Blockchain, the technology behind cryptocurrencies, is proving to be an important tool in combating counterfeiting.

Counterfeiting is a massive global problem. The US Chamber of Commerce estimates counterfeiting to be responsible for annual losses of US$500-billion to legitimate trade. In South Africa, the counterfeit market accounts for as much as 10% of the country’s economy.

But the economic loss to brand owners is not the only consequence. According to the World Health Organisation, counterfeit medicines kill about a million people per year, with half of these deaths occurring in sub-Saharan Africa. The pharmaceutical industry has even greater challenges since supply-chain information is often reflected as a label on the container of bulk product, to match paper-based records or electronically stored information that has been manually captured. Furthermore, the advent of online pharmacies has attracted price shoppers and introduced further obscurity into an already complex supply-chain network.

Over the years, brand owners have used various methods to enable retailers and consumers to authenticate genuine products, including the use of holographic stickers, bar codes, smart tags, QR codes and near-field communication (NFC) chips. The problem is that the technology accessible to counterfeiters has advanced at a similar pace, enabling these markers of genuine goods to also be copied.

Essentially, brand owners need a permanent, secure, transparent and immutable record that evidences the genuine nature of their products.

Enter blockchain.

A blockchain is a ledger that stores time-stamped records, which cannot be removed or altered. The unalterable nature of blockchains make them ideal for anti-counterfeiting in Africa and across the world, as an alternative to other verification methods. For this reason, many brand owners have either developed their own blockchain platforms or use third-party platforms for product authenticity verification.

Fighting counterfeiting

In fact, with blockchain, records pertaining to the entire supply chain of the product could be traced back to the raw materials. But this is not strictly necessary, and reducing the number of parties who need to participate in the process saves time and cost. The underlying question, when considering whether a product is genuine or counterfeit, is whether or not the product originated from the brand owner or its authorised licensees/agents, so this blockchain record must be evident along with the chain of title of the goods from that point on.

For their own protection, consumers should also be able to access blockchain platforms to verify product authenticity. In this way, consumers could avoid purchasing from vendors who are not reflected in the chain of title, as sellers of genuine products.

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For brand holders and law enforcement officials, the main focus will always be the source of the counterfeit products. Verification platforms could easily be utilised by border and customs officials who examine goods for authenticity, when they enter a country. The detention and eventual seizure of large consignments of counterfeit goods would hopefully deter counterfeiters from producing and selling counterfeits.

The road to regulated blockchains in South Africa

The full potential of blockchain to combat counterfeit goods has yet to be realised by brand holders, consumers and law enforcement officials. While smart electronic devices have been deployed with limited success in the past, blockchain technology will introduce a new era in the war against counterfeits.