Blockchain in China’s Future: Avoiding Counterfeits

With the emergence of cryptocurrency Bitcoin in 2009, online consumers realized that the decentralized currency increased anonymity and allowed people to partake in illicit and untraceable trade. This completely removed the middle man and allowed online transactions without the use of regulatory middle men or exchange bodies.

Essentially Blockchain distributes permanent records of transactions (called blocks) in real time, to all users of Blockchain. “The blockchain is an incorruptible digital leger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value” Don & Alex Tapscott write in their book, Blockchain Revolution.

The key concept is as follows: blockchain “blocks” cannot be copied, it reveals the source for all products from the source directly to the computer in real time and can be used for buying anything with or without an intrinsic value [www.blockgeeks.com]. The “chain” is where the data established by transactions is placed and is permanent and can be checked at any time at any moment throughout the process.

 Source: www.blockgeeks.com

Source: www.blockgeeks.com

Take an example of a paper with some simple text on it. If you make several hundred individual copies the message itself will stay clear – concise – perfect. No obscurity and the reader will be able to identify exactly what the writer was aiming to deliver as a message, a very clear message. Now take a separate example of the same piece of paper being copied over and over – several hundred times. The person copying can potentially edit the paper while it’s being copied, stray dust can get into the machine and inevitably the quality of the copy starts to deteriorate and distort the message before it’s delivered to the reader. Standard supply chains work in a manner akin to this, where a supplier manufactures or obtains a product, delivers it to a third-party company it usually has an agreement or contract with then ships it to the consumer. The process is kind of a gray area when it comes to standard of quality because the middle-man can potentially use the lack of transparency to try to cut corners and sacrifice product safety or quality assurance.

With emergence of blockchain being used on a wide-scale in China, this entire process will become entirely transparent and cause an evolution of supply chain management – for both the consumer and the producer.

So, in theory this could be the foundation for online transactions to be authenticated and verified, especially for rising markets with problems with authentic products and unclear standards of production like in China. Alibaba has filed more blockchain patents than any other company in the world, and recently created a blockchain supply management project called the Food Trust Framework [www.atimes.com]. This is just in an alpha stage, but if applied correctly this could track and manage the production of food and be applied to a collection of widespread products consumers use every day – without them having to worry about the source, process, or authenticity.

While on paper this entire process seems like it can’t be duplicated, edited, or replicated, leaders in the market claim that the application of blockchain supply chain will be far more complicated to maintain and apply. “Brands in categories such as foods, baby and maternal, liquor, and luxury products are eager for traceability” which could give Alibaba a foothold on the market where fakes are so prevalent [www.techinasia.com].

On the other hand, there are problems with implementation and coordination that arise when discussing real-world application. Companies that use blockchain will have to coordinate every single phase – from beginning to end – and would be required to add in additional steps to supply chain management. Take the example of fresh meat or milk powder from Australia or New Zealand imported into China. Companies coordinate flawlessly from start to end and the consumer receives the product and scans the QR code that reveals the origin and process of how it got to them. But what wasn’t recorded using blockchain was the contaminated environment the product was made, or how fluctuations in temperature caused the milk or meat to spoil along the way. The process might potentially harm consumers that place their trust entirely in blockchain and could result in more being swindled or even becoming sick. So, using blockchain in China has the potential to cure some other problems – and give birth to an entirely different echelon of product supply management.