How NFTs Help Ensure the Security of Physical Goods and E-Commerce

It is undeniable that all emerging technologies have the potential to reshape our lives – but some are certainly attracting more attention than others. In particular, Non Fungible Tokens (NFTs) are revolutionizing many fields, from helping protect patents and copyrights, to streamlining the buying and selling of digital assets.

Over the past months, the $69-million-sale of a Beeple artwork at the prestigious Christie’s auction and the sale of Jack Dorsey’s first tweet have drawn the attention of giants in industries such as gaming and digital art. But most of the potential of NFTs is still unexplored, and this emerging technology is bound to leave its mark in the world of product authentication.

In collaboration with the product authentication experts at Authena, let’s look at how the NFT technology is helping ensure the security of physical goods and eCommerce transactions. Or, find more here about the NFT and blockchain.

What Is an NFT? An Overview

According to Google Trends statistics, searches for “NFT” on Google increased by 1000% in 2021, surpassing the search volume of “crypto” in January 2022. But what does NFT mean? And how is this technology so powerful?

NFT simply stands for “Non Fungible Tokens.” To understand this, let’s start by clarifying what fungible tokens are. If two tokens have equal objective value and can be exchanged without a loss of value, these tokens are “fungible.” For example, two $5 bills are fungible, because they all have the same value.

However, when it comes down to artworks, collectibles, and real-world assets such as real estate, each object has an intrinsic subjective value. For example, a Basketball star’s autographed rookie card can be sold for several million, despite its minimal manufacturing costs, and will have a different value from another collectible card.

This value, which is called “subjective” will depend on factors such as:

• Authority
• Scarcity
• Demand
• History of the object

Ultimately, Non-Fungible Tokens are digital and cryptographic certificates (serial numerical numbers) that certify the authenticity, ownership, and value of a digital or real asset.

How NFTs Are Revolutionizing Product Authentication

So, linking an NFT to a product can certify the authenticity of the product itself and help consumers and manufacturers track transactions across the entire supply chain. These digital certificates are then recorded on the blockchain and acquire the characteristicsthat make them so valuable:

• NFT blockchain transactions are transparent and immediately visible by users
• NFTs are standardized and can be exchanged, sold, or bought across many platforms
• Digital certificates can be created by any blockchain users and are tradable on an open and free market
• NFTs offer high liquidity standards, meaning that they can be bought and sold

One of the most important characteristics of NFTs is that, since they exist within and are recorded on the blockchain, they are immutable and virtually impossible to tamper with. Here is how these characteristics are transforming the world of product authentication and eCommerce transactions.

NFT Blockchain

Being immutable certificates that can be associated with a digital or real asset (or product), NFTs are extremely instrumental for product authentication. But they could not operate as they do without existing within a blockchain environment.

A blockchain system is nothing more than a database used to store data and record transactions. However, there are a few characteristics of a blockchain environment that made this emerging technology so important – and even allowed the creation of Bitcoin, the first-ever functional cryptocurrency back in 2009.

Here is why blockchain-based NFTs are so secure:

• On the blockchain, information is stored in blocks and saved in different nodes (hardware or computers), thus preventing data loss
• Blockchain is decentralized, meaning that it is not controlled by a single entity and information is available to all users at any given moment
• A blockchain system is based on the Distributed Ledger Technology (DLT), or a peer-to-peer protocol that makes it easy to verify the authenticity of transactions

Several different types of blockchain exist, from public databases (i.e.: Bitcoin) to private ones. A blockchain database offers several layers of security thanks to three principles:

• Cryptography – information is encrypted
• Decentralization – control and decision-making is transferred to a distributed network
• Consensus – there is only one valid copy of each record which is agreed upon and shared with all the nodes

Ultimately, each transaction of an NFT associated with a product is recorded on the blockchain, making it immediately available and impossible to manipulate. This means that both manufacturers and consumers can have full control of each product across the entire supply chain.

Digital Twin Models

Initially conceptualized by David Gelernter in his 1991 book ‘Mirror Worlds’, digital twin models have been in continuous development since, and, in 2017, it was highlighted as one of the most important strategic technology trends. Today, digital twins are finding new uses every day, and the world of product authentication is being entirely reshaped by it.

Digital twin technology allows manufacturers or producers to associate a real-world asset (i.e.: a product, a process, or a business) to its own digital replica or virtual representation. When the two are connected via digital twin technologies, this strategy allows continuous data acquisition and recording of information.

What’s more is that digital twins can be used to visualize and control the product’s entire journey through the supply chain, noticing any alteration, diversion, or fraud. In turn, this can help brands:

• Prevent data loss
• Reduce the risk of financial losses
• Avoid reputation damage
• Prevent counterfeit goods
• Enhance the customer experience

NFTs play a vital role in creating, authenticating, and connecting a real-life asset to its digital twin.

NFTs & Smart Contracts: A New Way of Securing Transactions

For brands, companies, and manufacturers, counterfeit, manipulated, and diverted goods represent a severe threat. And, as the global supply chain extends further, the risk of counterfeit goods causing severe brand damage is increasing.

Thanks to the use of “smart contracts,” each transaction on the blockchain is secured, recorded and automated! Therefore, brands can be certain of a transaction’s outcome and authenticity. And, each transaction can be executed without loss of time or the need of third parties and intermediaries.

A Tailored Product Authentication Solution for Your Business With Authena’s Technology

While there have been some notorious multi-million sales of NFTs, this technology is still in its infancy. Nonetheless, new applications for blockchain-based NFTs are discovered every day, and, today, they can be successfully used as proof of authenticity.

Of course, each brand is unique, and so should be its product authentication strategy. Whether you prefer to use NFTs, smart packaging solutions, NFC tags, or RFID labels, the right product authentication solution can help your company prevent financial, reputation, and customer experience damage.