Authenticity certificates can be forged and replicated but NFTs are unique, immutable and irreplicable - has the answer to the counterfeiting problem been found?
Luxury goods and designer clothes are bought and worn as status symbols by consumers the world over, but what gives authenticity to the Rolexes, Gucci bags and signed pairs of football boots that are purchased every day?
Certificates of authenticity (COA) have been used for decades to verify the credibility of high-value items such as art, collectibles, and luxury goods. These certificates are issued by the manufacturer or a third-party authenticator, and provide proof that the item is genuine — ensuring the quality of the product matches the status of the brand name associated with it.
But while the concept of authenticity certificates are intended to provide a level of assurance that the product is genuine, they are not always foolproof. Fraudulent certificates can be forged, and legitimate certificates can be easily replicated. This makes it difficult to rely solely on authenticity certificates as a means of combating counterfeiting.
Counterfeit products have long been a major problem for the global economy, with estimates suggesting that the counterfeit market is worth over a trillion dollars annually. The World Customs Organization (WCO) estimates that 5-7% of all goods traded globally are counterfeit. In 2018, then Adidas CEO Kasper Rørsted admitted that over 10% of the company’s products in Asia were fake.
This not only causes financial losses for legitimate businesses but can also pose a serious threat to consumer safety, particularly in the case of counterfeit pharmaceuticals and other goods that are intended for human consumption.
Fighting the Fakes
The global market for counterfeit goods was thought to be worth $1.2 trillion in 2022, according to a report by the International Trademark Association (INTA). Counterfeiting not only harms the reputation of legitimate brands, but it also poses a risk to consumer safety and can result in lost revenue for businesses. In the US alone, the economy loses $250 billion to $500 billion each year due to counterfeiting.
Various initiatives have been launched In an effort to combat counterfeiting in recent years. For example, the use of RFID technology (radio-frequency identification) and holographic labels have been implemented as a way to make it more difficult for counterfeiters to replicate products. Interestingly, some companies have begun using blockchain technology to track and record the authenticity of their products.
Blockchain technology, and specifically non-fungible tokens (NFTs), may have the potential to revolutionize the concept of authenticity certificates. NFTs are unique digital assets that are stored on the blockchain, providing a tamper-proof record of ownership. Because NFTs are unique and completely irreplicable, they can be used to represent one-of-a-kind items such as artwork, collectibles, and other luxury goods.
Some companies are already utilizing NFTs in the retail sector to give physical products a digital identity, allowing customers to verify the authenticity of their items. By embedding an NFT into a product, brands can create a tamper-proof record of authenticity that can be easily verified by simply scanning a QR code. This not only helps to combat counterfeiting but also provides customers with a new way to interact with and own their products.
Tracking Luxury Goods with NFTs
Because they’re backed-up by a blockchain network that’s running simultaneously on thousands of computers around the world, NFTs are tamper-proof, cannot be forged, altered or replicated, and provide an accessible way for customers to instantly verify the authenticity of their goods. Additionally, NFTs open up new possibilities for product customization and personalization, potentially creating new revenue streams for businesses.
According to a study by the World Intellectual Property Organization (WIPO), it can take up to several weeks to verify the authenticity of a product using traditional methods. With NFTs, however, the process can be completed almost instantly.
One firm applying the utility of NFTs to the authenticity problem is Ownify. Using the Ownify app, brands can generate unique 2D barcodes or NFC tags to serve as distinct identifiers for their products, linking them to a corresponding NFT, even if the products themselves are not serialized and then display it on the open blockchain for anyone to verify their products are genuine. The end user can follow the path of an item throughout its entire lifespan, even after it has been resold on the second-hand market.
Ownify tracks and facilitates the easy transfer of these NFTs in its one-stop app for Mac and Android, providing an additional layer of security, transparency and data privacy not found on third-party NFT marketplaces, meaning customers are protected against loss, theft and fraud.
“NFTs have moved out of the realm of speculative JPEGs and are now showing real-world utility in a number of industries,” said Ownify CEO and founder, Khaled Samin.
“With little-to-no overhead costs and no need for middle-men, applying NFTs to the retail authentication sector has the potential to introduce levels of efficiency and security we’ve never seen until now,” Samin added.
In the retail sector, it is estimated that the global market for NFTs will reach $9 billion by 2024, according to a report by Zion Market Research. This growth is driven by increasing demand for unique and authenticated products, as well as the emergence of new use cases for NFTs in industries such as gaming, art, and collectibles.
NFTs and blockchain technology have the potential to significantly improve upon and refine the concept of authenticity certificates. They provide a tamper-proof record of ownership and origin, making it more difficult for counterfeiters to replicate products. As the global market for NFTs continues to grow, it is likely that we will see more companies adopt this technology as a means of providing customers with a guarantee of authenticity for their products.