How Blockchain Will Reduce the Number of Counterfeit Goods
For all the talk about Bitcoin and cryptocurrencies, the underlying technology behind them is potentially more of a game-changer than initially imagined. There is actually a growing belief that blockchain can reduce the number of counterfeit goods around the world. Vox explains in detail how blockchain can do this, but we’ll try our best to simplify it. The first thing to bear in mind is that blockchain is essentially one big, virtual ledger.
Through this virtual ledger, every entity in the supply chain — retailers, suppliers, and go-betweens, among others — can record their respective inventories. Data recorded will then be validated and stored in multiple devices, effectively safeguarding them from hacking. Every item, therefore, has a record. This makes it substantially more difficult to mix counterfeit items into the circulation of genuine goods.
The process improves what Coin Journal calls “the traceability of physical goods”, as well as transparency in the supply chain. Perhaps just as important, tracking can be done in real time, thus giving counterfeiters less time to sell their counterfeit goods. Additionally, blockchain is now used to ensure provenance in the case of works of art, and authenticity of items like jewelry, designer bags, clothes, and shoes.
Potentially reducing the number of counterfeit goods globally underscores the immense potential of blockchain. However, the technology is far from perfect as it, too, has quite a number of shortcomings. In a post by FXCM they list the limitations of blockchain, including the process with which changes can be made. A change, no matter how vital it may be, requires support from the majority of miners before it can be implemented, at which point it might already be too late. Even the speed at which blockchain-based transactions are processed has slowed down recently on account of rising network demand. Ironically, developers had foreseen this particular problem, but many of the solutions they have proposed have not been implemented as the consensus needed to apply them has not been met. These, along with a potential loss of privacy, are just some of the issues blockchain is dealing with at the moment, and there is a likelihood that more will crop up in the future.
But then again, what system is perfect? Despite these limitations, blockchain has been useful for the most part. Its role in reducing counterfeit goods may be significant, but that is not the only thing that blockchain is doing. As noted previously in ‘Four Ways Blockchain is Doing More Than You Think’ this technology, among other things, can also help reduce travel cost, protect people’s identity, improve healthcare, and introduce so-called smart contracts. What’s more, blockchain implementation across a variety of other industries is a very real possibility in the next five years, which means the technology can be used to do so much more in the future.
So again, there are pros and cons to using blockchain. Now, whether the pros outweigh the cons or vice versa is a more a matter of perspective.