Roei Ganzarski is CEO of Alitheon, whose FeaturePrint® optical AI helps companies avoid counterfeits & gray markets, and trace products.
Blockchain can be a powerful tool for managing and securing digital information in a manner not previously possible for the average person or company. Its key features—decentralization, immutability, transparency, security and traceability—make it an effective and attractive technology, particularly in areas such as finance, healthcare and supply chain management where data security and transparency are critical.
Let’s touch on its key features a bit more:
- Decentralization. Data and information are distributed across a network of computers, making it more difficult for bad actors to manipulate the data or compromise the information in the system.
- Immutability. Each block on the chain contains a cryptographic hash of the previous block, creating a secure chain of blocks that is virtually impossible to modify without being detected.
- Transparency. Each transaction is recorded on the blockchain, creating a public ledger that can be audited and verified by anyone on the network.
- Security. Blockchain uses cryptographic algorithms to secure information and transactions. This makes it highly impervious to hacking, manipulation and fraud, as each transaction must be verified by multiple nodes on the network before it can be added to the chain.
- Traceability. The chain records every transaction and data point, allowing you to trace the origin and movement of data through the entire chain.
This last characteristic makes blockchain very useful in tracking, for example, supply chain electronic data, verifying the authenticity of products’ digital data and ensuring data privacy and security. However, because blockchain doesn’t interface with the physical world, I believe it is not well-suited for authenticating or tracking and tracing physical items.
To track and trace physical items using blockchain, a mechanism to link real-world objects with blockchain data must be put in place. Usually, these include things like scanning QR codes or using RFID tags. With that said, stickers, tags or other types of product markers do not provide an adequate level of authentication and identification that matches the blockchain’s own level of trust. While one may be able to prove a sticker, marker or tag is real, it is a stretch to then conclude that the item it’s attached to must also be real.
While blockchain solutions can ensure the integrity of digital data by providing a tamper-proof record of transactions, they cannot verify the authenticity of physical items. For example, if a gold bar or aircraft part is scanned into a blockchain-based tracking system, that does not guarantee that the bar or part is not a fake or gray-market item. Moreover, this misconception could lead to more robust fraudulent activity since “it is on the blockchain” can be used as a perfect cover.
Overall, blockchain has many valuable applications and is an important and powerful tool when immutable digital data is required. However, it is not a solution for authentication, identifying or tracking and tracing physical items. It is important that it not be confused as such so that illegal activity comprising fake and gray-market goods is not given the cover of a blockchain blanket.
Here are a few things companies can do to ensure they only connect digital ledgers to physical items in a way that adds value:
- Identify the need first. Is having digital data related to your physical product required to be in an immutable state? Blockchain technology can be expensive to implement, and the cost may not be justifiable for simply tracking and tracing or authenticating physical items. However, if you need irrefutable data for regulatory reasons or proof of ownership, the blockchain is a great tool for the digital data portion of that need.
- Separate the physical from the digital. Be clear about the difference between your physical item or product and the data that revolves around it. Which do you have issues with or a need to solve and find the solution that addresses that need and not another. For example, are you concerned that your physical product is being counterfeited or that the real one gets associated with fake certificates of origin?
- Test out the technology. Try out any technology you are thinking of implementing with your actual use case. Demos are nice, but you should see if your specific needs get addressed fully, partially or not at all by the proposed solution.
With illegal and illicit activity on the rise both in the digital and physical realms, it is important to know about the various technologies and tools available to help us. But sometimes, using the wrong tool could result in as much damage as the bad activity itself.
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