America has a global trade problem worth nearly half a trillion dollars a year. It comes in the form of brand counterfeiting. It’s a gigantic black market, and originates most often from China—about 85% according to the OECD, an organization for the promotion of economic and social well-being of people around the world.
The U.S. is hit the hardest for the simple reason that it is the largest of all consumer markets, and also the richest in intellectual property. Whether it’s pharmaceuticals, food and beverages, electronics, auto parts, hygiene and cosmetics, even fashion goods and toys, virtually any commodity is at risk. Pharmaceuticals alone account for an estimated $200 billion in illegally copied goods.
It could be a health or safety-related scam, or it could just be consumers thinking they have purchased an authentic brand name product like Nike, Coach, Gucci, etc. and have no way of checking if the product is genuine or a fake. Is there a way to protect consumers in this multi-billion dollar market?
Steve Kuh, founder and CEO of upstart Bonafi, has a solution. Bonafi has created a way to protect consumers by using blockchain. “The issue with counterfeited goods is that people find out after the fact,” Kuh tells FreightWaves. “Especially with Amazon. Turns out they don’t have the responsibility so anything is good there. There can be fire hazards, and safety. You name it.”
“A lot of small companies could use this too, especially companies that use IP and hold the patent,” Kuh explains. “They produce a product and yet they have this influx of product coming from overseas. The counterfeiters make it so close to the real thing, and it’s really hard to tell until you possess the item. There’s lots of industrial applications for this as well in terms of recall of parts. It’s really good with damages.”
Bonafi (think bonafide) is a young Blockchain company based in Los Angeles that began at the top of 2018. They are dedicated to solving the problem of counterfeit products plaguing the global economy. By integrating the CryptoTag technology and mobile application with blockchain technology, they empower brands, manufacturers, wholesalers, retailers, and ultimately consumers to fight against counterfeit products.
Bonafi’s team so far is comprised of nine members, and on average they have 18 years of experience in the industry. Their profiles can be found on LinkedIn, and it’s impressive indeed. The team is not a gaggle of tech-heads who think they have all answers and that it’ll be fun to do something with blockchain. They’re a highly-skilled team with what appears to be the right expertise.
It begins with a token, but it doesn’t end there.
“Bona tokens are our vehicle to raise funds and run the platform,” says Kuh. "It’s one of the ways we raise funds. Fundraising begins next week and it runs for a year. The way the token works, during the ICO, we are selling the ICO to raise funds. They call it the SEC 506c. It’s one of the regulatory ways that we’re allowed to raise funds, exempted securities. We’re minting the coin and getting it ready. It’s a part of the authentication process.”
How does it work?
Manufacturers insert the tag to whatever the product may be. When consumers get it, they use the phone app to scan it.
The consumer scans the app with a Bona token. They can either buy the token, or receive it as a reward from the manufacturer. Customers of Bonafi could get rewards through product registration, customer reviews, their buying patterns, and other means. This increases engagement between customer and manufacturer. Manufacturers, for their part, will be naturally motivated to supply necessary authentication.
Bonafi’s patented CryptoTag is a piece of hardware, an encrypted tag that will be attached to each item. A physical RF (radio frequency) tag that is placed into product. It then can record the data through the tags that are encrypted through the blockchain all along the supply chain from manufacturer to distributor to wholesaler to retailer to customer.
The CryptoTag is protected against duplication through a public cryptography algorithm and renders copying impractical. There are no QR codes, bar codes, or regular NFC tags, such as some of the larger players in the space currently use. Their biggest competitor is probably VeChain, which is valued at $762 million. WaBi, valued at $6.7, is another. BlockVerify is another startup in the space.
“With the CryptoTag every single tag is uniquely coded,” says Kuh.
Also, Bonafi plans to build an online version of the physical CryptoTag, and you can get a lot of that supply chain information ahead of time.
For more detailed information about Bonafi than can be provided in an article, here’s a link to their whitepaper.