IBM Research-Zurich

Crypto anchors and blockchain: a strong alliance against supply chain fraud

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If you are a wine collector, chances are your vintage bottle doesn’t contain the rare, expensive wine it is supposed to. The same goes with consumers of extra virgin olive oil or expensive brands of whiskey. While counterfeits of luxury goods are a nuisance and can cause sizable economic loss, there are even worse sorts of fraud involving much more sensitive goods. Taking a fake pill instead of the authentic one, for example, can have fatal consequences. And most people would not board an airplane knowing that the electronic parts in the cockpit could have been tampered with along the manufacturer’s supply chain.

Counterfeiting and fraud cause the world economy significant harm. An OECD report issued in March placed the losses due to counterfeited goods at 509 billion US dollars, which amounts to 3,3 percent of global trade.

Forged and altered goods enter the stream of global trade at different points along often complex supply chains spanning dozens of countries. The difficulty of authenticating and tracking myriads of traded items throughout their life cycles is further compounded by the fact that each one of the actors involved uses their own technology to manage and secure transactions.

Connecting the physical and digital worlds to fight fraud

IBM Research is developing a framework to enhance security, transparency and efficiency in supply chain management. The solution consists of 3 layers: A blockchain to digitally store and track transactions and ownership rights, a layer of crypto anchors attached to or embedded in the actual trade goods connecting their digital identity to a physical support, and finally, a blockchain platform in between that allows the seamless integration of different crypto anchor embodiments into one single blockchain backend.

The layer on the digital end of this triad, the blockchain, is likely known to many. However, they might think of it simply as a fintech technology. Blockchain technology has recently gained increasing public attention for providing the underpinnings for cryptocurrencies like Bitcoin. However, blockchain is not just about cryptocurrencies. Essentially, a blockchain represents a distributed digital ledger secured through cryptographic techniques in a way that transactions are permanently recorded and time stamped. A blockchain thus allows for auditing in nearly real time by any participant without having to trust a centralized third party. The high security level promised by blockchains makes this technology especially attractive for supply chain management. But real end-to-end trust in supply chains is only possible if the digital trust provided by Blockchain is connected with the physical world where the material goods are traded.

Crypto anchors – warrants of identity in the physical world

This is where the concept of crypto anchors comes in. We define crypto anchors as some sort of physical tag or property that may be inherent and unique to an object or entangled with it on purpose during the production process. There are several possible variants of crypto anchors but their common quintessential property is that they represent a physical link to a digitally stored unique identifier of the object which can’t be forged, tampered with or removed and transferred to another object without destroying the crypto anchor, the object itself, or without leaving visible signs of the tampering attempt. Examples of possible crypto anchors can include a smart tag strongly attached to the object, a specific pattern on the surface of a piece of fabric, the optical signals produced by reflecting light off a diamond or even microscopic variabilities arising from inevitable randomness in the manufacturing of an electronic component. Each form of crypto anchor requires a class of reading device providing a cryptographically secured way to test whether the information encoded in the crypto anchor corresponds to the unique identifier stored in the blockchain.

The glue between crypto anchors and the blockchain

The intermediary layer, i.e. the blockchain platform provides a special API connecting the different types of crypto anchors and reader outputs to a common blockchain. This platform is of paramount importance in order to increase flexibility, efficiency and ease of adoption in a complex ecosystem of manufacturers, suppliers and retailers. It would be too complicated should each crypto anchor technology and the related reading devices need a separate reader infrastructure, connection layer, and blockchain to communicate with. The intermediary blockchain platform’s role is therefore to serve as a sort of translator that enables communication between a single backend blockchain with different crypto anchor technologies.  Furthermore, developers can write applications on this blockchain platform that are compatible across all different crypto anchor technologies which further increases efficiency and flexibility in the use of the system.

We are currently working in partnership with crypto anchor vendors to take this 3-layered system a step closer to commercialization.

One example is our collaboration with Austrian company Authentic Vision. Its technology consists of  a unique holographic fingerprint (patent protected) that can be produced only once, and a mobile app. The app, which works on any smartphone based on computer vision technology, reads the holographic fingerprint and instantly authenticates the product, without any reliance on the human

tesa scribos is using IBM crypto anchor technology to authenticate and trace products.

eye. Using next generation void foil materials makes the Authentic Vision security tag tamper evident, and the authenticity of the physical product can automatically be verified with any smartphone.

Another crypto anchor vendor we are partnering with is tesa scribos. To provide reliable identification of physical goods, tesa scribos developed their product marking tesa ValiGate which is copy-protected and authenticated automatically without human error. This way, physical products communicate safely and automatically with their blockchain twins, turning this technology into real benefit for consumers and brand owners.

Fraud and counterfeit are huge challenges in today’s globalized trade and their damage can not only mean economic losses but also significant health and security risks. By providing an end-to-end solution connecting the physical world of traded goods with the digital world where their identities are tracked throughout the entire lifecycle, we aim to contribute towards a solution to this pressing issue.

Gero Dittmann

Research Staff Member at IBM Research – Zurich

Miguel Angel Prada Delgado

Postdoctoral researcher at IBM Research – Zurich

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