Thursday, August 18 2022

It’s undeniable that all emerging technologies have the potential to reshape our lives, but some certainly attract more attention than others. In particular, non-fungible tokens (NFTs) are revolutionizing many areas, from protecting patents and copyrights to streamlining the buying and selling of digital assets.

In recent months, the sale for $69 million of a Beeple artwork at Christie’s prestigious auction and the sale of Jack Dorsey’s first tweet have attracted the attention of giants in industries such as as games and digital art. But much of the potential of NFTs is still unexplored, and this emerging technology is sure to leave its mark on the world of product authentication.

In collaboration with the product authentication experts of Authenalet’s see how the NFT Technology helps ensure the security of physical goods and e-commerce transactions. Or, find more here about NFTs and blockchains.

What is an NFT? An overview

According to statistics from Google Trends, searches for “NFT” on Google increased by 1000% in 2021, surpassing the search volume for “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 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 to works of art, collectibles, and real-world assets such as real estate, every object has intrinsic subjective value. For example, a basketball star’s autographed rookie card can sell for millions, despite its minimal manufacturing costs, and will have a different value than another collectible card.

This so-called “subjective” value will depend on factors such as:

  • Authority
  • Scarcity
  • Demand
  • History of the object

Ultimately, non-fungible tokens are digital and cryptographic certificates (serial numbers) that certify the authenticity, ownership, and value of a digital or real asset.

How NFTs are revolutionizing product authentication

Thus, linking an NFT to a product can certify the authenticity of the product itself and help consumers and manufacturers track transactions throughout the supply chain. These digital certificates are then recorded on the blockchain and acquire the characteristics that make them valuable:

  • NFT blockchain transactions are transparent and immediately visible to users
  • NFTs are standardized and can be traded, sold or bought on many platforms
  • Digital certificates can be created by all blockchain users and are negotiable on an open and free market
  • NFT offer high liquidity standardswhich means they can be bought and sold

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

NFT blockchain

As immutable certificates that can be associated with a digital or real asset (or product), NFTs are extremely useful for product authentication. But they couldn’t function the way they do without existing in 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 led to the creation of Bitcoin, the very first functional cryptocurrency in 2009.

Here’s 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
  • The blockchain is decentralized, which means that it is not controlled by a single entity and the information is available to all users at all times
  • A blockchain system is based on Distributed Ledger Technology (DLT), or a peer-to-peer protocol that makes it easy to verify the authenticity of transactions

Several types of blockchain exist, from public databases (eg Bitcoin) to private ones. A blockchain database offers multiple layers of security through three principles:

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

Ultimately, each transaction of an NFT associated with a product is recorded on the blockchain, which makes it immediately available and impossible to manipulate. This means that manufacturers and consumers can have full control over every product throughout the supply chain.

Digital twin models

Originally conceptualized by David Gelernter in his 1991 book “Mirror Worlds”, digital twin models have been in continuous development ever since, and in 2017 were highlighted as one of the most important strategic technology trends. Today, digital twins find new uses every day and the world of product authentication is completely reshaped.

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

Additionally, digital twins can be used to visualize and control the entire product journey through the supply chain, noticing any tampering, diversion or fraud. In turn, this can help brands:

  • Prevent data loss
  • Reduce the risk of financial losses
  • Avoid reputational damage
  • Prevent counterfeits
  • Improve the customer experience

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

NFT & Smart Contracts: a new way to secure transactions

For brands, companies and manufacturers, counterfeit, manipulated and diverted products pose a serious threat. And, as the global supply chain expands, the risk of counterfeit products causing serious brand damage increases.

Through the use of “smart contracts”, every transaction on the blockchain is secure, recorded and automated! Therefore, brands can be certain of the outcome and authenticity of a transaction. And, every transaction can be executed without loss of time or the need for third parties and intermediaries.

A tailored product authentication solution for your business with Authena’s technology

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

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

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