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[techinsight360]

The impact of blockchain on luxury brands and its part in reducing counterfeiting in 2023

In the last decade, blockchain technology has grown into prominence as adoption has increased significantly. The technology has found its way into several different sectors, including payments, agriculture, and healthcare, among others. The retail luxury sector is another industry that is using blockchain technology to improve its offerings to customers.

In addition to this, luxury retail brands are also seeking to utilize the technology for reducing counterfeiting, which is causing billions of dollars in losses for businesses in the sector. Although retail brands cannot stop the production and sale of replicas, they can use blockchain technology to make it easier for genuine luxury buyers to validate their purchases. Consequently, the adoption of blockchain technology is expected to grow significantly over the next few years, as more and more retail luxury brands seek to enhance the buying experience of their customers.

In 2021, prominent luxury brands such as LVMH, OTB, Prada Group, Mercedes-Benz, and Richemont joined forces to establish the Aura Blockchain Consortium. The consortium aims to combat the issue of counterfeiting and deliver an enhanced buying experience for luxury shoppers.

In addition to this, the consortium was also developed to promote the usage of blockchain among luxury brands for authentication processes, supply chain transparency, and facilitating ownership transfers among luxury products. Since the founding of the Aura Blockchain Consortium in 2021, 20 million units have been ingested on the blockchain.

The authenticity use case offered by blockchain technology is a goldmine for luxury retail brands. As a result, many brands including the Swiss watchmaker H. Moser & Cie are joining the consortium. Loro Piana, the Italian clothing brand, is one of the most recent ones to join the consortium in March 2023. The firm is seeking to use blockchain technology for enhancing the traceability of its products from the supply chain through different phases of ownership.

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Ownership of the product is one of the critical elements for luxury brands, as high-quality goods are often created with the expectation that they might be passed from one generation to another.

The blockchain tool offered by Loro Piana offers customers a QR code. This QR code is used for tracing the production journey of the product through the supply chain. Furthermore, it also provides customers with a certificate, which uses blockchain to transfer ownership.

Vacheron Constantin, the high-end watchmaker, uses the blockchain solution Arianee for registering the watches and providing customers with a digital passport. This digital passport can be transferred between owners. Blockchain technology also enables investors to insure their product, declare it lost or stolen, and share or prove the ownership.

LV Diamonds, another luxury brand incorporating the use of blockchain, also provides customers with an encrypted digital file. The file maintains different records including the weight, color, purity, and cut quality. As the information is stored using blockchain technology, the brand ensures a reliable, safe, and efficient data transfer process.

The Aura Blockchain consortium seeks to use blockchain technology in such different ways, and as a result, is aiming to raise the standard of luxury brands. The use of blockchain technology by these retail luxury brands also provides peace of mind to shoppers, who are often worried about the authenticity of their products.

[techinsight360]

Launch of a state-backed NFT marketplace in China

Non-fungible tokens (NFTs) had gained widespread popularity among both brands as well as consumers. Many of the leading domestic and global luxury brands have launched NFT projects to better engage with their customers while driving the popularity of their brands in a tough and competitive market. Amid the surging popularity, leading tech giants have launched NFT marketplaces over the last two years, thereby allowing Chinese individuals to buy, sell, and trade their digital collectibles. However, unlike the rest of the world, buying NFTs using cryptocurrencies is prohibited in the country.

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While the Chinese government had banned cryptocurrencies, it has consistently shown interest in the NFT segment. The launch of a state-backed NFT marketplace is a testament to its interest.

According to a report published by the Chinese official media source China Daily, the government is planning to launch a new NFT marketplace on January 1, 2023. For the launch of the marketplace, Beijing is expected to hold an opening ceremony in the country. The China Digital Asset Trading Platform has been partially built by the China Technology Exchange, the State Intellectual Property Office, the Chinese Academy of Sciences, and the Beijing Municipal People’s Government.

The state-backed NFT marketplace will enable Chinese individuals and businesses to transact digital collectibles, copyrights, and intellectual property rights. The marketplace will use a blockchain called the China Cultural Security Chain. However, it will rely on the trading instruments and settlements offered by China Technology Exchange.

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TechInsight360 expects a lack of interoperability between the marketplace and other blockchains, due to the negative view of the Chinese government towards decentralized cryptocurrencies. The country, however, had made a significant move towards the protection of digital collectibles.

In December 2022, the Hangzhou Court of China announced that digital collectibles are virtual properties and therefore, enjoy protection under Chinese law. Different jurisdictions have opted to place NFTs under property law. In October 2022, Singapore High Court designated digital collectibles as physical property such as fine wine or luxury watches. This trend is projected to further emerge in more emerging markets in 2023, where NFTs are gaining widespread popularity.

Globally, many innovative NFT projects have launched in 2022. Even during the current economic uncertainty, brands and businesses have invested significantly in the space and the trend will further continue in 2023. Over the last two years, industry leaders such as Apple, Starbucks, and Reddit, have launched NFT projects to mark their entry into the segment. The presence of these big corporations explains the growing interest in the space and the future potential of the NFT market.

Read More - Firms are launching innovative NFT marketplaces to serve different industry verticals

From the domestic market point of view, the foray of the Chinese government into the NFT sector will further accelerate NFT adoption among brands and individuals. A favorable regulatory landscape will also lead to greater investment in the space, driving innovation and a competitive landscape from the short to medium-term perspective. This will keep supporting the growth of the domestic NFT market over the next three to four years in China.