By Emily Newton, Editor-in-Chief at Revolutionized Magazine
People commonly associate non-fungible tokens (NFTs) with digital art or collectibles. There’s still a hot market for such products, too. One NFT recently sold for approximately $1.6 million, enticing the buyer because the product was the only one of its kind. However, some professionals have also wondered what other possibilities exist. Can NFTs secure the supply chain? That’s an option people are aggressively exploring.
Indeed, using NFTs for collectible items helped people become interested in non-fungible tokens, even if they’re not cryptocurrency investors or fans. However, an important thing to know is NFTs represent unique digital tokens on the blockchain. There’s nothing restricting the kinds of items a person could track.
Why Could NFTs Secure the Supply Chain?
Many leaders are working on digitally transforming their supply chains. Doing that can improve workflows and reduce costs, among other benefits. Some company executives have already approved using the blockchain in operations, so branching out to NFTs is a minor step in such cases.
It also helps that most executives recognize there’s room for improvement in tracking and verifying goods. Counterfeit products are rampant in today’s supply chain and the problem’s proliferation puts reputations at risk. If customers unknowingly get a fake product, they could have negative impressions of the associated brand as a result.
To get an idea of how severe the counterfeit problem is, consider a January 2023 incident where officials seized two shipments of fake items worth more than $686,000 if they were genuine. Together, the parcels contained 451 pieces of jewelry and apparel.
An NFT is a unique digital identifier people cannot alter or replicate once it records on the blockchain. Thus, the blockchain entry could be a digital receipt confirming a transaction and the item’s authenticity. Since no one can tamper with blockchain records, supply chain leaders can feel confident while tracking their products from factory to destination.
Enabling Better Tracing and Auditing
Although people have yet to see many real-life examples, some experts believe NFTs will make tracking goods through the supply chain and auditing those journeys easier. If that happens, people should have fewer administrative responsibilities to juggle as supply chain professionals.
Wine industry brands have already ventured into NFTs by selling tokens associated with limited-edition bottles and barrels. Considering how one such barrel sold for $130,000 in 12 seconds, people seem interested in this option.
Each product sold like this has an individual NFT associated with it. It enables continual tracking while assuring the purchaser and all others involved that the item is authentic. Some people also refer to these products as “phygital,” reflecting how they’re tangible items with digital blockchain records.
Most products frequently change hands before reaching their final stops. NFTs give visibility into that journey while assuring people of specific attributes. For example, customers may want assurance that their coffee came from an organic farm. NFT data stored on the blockchain can verify that and may include specific details such as the field where the coffee came from or the product’s packaging date.
Reducing Manual Tasks
When people explore how to let NFTs secure the supply chain, they often realize this approach could drastically reduce how much paperwork they must do. NFTs can function as smart contracts.
They contain if/then statements agreed upon by all parties involved and meeting the parameters automatically updates the smart contracts. Thus, this use of NFTs could minimize paperwork done by hand, making the supply chain safer through error reduction.
Using NFTs as smart contracts is also a great way to ensure companies don’t unknowingly work with supply chain partners that don’t follow all the rules. America has about 1.8 million trucking businesses. The vast majority are small and independent operators, and some don’t have the resources to pay for insurance. That means some insurance documents get forged. However, smart contracts can tackle that problem while reducing or eliminating paperwork filled out by hand.
Some smart contracts also interact with data existing outside the blockchain. If people are interested in letting NFTs secure the supply chain, that can happen if the respective information about suppliers and supply chain movement exists in multiple places.
Counterfeit products create significant issues in supply chains, particularly in the cases of luxury or hard-to-find goods. However, work is already underway in using NFTs to prove authenticity and stop counterfeit attempts. Consumers and brands can trace products from their origins to the point of sale.
Such progress in exploring how to have NFTs secure the supply chain is especially welcome since people are making counterfeit versions of products you might not expect. For example, people bought and tried to use 1,710 fake tickets to two Bad Bunny concerts in Mexico. People familiar with the matter say Ticketmaster faces a fine of up to 10% of its total 2021 sales.
However, Ticketmaster executives think NFTs could help. One of the reasons why specific concerts are in such high demand is scalpers often use bots to snatch up tickets before everyday consumers can. Then, they resell the tickets at astronomical prices. The situation makes counterfeiting more likely to happen while shutting many fans out of live music experiences.
Ticketmaster and band Avenged Sevenfold are testing an NFT-based strategy that requires fans to hold Deathbats Club Ethereum NFTs before accessing tickets for two upcoming gigs. Only 10,000 exist, significantly reducing the number of people trying to get concert access.
Some applications are exceptionally user-friendly and accessible. For example, a Swiss company uses IoT sensors and blockchain technology to let people verify product authenticity with their smartphones.
Worthwhile But Not Yet Widespread
Applying NFTs to the supply chain for better security is still not a widespread option. However, the potential use cases and examples here could motivate people to invest more time and money to explore the possibilities.
If you’re thinking about doing it, set specific goals. Then, look for technology partners that can help you. Even if your company has never used NFTs and you’ve only recently become aware of them, those realities need not become barriers.
Emily Newton is the Editor-in-Chief at Revolutionized Magazine. A regular contributor to Brilliance Security Magazine, she has over four years of experience writing articles in the industrial sector.