How To Check Brands’ Defraudation With The Blockchain

The blockchain is coming to the rescue of consumers especially as regards proving the ethical and legitimate sourcing of raw materials. It’s no longer news that the blockchain as a distributed ledger has made its way into a number of industries and has effectively found interoperability in every sphere of work.

Consumers purchase goods on the premise that what the brand has promised is what they will get, most times this is not the case and the consumers are left dejected and frustrated. This seldomly is the fault of the brands since they depend on outside sources to procure their raw materials.

When you depend on suppliers for raw materials, you are most affected by this type of fraudulent deceits. Ordinarily, you are expected to maintain your brand promise and value proposition, in order to draw attention to your brand, maximize brand loyalty, and retain your customer base, however, you are often left at the mercy of suppliers who tend to defraud you into believing in the “singleness” of your raw material and cannot be any the wiser.

One area that quickly comes to mind is where suppliers make you believe that you are purchasing single-origin raw materials such as single coffee and single-vineyard vines and you go on to label your products “single.” Brands err on the part that they overlook the serious need to record all the values and transactions with their suppliers for transparency and are therefore facing the inconsistency of information and overlapping issues all the time.

Single malt for scotch, single vineyard for wine, and single origin for coffee are terms that brands use to signal and market higher quality products. Single malt or single grain indicates that the blends of whiskey are from a single producer, while for wine, single vineyard means that the wine is fermented from a certain block of a vineyard or the entire vineyard where all the fruit or at least 95% of the grapes is grown.

The term single origin for the coffee industry actually lacks an official definition notwithstanding that single origin still represents the pinnacle of quality, character, and price in coffee. Single origin beans are by all standards specialty coffee which is delicately picked by hand, usually in small farms in far-flung equatorial countries and this is the basic reason suppliers can easily defraud brands that have no means of assessing the true quality of their coffee source.

To be capable of ascertaining the single origin of any supply, brands really must make meaning of the complex data from different sources, and clearly, this can be a considerable headache for novice brands. This is where you have to turn to blockchain technology to enhance your brand strategy, as well as keep your promises to your consumers, by relying on the blockchain transparency to verify your supply source.

While it may not be easy for end consumers to access blockchain logistics apps, logistics and supply chain management tools for brands have emerged. In mid-2018, American retail giant Walmart came up with a blockchain-based platform designed to track the source of their fresh produce from farm to shelves.

The beauty of the blockchain technology in combating frauds is that you don’t need to have a point-to-point contact with your suppliers, you can independently verify their information on the blockchain ledger. Since no single participating member can lay credit to the source of origin for the data that is contained in the shared ledger, blockchain technologies have brought about an increase in the trust and integrity that are inherent in the flow of transaction information among the participating members.

Integrating the following four indisputable features of the blockchain will place brands in good stead to check defraudation.

1. Blockchain can be permissioned

Businesses that have to do with supplies and raw materials essentially deal with a lot of confidential data that should be guarded jealously and as such, they just can’t allow anyone from the blues to have access to it. They must, therefore, do everything possible to ascertain that outsiders can’t find a way of tampering with the network while insiders also can’t introduce any form of corrupt data into the records.

This is why permissions are of utmost importance in the blockchain technology but rather, unfortunately, not all blockchain networks are permissioned. However, as the case might be you can effectively check defraudation since permissioned networks can restrict who can access your data and in what capacity.

Before members of a permissioned network can be allowed to contribute, they are usually invited and vetted. Two important aspects of a permissioned network that will work magnificently for you are controlling access and identity management.

Participants should necessarily be issued cryptographic membership cards to represent their identity. The membership card serves the purpose of granting access to see the transactions that pertain to them.

This in no way means that the accredited participants have the right to add to the blockchain without consensus, and they can’t tamper with the records on the blockchain because they are wholly encrypted. Permissioned networks ensure that any fraudulent activity will be easily discovered since tracks left by fraudsters will be blazing.

2. Blockchain is distributed

A blockchain as a type of distributed digital ledger contains transaction data that is shared across a peer-to-peer (P2P) network and is continually updated. Apart from the fact that there is no central administrator or centralized version, there is also no single point of failure.

A big plus for the blockchain is that management and authorization are distributed across the network, so there is no obvious point of entry for anyone to initiate a fraudulent act. Member nodes in a blockchain network use a consensus protocol to agree on ledger content, as well as cryptographic hashes and digital signatures to ensure the integrity of transactions.

The consensus protocol is to establish that the shared ledgers are exact copies and not corrupted. It reduces the risk of fraudulent transactions to the barest minimum because tampering would have to occur across many places at exactly the same time.

Using cryptographic hashes, such as the SHA256 computational algorithm, ensure that once an alteration to transaction input has been made, even when it’s the least possible will give rise to a hash value that’s completely different from the one being computed. This will outrightly indicate that a potentially compromised transaction input has taken place.

Some of the methods fraudulent suppliers of raw materials can use to outwit unsuspecting brands include altering or deleting information in a company’s accounting systems, changing electronic or paper documents, and even going to the extent of creating fraudulent files. When a shared digital ledger is used as is seen in the blockchain, it helps to truncate any attempt at fraudulently changing data due to its ability to increase the visibility and transparency of the transactions that occur within the supply chain of a single origin product and between other associates of the business network.

Since participants are able to vividly see the history and transfer of assets, it’s very easy to detect any attempt at fraudulent transactions. Needless to say that before transaction records can be adulterated on a blockchain, a participant or a group of participants who have the intention to collude must have a controlling majority of the system.

3. The Blockchain is immutable

The fact that transactions recorded on blockchain are immutable because they cannot be deleted or changed is a very good opportunity for your brand to check the nefarious activities of fraudulent suppliers. No new “block” of transactions can be appended to the blockchain without all the network participants reaching an agreement that the transactions are valid through a process of consensus.

It’s only then that the block can be given a timestamp, after which it’s secured through cryptography, and then linked to the previous block in the chain. Though you can create a new transaction to change the state of an asset, it simply gets added to the chain, and the original record will still remain absolutely accessible.

With the integration of the blockchain technology into your business, you will be able to see the provenance of an asset, as well as where it’s coming from, where it has been to previously, and who has ever had ownership of it. Counterfeiting is a global cankerworm, it’s not secluded to only single products, it affects virtually all industries and can be seen in luxury goods, clothing, food products, as well as the pharmaceuticals to mention a few.

Suppliers are aware and capitalize on the fact that it’s a herculean task to ordinarily prove or disprove the authenticity and quality of an asset because traditional supply chains are usually long, very complicated, and lack transparency. However, if the supply chain of your raw materials is placed on the blockchain, your single products will have provenance due to their immutable transaction history, and you will rest assured of introducing any fake or non-qualitative product into the market as a real single product.

4. Increase The Fraud Entry Barrier

The ability of the blockchain to reform the passive way of ensuring wholesale data sharing to include ways to segment data so suitable data is accessed only by those who need it is an added asset that can be utilized to disrupt fraudulent activities by brands. This ensures that before corrupting such a system, a fraudulent supplier would need to go from one identity to another, one at a time, an almost impossible task as compared to having the ability to access a centralized database holding all the information at a single place.

Quite unlike the decentralized nature of the blockchain, a centralized architecture provides a glaring and inviting attack surface with just a single point of failure for identity. When decentralization is effected with the use of public-key cryptography (PKI), it ensures that cyberattacks that lead to mass data adulteration are far less enticing and possible.

Due to the fact that the database within the blockchain is encrypted, only those who have access to the crypto keys can even think of trying to access the information it holds. Blockchain technology safeguards the line of trust by requesting for proof of credentials whenever information is to be accessed, apart from the fact that the approval from the server must be sought, as well as the conformity of the network to grant the request.

It’s overly important that you aspire to keep and maintain your brand loyalty base by ensuring that your single product can stand any quality test, this daunting task by any standard has been reasonably made easy for you. Brands that have resorted to the blockchain technology to enhance their brand strategy, find it easy to keep their promises to their consumers, as well as render transparency, a feat that not many companies can be proud of.

How To Check Brands’ Defraudation With The Blockchain was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.