Counterfeiting has been a global threat to companies in all industries for centuries. From fake handbags of the most popular designers, bought during vacation, to the imitation of machine parts or electronic components — no industry is 100% protected against incidents of fraud. The total damage caused by product piracy is estimated to be as much as 2.5% of the value of global trade, which means a loss of 461 billion US dollars per year. In addition to many organizations specialized in taking actions against this challenge, it is also the responsibility of affected companies themselves to arm against this problem and develop appropriate anti-counterfeiting and security strategies.
The prevailing challenges
Forged products are often of inferior quality compared to the original product but the standard of counterfeiting has become so high over the years, that it is often only noticeable after a certain period of time, still resulting in poor value for money despite the supposed low price. Buyers of these products will associate the poor quality with the original brand, share the bad experience with others and won’t recommend nor buy the products of said brand anymore. Besides damaging the brand image, this can also lead to lost sales, higher repair costs and additional costs for battling against product piracy. Furthermore, especially with electronic devices or other mission-critical components, counterfeiting can result in security and safety threats.
Indications for forged goods are uncommon market prices and the supply of products through previously unused distribution channels. Unfortunately, the clear identification of counterfeit products today is often only possible for specialized experts because as quickly as manufacturers are trying to make their products counterfeit-proof, pirates are working to bypass these measures and bring increasingly better imitations onto the market.
How filancore addresses product piracy by using SSI
The concept of Self-Sovereign Identities (SSI) and the associated standards Verifiable Credentials and Decentralized Identifiers is a promising approach to improve the situation and resolve some of the challenges surrounding product piracy.
In public institutions and companies, ID cards (e.g. passports, social security cards, and employee ID cards) are often used to identify people. But like bags and machine parts, ID cards can be forged as well. Unfortunately, this problem also exists in the digital world for everything and everyone able to hold an identity. To address this issue not only for people but especially for devices and machine components Self-Sovereign Identities and Verifiable Credentials emerged. All devices and machine components holding a Decentralized Identity build trust between parties by using a set of tamper-proof asserts that cryptographically prove the identity of the holder and issuer. The holder keeps the data and can share a Verifiable Credential with another party to identify themselves whenever its needed. To make this easier to understand, we have following example for you:
A manufacturer of machine components is struggling with product piracy. To overcome this challenge, he wants to make his parts more counterfeit-proof by implementing SSI. Now the filancore Identity Gateway comes into play.
During the production of the machine part, a secure hardware chip or a piece of software on the component with an identity is applied. This identity is unique. At the end of the production process, this identity is registered on a Distributed Ledger (Blockchain) by the filancore Identity Gateway. The manufacturer issues a Verifiable Credential, which is stored on the chip. This credential confirms the origin and authenticity of the component and may contain attributes inherent to the manufacturer, customer or product depending on the application. If the component is installed in a smart device, the smart device is able to verify the authenticity itself by reading out the Verifiable Credential. However, if the device is not smart and therefore not able to read out the chip itself, it can be read out manually. Should a complaint arise, this allows the manufacturer to determine the authenticity of the part & counterfeits can be immediately identified.
The use of SSI & the decentralized storing allows counterfeits to be detected more quickly. Furthermore, by using Self-Sovereign Identities, Verifiable Credentials and a Distributed Ledger (Blockchain), this process is particularly secure, as it can be conclusively verified that this part comes from the original manufacturer or has even been further processed / refined by other companies. An additional advantage of SSI is, that the damage suffered due to forgeries is minimized, as each part of a production series has its own identity. In the event of product piracy, this does not affect the entire production. It helps to reduce the damage a company suffers, both in terms of the financial aspect as well as the brand identity aspect.