Amazon Transparency has limitations especially when it comes to some special groups of products.
With the Transparency program, Amazon is primarily concerned with improving its own image. The reputation of the US company has suffered from fraud, falsified valuations and product imitations, particularly among retailers. But Transparency is not equally suitable for all products. It is a form of labelling that works for goods that are actually primarily about authenticity, such as clothing and bags. However, this is not enough for products with an elaborate supply chain where claims for damages play a role. Examples include medical products. Customers in this sector have to be sure that they have not purchased a counterfeit, that could in the worst case be harmful to health. This is why tracking ingredients is critical in the medical sector in particular.
3 reasons why blockchain can help
First, once fed in data is unchangeable, subsequent manipulation is excluded. Another blockchain characteristic is that all available information is stored and verified decentrally on all computers connected to the network.
Secondly, the blockchain is virtually unhackable, since changes always have to be made in the majority of nodes.
Thirdly, transaction costs can be significantly reduced by skipping middlemen. In particular, the use of Smart Contracts simplifies data management and automation.
An example of how tracking can be implemented on the blockchain is the iVAULT pilot case with the Swiss company Golisan GmbH. Golisan produces herbal extracts which are sold online – mostly via Amazon. In view of counterfeit products and in terms of quality assurance, it is important to the manufacturer on the one hand to guarantee the authenticity to the customer and on the other hand to be able to trace the origin of the ingredients completely. Counterfeit food supplements are a lucrative business because they are less strictly monitored than prescription drugs. Fake products are sold via Amazon in particular, so the online giant recently sent a warning to affected customers.
Apart from the potentially serious consequences of taking counterfeit dietary supplements, the counterfeits have a negative impact on the business balance and reputation of the actual manufacturers. Beyond the authenticity guarantee, the manufacturer’s goal is to monitor the entire supply chain to provide maximum security for its customers. For this reason, all suppliers have access to the blockchain and can store information on the ingredients: from the harvest of the plant raw materials to their further processing and the container in which the product is sold. For this application, it is advisable to use software that has been developed for this kind of collaboration so that data can be exchanged with other areas of technology. This also facilitates the integration of the blockchain into the existing supply chain management.
Blockchain solutions can be implemented in a resource-saving way
One of the biggest points of criticisms frequently voiced about blockchain technology is its comparatively high energy consumption. However, a distinction must be made between mining activities, which are necessary for crypto currencies and are actually very energy-intensive, and applications for companies, such as securing the supply chain. The latter takes place in a private blockchain and without the computationally expensive proof of work. So the energy requirement is no higher than that for common web apps. Additionally, since fewer nodes are involved, the transaction speed can be increased.
Examples such as Amazon’s Transparency show that companies are concerned with the security of their goods against counterfeiting, but they are not yet exploiting the full potential that would be possible with blockchains. The technology has long since arrived in practice and simplifies processes beyond crypto currencies that were previously cumbersome or even impossible to carry out. When selecting a technology partner, companies should consider whether the solution can be well integrated into the existing IT. This will lay the foundation for more transparent supply chain security and valid proof of authenticity.
What do you think?
Industry of Things brings together experts from IT and industry to facilitate interdisciplinary exchange across boundaries. Not only more than 40 editors report on current developments in the Internet of Things and industry, but also experts whose proximity to practice offers a new perspective on applications, technologies or IT security as well as political and current topics. Arman Sarhaddar is from now on sharing his expert knowledge on blockchain and InfoSec on this high-ranking platform as well. We will keep you updated on a regular basis.
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- What do you think of Amazon Transparency and the potential of the iVAULT blockchain in this sector?
- Soon you will be able to take iVAULT for a test drive… what do you think of it?
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