Blockchain Anti-Counterfeiting for food and pharma supply chains

Businesstalk am Kudamm, Berlin

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The counterfeiting market is booming. Fake brands and products account for about 3.3% of world trade. It hurts the reputation of companies that have built up their brand image over years or even decades. Counterfeit medicines and cheaply produced car parts such as airbags or lithium-ion batteries sometimes have fatal consequences.

This month, Arman Sarhaddar, CEO and founder of Vault Security Systems AG, presented the solution for companies and brand owners at Businesstalk am Kudamm in Berlin: the ivault™ Blockchain. In an expert interview with the eloquent moderator Claudia Bechstein, he explained blockchain supply chain use cases in a simple and understandable way, e.g.:

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• how the modern and particularly energy-efficient ivault Blockchain differs from the outdated blockchain technologies such as the Bitcoin blockchain,
• how blockchain technologies increase anti-counterfeiting for supply chains of pharmaceutical or food manufacturers, and
• how consumers can detect counterfeit products by scanning QR codes alone and why NFC chips are even better
  

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You can watch the first blockchain interview with Arman Sarhaddar in German right here. Below you will find an English transcription of the interview with additional information on our successful showcases.

More interviews on the new supply chain act in the EU and blockchain-enabled applications for the circular economy will follow soon. Feel free to subscribe to our newsletter to stay informed.

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Blockchain-based Anti-Counterfeiting Solutions

Translation of the interview with additional information

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Claudia Bechstein: 

Welcome to Business Talk am Kudamm. Today we’re talking to Arman Sarhaddar, Managing Director of Vault Security Systems AG, about the security of blockchain technology for supply chains.

Mr. Sarhaddar, welcome to Business Talk am Kudamm. It’s great to have you here today and I’m really looking forward to this issue because it’s topical, it’s exciting and we all have to learn much, much more about the Blockchain.

So, your company is developing blockchain technologies and applications. The most well-known example, which is of course on everyone’s mind, is cryptocurrency – is that your focus as well?

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Arman Sarhaddar:

Not really. Cryptocurrencies as such were only the first application of blockchain technology. After that, many other use cases have emerged over the years – or decades has to be said, as Bitcoin has been around for more than 12, 13 years now.

With ivault, we specialize in anti-counterfeiting technologies because there is an enormous need for action. Almost one million people die every year because of counterfeit medicines. But there is also an immense need for action regarding spare parts. That’s our focus as well.

For consumers, we have also developed an app that focuses on Lost & Found to protect valuables against theft and loss.

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Claudia Bechstein:

If we now take a look at the “production” of cryptocurrencies, especially of course that of Bitcoin, which everyone knows, it has been criticized because of its high energy consumption. Does your blockchain have to contend with the same problems, or did you solve it differently?

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Arman Sarhaddar:

Bitcoin was the first generation when it comes to blockchain applications. Back then it was called proof-of-work sort. Bitcoin mining not only serves the purpose of mining new coins, but also of verifying transactions, and that, of course, takes an extreme amount of energy. But over the years, the innovative technologies in the blockchain space have improved a lot.

We are using a very energy-efficient blockchain that makes our solutions indeed very sustainable. You can compare it with a normal household router that allows you to access the Internet at home.

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Claudia Bechstein:

For which areas of application is your technology particularly suitable?

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Arman Sarhaddar:

As I mentioned before, the application of blockchain has a huge potential in the pharmaceutical sector. Today, whenever we get a prescription drug from a doctor or the pharmacy, we assume that it is 100% authentic. But unfortunately, also due to the pandemic, a lot of people got used to ordering medication online through online pharmacies, and they can’t identify whether a drug is fake or authentic. Blockchain technology is particularly suitable for proving authenticity. You can scan QR codes or NFC chips that connect physical products to the blockchain platform with any conventional smartphone to determine very quickly whether a product is original or not.

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Claudia Bechstein:

To make this a bit clearer for our viewers: Do you have a blockchain use case to demonstrate in a little more detail how this works in practice?

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Arman Sarhaddar:

Sure, we have been working, for example, – I can also show it to you [see below] – with a Swiss company,  that is active in the food industry. For this food manufacturer, it was particularly important to make the supply chain transparent and show all the ingredients the product contains to the end consumer.

Since the product is relatively inexpensive – only 20 € – a simple QR code is sufficient. Conventional QR codes that you see on a product’s packaging today will only direct the consumer to the brand owner’s or manufacturer’s website. They don’t really show what happens in the supply chain, they don’t show the verified source of ingredients and raw materials or the carbon footprint that helps to determine whether it is really a climate-neutral product I am holding right now or not.

Nowadays, thanks to the blockchain, you can verify this with any smartphone by pointing the camera at the QR code. Then you can see the entire supply chain on the blockchain platform. On top, you can see that the product is original. You can see which ingredients it contains and below you can also register as a customer to receive benefits. So you can enable many applications in one fell swoop with a simple QR code to connect with customers in both ways, which is also an important pillar for many companies.

 

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Explaining our Blockchain Use Case for Food Supply Chains

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More and more consumers want to know whether a product they bought is sustainable and fair. They often want to know whether it is an original, to make sure they haven’t been mugged off or that it is safe to use. Companies can store the desired information such as certificates on the blockchain and make it available for retrieval via a unique consumer interface. Customers can scan a simple QR code or NFC chip to view validated data, for example, on the origin of coffee, cocoa, or other foods that have been entered by manufacturers in third-world countries themselves.

Companies can decide which data they make accessible in this way. But they can no longer change or subsequently manipulate this data (!) – unlike any text they put on a website. A website is unable to offer real proof of the sustainability of a product or the credibility of a green label. That is something blockchain can do.

Only the tamper-proof information stored on the blockchain is truly reliable as you can be sure it is unaltered. This significantly increases the authenticity of a sustainable brand and helps corporate communication.

 

The scan also allows buyers to register as a consumer, for example, to receive immediate alerts from the blockchain platform when certain fakes seem to be in circulation, e.g. regarding drugs they regularly consume.

You can also register as the rightful owner of a branded product to access blockchain-based proof of ownership at any given time. This is where the ivault app plays a key role: Everywhere you go you have proof of ownership of your beloved belongings right at hand. That makes it much easier to recover lost or stolen items.

Lastly, at the end of a product’s lifecycle, the scan at the drop-off can reward consumer as the enabler of the circular economy. This process can easily be automated via the blockchain platform and motivates consumers to buy certain products.

At the same time, companies will benefit from new types of customer intimacy and brand loyalty. In the future, they could even track ownership changes on the blockchain when products are resold second-hand.

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Claudia Bechstein:

Exciting and, above all, so easy to use! You said: Of course, it is fatal if drugs are counterfeited. But how many cases of damage caused by counterfeit products are there, that can be reduced through the use of blockchain technologies? Do you perhaps have some figures?

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Arman Sarhaddar:

Right now, the global counterfeit market is worth approximately $900 billion: every year, companies around the world lose close to $900 billion due to counterfeiting. We believe that by using blockchain technology – if you implemented it properly – you can reduce those numbers by up to 30%, that means you have 30% less counterfeiting. We are rock-solid convinced of that, if not 37%.

But it is still a long way to go. The adoption of new technologies usually takes quite a bit of time …

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Claudia Bechstein:

OK, despite everything, you just have to let this sum roll off your tongue for a moment: $900 billion… is an incredible amount. And it should be a huge issue for companies and brand owners to become active here. So, how much willingness to invest in blockchain technologies for this reason is there right now?

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Arman Sarhaddar:

You can already see this happening in large corporations, whether it’s Bosch or Siemens. They are already using blockchain applications. In smaller companies as well as in food companies or in the pharmaceutical sector, there is a huge need to catch up. We have noticed that through our meetings with such companies. As I said, I am convinced that it will soon be there, but as with every new product, it needs a certain start-up time.

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Claudia Bechstein:

Now we have already talked about the QR code that enables consumers to access the blockchain, which is certainly a better application than simply using a link to direct consumers to a website. But that’s not one hundred percent secure either. Are there any other options beyond that?

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Arman Sarhaddar:

Absolutely. We are using QR codes for products that have a relatively low price because, in the end, a QR code costs almost nothing. In the example mentioned before, you have 1000 bottles and 1000 unique QR codes to label each bottle individually. That means each product has its own identification, as it has its own serial number, and you can retrieve that information with your smartphone easily to check for authenticity.

Sure, you can fake a QR code – that’s easy to do in itself. Thanks to blockchain, though, even if you copied a unique QR code once, you can see where a scan was made through geofencing and the IP address of the smartphone, for example, and determine exactly whether it was copied and scanned in two different places in the world.

But there are of course much better technologies, such as NFC chips or RFID, which we can also hide in labels and right inside even the smallest products. NFC chips can be as big as a fingernail or the size of a grain of rice and they are still very, very effective.

NFC chips can no longer be forged so easily because they have a built-in crypto processor. This means that every time an NFC chip is scanned, the UID number changes. This cannot be forged, copied, or stolen.

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Claudia Bechstein:

Super exciting. Thanks for explaining it in a simple and understandable way, since I think it is still a completely new topic for many viewers and thus helps a lot. Thank you very much.

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Arman Sarhaddar:

Thank you.

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Supply chain transparency and counterfeit protection

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Vault Security Systems AG has worked with various industries of different sizes. In addition to developing and implementing blockchain-enabled supply chain tracking technologies for pharmaceuticals (including corresponding pharma packaging solutions), we dedicated, for example, one pilot project to blockchain-based GPS asset tracking for theft prevention as well as for tracking of disposal and recycling measures.

Our highly customizable use cases at a glance
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1. A visible QR code is the most accessible option. Every consumer can retrieve counterfeit-proof data that is validated and verified via their smartphone camera. And thanks to the blockchain platform, this simple measurement already provides effective protection against counterfeiting.
2. Hidden NFC chips or RFID tags are even more suitable and offer twice the level of security, for example, as counterfeit protection for pharmaceutical products. When scanned via NFC scanner apps for basic smartphones, no counterfeiting attempt can go unnoticed anymore. In addition, it is possible to track exactly where counterfeit products have entered the supply chain.
3. GPS-enabled asset tracking systems: Another useful case study, which offers maximum security in theft prevention. Transportation vehicles or container deliveries, as well as disposal measures, can be tracked seamlessly and documented automatically.

All of 
this comes in very handy in the context of the new EU supply chain act as well. Hardly any other technology enables companies to prove their own compliance across global supply chains in an incontestable and unambiguous manner. You can find out more about this in the next blog post.

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Missing an example of a customized anti-counterfeiting application that can help make your products more secure? We’d be happy to consult with you personally on the best blockchain solution for your unique supply chain:
 Get in touch with us now.

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