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Anti-counterfeiting blockchain app demoed at Shanghai Fashion Week

The bi-annual Shanghai Fashion Week is packed with almost 50 shows. As part of both the Shanghai International Fashion Culture Festival and supported by the Ministry of Commerce, the event is a growing business and a cultural event hosted by the Shanghai Municipal Government.

The bi-annual Shanghai Fashion Week is packed with almost 50 shows. As part of both the Shanghai International Fashion Culture Festival and supported by the Ministry of Commerce, the event is a growing business and a cultural event hosted by the Shanghai Municipal Government.

During this years event, from October 12 to 19, cult fashion brand BABYGHOST demonstrated how far blockchain technology now reaches. The independent fashion brand is lead by Qiaoran Huang and Joshua Hupper. Nylon Magazine calls it, “A grungy mix of East meets West, with influences hailing from New York City’s downtown neighborhoods and Huang’s native China.” The publication claims over 1 million readers and states BABYGHOST is, “The up-and-coming brand to look out for.”

The company debuted its 2017 Spring and Summer collection at this years event, complete with blockchain-enabled Near-Field Communication (NFC) chips, and an anti-counterfeiting smartphone app called VeChain.

“VeChain offers not just the emergence of blockchain technology and fashion, but arguably the most seamless pairing of this concept so far.”
— – Joshua Robert Hupper, BABYGHOST Founder

VeChain is the flagship product of a Shanghai-based blockchain startup called BitSE. The company was founded in 2013 by ex-employees from IBM, Louis Vuitton, and Alibaba. The company opened a blockchain lab in 2015, where they research distributed consensus, DAPPs, and smart contracts.

BitSE’s overall aim is to build blockchain applications that everyone can use. “Blockchain has become a disruptive technology, but it is really difficult for most people to understand,” said Sunny Lu, BitSE COO. “We believe blockchain can change the world.”

The company formed a strategic alliance with PricewaterhouseCoopers (PwC) in June, to accelerate the use of blockchain in China and Hong Kong.“Our alliance with BitSE will ensure that we supplement PwC’s market leadership position with a deep technical capability to help our clients design and implement innovative blockchain solutions," said Jim Woods, PwC’s Risk & Regulatory Services Leader for Asia Pacific. BitSE is also a member of the Hyperledger project.

The company released the VeChain blockchain NFC, Android Mobile App, and Product Management Platform in July. The anti-counterfeiting platform applies a unique ID to individual products or items, using an NFC chip. Mobile devices can communicate with the VeChain chip located inside the item, which holds a unique public and private key pair.

The public key is also stored in the blockchain, where it can be verified by the app. The app verifies the public key with the VeChain servers, which will confirm if the signed public key is genuine. 20 BABYGHOST outfits and 80 handbags were embedded with a VeChain chip for Shanghai Fashion Week.

“VeChain is cloud product management solution integrated with blockchain technology enabling clients and end consumers to manage and verify product information in an immutable database. VeChain puts unique product ID’s on the blockchain to power supply chain management, asset management, client experiences and anti-counterfeiting solutions.”
— – BitSE

While VeChain is aimed at  Luxury Retail, an industry that is faces severe counterfeiting problems, the FBI, Interpol, World Customs Organization and International Chamber of Commerce estimate that seven to eight percent of global is in counterfeit goods. This translates to roughly US$512 billion in lost sales, between $200 billion and $250 billion of which is from U.S. companies.

The U.S. Department of Homeland Security states that there were only about 15,000 Intellectual Property Rights (IPR) seizures in 2016, compared to 28,865 in 2015. 49 percent were from China and 34 percent from Hong Kong last year. Apparel and accessories has consistently been the category with the largest number of seizures, accounting for 22 percent of the total.

Counterfeiting market Oct 2016

Last May the Director of the ICC initiative Business Action to Stop Counterfeiting and Piracy (BASCAP), Jeffrey Hardy, urged brand owners and intermediaries to work together with their business partners to stop counterfeit goods entering the global supply chain. Speaking to over 550 participants at the Annual Spring Conference of the International Anticounterfeiting Coalition (IACC) he said, "Industry needs to develop a sense of urgency for the war on counterfeiting.”

"Counterfeits have crept into legitimate online platforms and it’s nearly impossible for shoppers to determine what’s real and what’s fake. Industry cooperation would help reduce the risk of illegal content that violates intellectual property rights. At the end of the pipeline, it’s the customer who’s harmed by fakes and it’s the brands, artists and creators whose reputation and trust that are jeopardized."
— –  Jeffrey Hardy, Director of the ICC initiative BASCAP

Brands are also frustrated that e-commerce websites are not doing as much as they can to crack down on counterfeit goods. CNBC’s Ari Levy recently explored  how Amazon’s Chinese counterfeit problem is getting worse. More than 40 percent of Amazon’s unit sales now come from its third-party marketplace, with sales from Chinese-based sellers doubling in 2015.

"Amazon is making money hand over fist from counterfeiters, and they’ve done about as little as possible for as long as possible to address the issue," said Chris Johnson, an intellectual property and brand enforcement attorney at Johnson & Pham LLP. Furthermore, Amazon let manufacturers send their goods to Amazon’s fulfillment centers and orders are then fulfilled by Amazon, making them seem legitimate to consumers.

Chinese e-commerce giant, Alibaba, has also come under fire for counterfeiting problems. The company’s co-founder, Jack Ma, reportedly said that fake goods can be, "Better quality," and cheaper than authentic goods.

A contributor writing for the World Economic Forum, Andrea Stroppa, states that Instagram is filling up with fake goods. He identified over 20,000 accounts had collectively posted more than 14 million photos of counterfeit goods. “About 20% of the Instagram posts related to fashion brands feature illicit and counterfeit items,” Stroppa wrote, “The online market for counterfeit and fake luxury goods is clearly on the rise.”

“The counterfeit market directly affects many brands and companies, often resulting in profit loss and employee layoff, thus damaging entire supply chains.”
— – Andrea Stroppa, World Economic Forum

BlockVerify was among the first companies to use a blockchain to takle counterfeiting, with a focus on Pharmaceuticals, Luxury goods, Diamonds, and high-end electronics. "We believe in the potential of blockchain technology to improve anti-counterfeit measures in different industries and have a significant positive social impact," states the company.

Provenance is perhaps the most advanced blockchain startup hoping to to restore consumer trust. The company recently completed a pilot project to track fish, from the fishermen in Indonesia that pulled them out of the ocean all the way to a grocery store display in London.

Ascribe uses supply chain management to tackle counterfeit artwork, while allowing digital reproductions to be one-of-a-kind. From their website, graphic artists can protect their work, market it to potential clients, and verify the authenticity of copies online.


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