Using the Blockchain to Track Assets for Proof of Ownership
Counterfeit and stolen goods are a significant problem of global commerce. According to the Economist, “estimates for the total value of fakes sold worldwide each year go as high as $1.8 trillion.”
This results in tremendous losses to product owners without even taking into consideration the deceptive loss for consumers. Further, the resale of stolen goods results in losses for consumers and insurance companies. Every year, the insurance business has to pay out approximately $150 million in relation to jewelry theft.
The problem lies in the inability to truly track real from fake and proper provenance or ownership history. Due to historical and legacy reasons, many industries still use paper to prove whether something is real or whether a particular person actually owns an asset. Paper can be altered. Paper can be lost. When purchasing a diamond ring at a jeweler, it is easy for the corresponding certificate to say one thing, but for the ring to be something entirely different.
This is a problem that has been hard to solve until the blockchain came along.
A fundamental property of the blockchain is that, once something is on the blockchain, it cannot be altered or counterfeited. And a use case that has begun to pop up for the technology is as an ownership verification tool. Once an asset is listed on the blockchain, ownership is immutable unless the owner verifies a change.
One company that is attempting to accomplish this is Everledger, which is targeting the diamond industry first. While the actual diamond cannot be stored on the blockchain, the serial number and data about the stone can be, along with who the owner is.
With diamonds, the color, clarity, cut and carat size can all be stored along with an analysis on dozens of other data points, such as the crown height, girdle thickness, table size, cutlet, pavilion depth, pavilion angle, etc. Each of those pieces of data can be used to then digitize that same diamond.
Once something is digitized, it can be stored on the blockchain. Along with all of that data, the ownership record can be stored along with it.
The market for counterfeit good costs businesses trillions of dollars a year. Right now, it is incredibly difficult to prove that an item is a fake. However, if brands were to start recording their products on the blockchain, it would be far more difficult for a counterfeiter to present his or her product as authentic.
Consumers could then verify that a product is listed on the blockchain – in a user-friendly, non-technical way – allowing brands to generate more revenue and consumers to acquire authentic products.
Everledger is not the only company looking to achieve these goals. In the sneaker market, Chronicled is looking to create a smart tagging system whereby each sneaker would have a tag stored on the blockchain. Users could then ensure that the $300 LeBron James sneakers are, in fact, genuine and not a knockoff.
Verisart, while not yet launched, hopes to achieve the same goal with art. By assigning a piece of art with a unique authenticity code, individuals can ensure that the piece of art is legitimate.
This works is because the blockchain is a public, distributed and encrypted ledger, which ensures that data cannot be changed. With paper, someone can carefully make changes; with the blockchain, thousands of computers prevent data from being altered. And as the chain gets longer, it becomes even more difficult to change data.
While Bitcoin is the first use case that has implemented blockchain technology, the reality is that there are hundreds of other use cases. Preventing counterfeiting and working to eliminate the resale of stolen goods are just a few of the diverse use cases that companies are working on right now.