Can Block Chains Really End Up Shanzhai Luxury?

Recently, the world's largest fake LV case was broken, which once again amazed people about the rampant fraud of luxury goods.
In the case, after the completion of production in Shanghai and Guangdong, the bags were accompanied by counterfeit certificates and import customs declarations, which were shipped to Dubai, UAE. They were sold by discount on genuine items, and sold to many countries at the price of tens of thousands of dollars. Fake package from appearance to handle, almost false, the factory price is 1/30 of the genuine. That is to say, even if you buy luxury goods abroad, you can not escape the risk of counterfeit goods.
All along, the fake market is a huge Hidden Reef in the middle and high-end consumer goods market. Driven by huge profits, it not only causes high economic losses to brands and enterprises, but also continuously erodes the order of the entire retail industry. According to the 2018 global brand fake report released by market research firm Research and Markets (Global Brand Counterfeiting Report 2018), the total loss of global counterfeit products in 2017 amounted to US $1 trillion and 200 billion, which is expected to grow to US $1 trillion and 800 billion in 2020. The counterfeit and shoddy industries in online and offline channels have caused a total loss of 98 billion US dollars in the high-end consumer goods market.
When market regulators, businesses and consumers are unable to solve the intractable problem of anti-counterfeiting and counterfeiting, the block chain technology, which has springing up in recent years, has made the whole industry see the opportunity to realize "real, transparent and secure".
Take luxury goods giant LVMH and Richemont as an example, LVMH started working with Microsoft and last year, based on the development platform of Consensys group, which is based on the Ethernet platform (Ethereum), and launched Consensys chain traceability platform for code AURA in May this year. The project is designed to use block chaining technology to identify counterfeit products by tracking the source and circulation experience of high-end luxury products. LVMH plans to apply the technology to its more than 60 high-end brands, and further extend to other non brand brands in the industry. LVMH's rival, Richemont, began its collaboration with French chain chain start-ups last year, and announced in May this year that the block chain technology will be applied to the Les Collectionneurs collector series of its luxury watch brand Vacheron Constantin (Vacheron Constantin), which was successfully launched in May at the fourth emerging digital technology trade exhibition Viva Technology in Paris.
Vacheron Constantin Les Collectionneurs collector series will take the lead in using block chain anti-counterfeiting technology.
In addition to high-end luxury goods, street and tidal culture industries represented by tidal shoes are also the hardest hit areas of counterfeit goods. In recent years, the sports shoe trading has become a rapidly expanding emerging market. Highsnobiety, a popular media agency, released a report on the second hand footwear industry released earlier this year, showing that the global secondary shoe market has reached US $6 billion. According to Grand View Research, an American market research firm, the global market for sports shoes is expected to reach US $95 billion by 2025.
With the flourishing of the fashion culture and the increasing popularity of the "hot shoes", huge profits are also feeding the increasingly rampant industrial chain of counterfeiting and counterfeiting. The increase of distribution links and resale times has greatly increased the difficulty of businesses and law enforcement agencies against counterfeiting and shoddy goods.
Faced with such consumption chaos, many enterprises and technology R & D organizations began to explore the feasibility of applying block chain technology to the field of Chao Pai dress. The block chain application development platform Swell launched the SneakerCoin project, and developed the NFC block chain encryption chip with the block chain platform only chain (VeChain), and implanted the chip into the product, enabling the enterprise to trace and manage the whole production process through the chip. At the same time, consumers can directly use smart phones to close the chip to identify the key, and get the complete flow information from the production to the retail sale of the purchased goods, so that the trusty authenticity can be identified more conveniently and independently.
Not only that, consumers can also declare the "one-by one" ownership of the purchased products on the block chain, and this information will always be accompanied by a unique product permanently recorded on the block chain. When the product is traded for two times, the product owner can also transfer ownership to the product through the block chain, and the buyer can also trace the change records of the product through the block chain.
At present, this chip has been implanted in Nike, CONVERSE, Adidas, Innersect x Clot x Fragment, Alyx, Opening Ceremony, Neighborhood x Dr., and so on. It has guaranteed the authenticity of fashion clothing products, especially the limited amount of products, effectively avoiding the risk of counterfeit goods caused by complex market circulation.
Five advantages to innovate trust mechanism
Block chain, in the eyes of most consumers, is a new technology with high topics in recent years. It is also a very profound and obscure academic term. Whether it is a humble bar code on the product, or made of stickers, buttons, labels, and thin silicone style chips, it seems that there is not much difference between the appearance of the two-dimensional code and the RFID tag.
NFC chip is implanted on commodity labels for consumers to conduct anti-counterfeiting verification. Picture source: Swell
The traditional two dimensional code and RFID are set up and held by the brand side or the technology related suppliers. In essence, they are centralized data management systems, which means that data can be duplicated and forged. In addition, the barcode information and commodity objects attached to goods are not "one to one" relations. This "non unique" logo can only be subdivided into the level of product models. It is easy to generate goods in the layers of production to distribution, which further increases the risk of information being falsified and forged.
The uniqueness of data is one of the greatest advantages of block chain technology from traditional authentication technology. Through block chaining technology, every product has a "unique" identity information from the moment it is produced. It contains details of every link of the product from production, logistics, to market circulation, distribution, and even resale.
"When the product is produced, the corresponding block will record the information of the product. In the environment of Bluetooth or WiFi devices, all distributed accounts will use the nearest block chain nodes to register their own information regularly, so as to achieve logistics tracking. When any number is recorded in any block, the other blocks on the block chain will record identical numbers at the same time. Similarly, this bag is transported to the channel, terminal and store by logistics company. Every link in the middle, including the transport side, the departure warehouse, the warehouse, when to start, when to arrive, the information of the operator and so on, is uploaded and stored again in real time, "Cai Wanyu, founder and CEO of block chain consultant Panony, told BoF.
For example, Martine Jarlgaard, a designer who has been committed to sustainable fashion, began working with block chain technology company Provenance in 2017 to cut the wool from farms to transport the raw materials to London studios, then to the whole process of spinning, weaving and packaging to achieve full transparency of the entire production process.
These interlocking data are recorded in different servers in the world, forming a distributed, multi node, information synchronized public account. Every link of product from production to circulation has become a block chain data node. The information exchange between block chains is carried out directly between two nodes. There is no centralized data processing center, nor does it need data management by third party.
This de centralization eliminates human intervention from technology and ensures the equality, impartiality and integrity of data under the constraints of many nodes in the chain.
Martine Jarlgaard tracks and records the whole process of production and circulation through block chain technology.
At the same time, this multi node data storage and management mode ensures that the information in the block chain is distributed and distributed, and every node has a complete account book stored synchronously, and all historical data will be recorded. In other words, the information recorded in the account will only increase and not decrease, and the data will not only be untampered, but also non repudiated.
"If anyone wants to counterfeit, more than 51% of the nodes in the network will be recognized before they can be changed and recognized and recorded. And the cost of counterfeiting is so great that the counterfeiters don't have room for profit at all, "Cai Wanyu told BoF." every data can't be created out of thin air, nor can it be erased. If we record it on the chain, all historical data can not be tampered with.
Because all nodes on the block chain are involved in data recording, each node has the same data record and backup. Even if a single node modifies some data due to human errors or malicious operations, the other nodes still have complete and correct account books. The system automatically corrects the error information according to rules and references to most account records, synchronizing the correct account books to the nodes with existing problems.
Therefore, unless we can control more than 51% nodes in the system, even if there is a problem of data recording in a single node, it will not affect the data of the whole system and other nodes. This operation mechanism has greatly improved the security of the system and effectively avoided the risk of human error, hacker attack and other illegal information tampering.
In addition, most other traditional data storage systems are difficult to balance security and transparency. In practical applications, in order to protect data security, access to and management of databases is mostly in the hands of a single organization, but at the same time, it also sacrifices the transparency and openness of data management to a certain extent. The technology of block chain storing and managing data through many nodes provides a safe and impartial solution for this dilemma.
"For example, the development alliance chain, enterprises can have access to centralized system, and the system itself has a certain degree of encryption audits and security," Cai Wanyu told BoF. At the same time, any node on the block chain can query and trace information, ensuring the openness and transparency of all the data stored on the chain.
How to solve the four major problems
Although the security technology based on block chain has five advantages: Data uniqueness, centralization, non tampering, traceability, security and transparency, it is not a panacea to cure the disease. There are still many difficulties and challenges to be overcome in the process of block chain project from theoretical conception to reality landing, and some unavoidable application limitations are also faced.
First of all, the technology of block chain, one of the main advantages of "de centralization", is difficult to achieve complete centralization when the actual project is landing. On the one hand, because of the data security considerations, many enterprises still use the so-called "private chain with permissions". Only authorized users can access, input, verify and manage data. Although the private chain can make the system data more secure, it also means the centralization of data management. The fairness and authenticity of the data still depend on the integrity and norms of the enterprise itself. For the vast number of consumers, this obviously weakens the openness and transparency of the block chain technology.
On the other hand, some enterprises will adopt the way of introducing the third party identification and anti-counterfeiting organization, and intend to play a role of supervision and balance. For example, the anti-counterfeiting project developed by Arianee, a French block chain start-ups co operated with Richemont, will join the third party community into the connection between commodity owners and brands, and carry out three party information interaction. However, this practice has been questioned by the LVMH group, because block chain should be the technology to eliminate intermediaries and replace human identification. The third party's intervention in the market is likely to aggravate the interference of human factors and weaken the objectivity of technology itself.
LVMH Group believes that building a block chain industry alliance is more important than just developing an anti-counterfeiting App. LVMH is currently developing and promoting the AURA block traceability platform project plan, which will share all its related intellectual property rights in the form of an independent company to all brands participating in the AURA plan, hoping to attract more luxury enterprises and brands to participate and cooperate.
In the past, the apparel and luxury goods industry has long been short of supply chain transparency, and businesses are unwilling to disclose their supply chain information. This can avoid competitors' imitation competition, vicious competition, and also facilitate the brand to maintain a sense of high-end and mystery in the minds of consumers.
However, the final application effect of block chaining technology largely depends on the coverage of the technology in the whole life cycle of the product, production, processing, logistics, warehousing, distribution, retail and resale. Each link is closely linked, and work together to facilitate a block chain cooperation alliance and industry standard to reach the consensus of the whole industry in order to promote the whole process of anti-counterfeiting in the fashion industry.
It is worth learning that the world's largest diamond mining company, the diamond giant De Beers, launched the diamond industry's first block chain project Tracr in 2018 to track every change in the process of every diamond from exploitation to sale in the 2018. The success of this project can not be achieved without the participation of many industry leaders from mining, processing, and sales, including the world's most popular diamond retailer, Signet Jewelers, Russian diamond giant Elsa (Alrosa), Zhou Dafu group, the largest jewellery company in Hongkong, and the world's largest diamond processing site, India Venus jewelry company (Venus Jewells) and blue rose company (Rosy Blue).
Zheng Tian, the founder of block chain application development platform Swell, believes that technical consensus is only the first step to promote large-scale application of block chaining technology, and ultimately needs to form a business consensus.
"When more and more enterprises are willing to integrate block chaining technology with existing businesses, an open platform can achieve commercial value in series, separate from information islands and gradually form a new business mode," Zheng Tian told BoF. "A common industry standard can provide strong protection for enterprise development in the chain. Enterprises can voluntarily participate in some industry standard setting, so that every participant can become a value harvester in the new business ecosystem. This is inevitable as the scale of chain chaining is increasing.
In addition to how to truly centralization and realize the problem of industry alliance, block chaining technology also faces the technical bottleneck of "three paradox" for a long time. No one block chain system can simultaneously take into account the three requirements of performance, security and centralization. One of them often needs to be sacrificed. Although many solutions have been put forward in the industry, including increasing block size to enhance transaction processing capability, using indirect isolation to witness indirect expansion, improving performance through piecewise technology, and cross linking technology, how to technically achieve "efficient, low-cost, safe and decentralized" is still in the process of exploration.
Therefore, the existing block chain technology is more expensive than other traditional anti-counterfeiting technologies. At present, many chain companies in the retail industry achieve product traceability by embedding NFC chips. The VeChain CEO Lu Yang believes that the use of NFC chips will increase the cost of products, so it can only be applied to products with relatively high unit prices.
In addition, the whole process of data chain security in a product needs to be completed by multiple nodes. It needs bandwidth, storage space, human resources and so on, and these costs will ultimately be borne by businesses and consumers.
"Obviously, such a high cost is not what all consumers and businesses are willing to pay. Especially in the current luxury industry, in order to gain more market, the trend of fast consumption and de elite development tends to be reflected in the performance of commodity prices. If we use block chain anti-counterfeiting technology, we will significantly reduce the profit margins of merchants, "Cai Wan Yu told BoF.
Based on the cost considerations, whether consumers are willing to pay for the block chain technology will directly affect whether or not the merchants adopt this technology. But at present, most consumers do not understand the technology of chain block anti-counterfeiting and its significance, which further increases the difficulty of promoting the technology of block chain.
Zheng Tian believes that the Blockchain as a Service, or BaaS, which provides services directly to consumers, such as Swell, can educate and promote terminal consumers' understanding, understanding and active requirements for chain awareness, awareness of "right to do" and self-control of their assets, because block chains give each individual the ability to control their assets independently, allowing users to "make sure" of their products. This kind of "right" appeal from consumers will, in turn, require retailers to provide consumers with the "right to do" service. After knowing the needs of consumers, retailers will be able to reverse the requirements of distributors and then to the brand side to link the complete authorization and transaction information to the whole link chain of the entire supply chain.
Consumers use smart phones to identify NFC chips for detailed product information. Picture source: PANews
Therefore, compared with the use of block chain technology in the internal management of enterprises, the development of a direct consumer oriented block chain anti-counterfeiting platform or mobile phone App may be more conducive to enhancing consumer awareness of the chain of blocks.
Most consumers may not understand the technical principles behind the three words of "block chain". However, meticulous and interrelated product traceability information enables them to intuitively feel the integrity and authenticity of technology as the cornerstone, and strengthen their sense of ownership of products, as well as their sense of trust and identity toward brands.
When the trust system based on individual morality and institution standard is no longer reliable, block chain technology builds a trust mechanism based on machine trust and technology neutrality. It is true that there are still many technical bottlenecks and application limitations to be solved in practical application scenarios, but block chaining technology enables enterprises and consumers to realize the possibility of "eliminating the false and preserving the truth" step by step.