# Identifying Counterfeit Products using Blockchain Technology in Supply Chain
System

Nafisa Anjum  Department of Electronics and
Telecommunication Engineering
Chittagong University of
Engineering and Technology
Chittagong, Bangladesh
<EMAIL_ADDRESS>Pramit Dutta  Department of Electronics and
Telecommunication Engineering
Chittagong University of
Engineering and Technology
Chittagong, Bangladesh
<EMAIL_ADDRESS>
###### Abstract

With the advent of globalization and the ever-growing rate of technology, the
volume of production as well as ease of procuring counterfeit goods has become
unprecedented. Be it food, drug or luxury items, all kinds of industrial
manufacturers and distributors are now seeking greater transparency in supply
chain operations with a view to deter counterfeiting. This paper introduces a
decentralized Blockchain based application system (DApp) with a view to
identifying counterfeit products in the supply chain system. With the rapid
rise of Blockchain technology, it has become known that data recorded within
Blockchain is immutable and secure. Hence, the proposed project here uses this
concept to handle the transfer of ownership of products. A consumer can verify
the product distribution and ownership information scanning a Quick Response
(QR) code generated by the DApp for each product linked to the Blockchain.

###### Index Terms:

counterfeit, supply chain, Blockchain, Ethereum, QR code

††publicationid: pubid: 978-1-6654-2678-7/22/$31.00 ©2022 IEEE

##  I Introduction

Over the years, the identification of counterfeit goods in market has always
posed a challenge for all supply chain stakeholders. As per the latest
assessment of EU Intellectual Property Office (EUIPO) and the Organization for
Economic Cooperation and Development (OECD), the global sales of counterfeit
and pirated goods have increased alarmingly to 460 billion euros which is
about 3.3% of the global trade [1]. The sales and profits of companies around
the world have been affected by this phenomenon. The clothing and
pharmaceutical sectors experienced sales losses of about 26.3 billion euros
and 10.2 billion euros respectively [2]. Moreover, with the advent of recent
technologies and E-commerce, the market of counterfeit goods have exploded on
social media platforms. The anonymity, reach and segmenting tools of Ecommerce
and social media have smoothed the pavement for counterfeiters. Hence,
counterfeiting as in producing twins or fakes of real products pose great
threat to innovation and economic growth.

Blockchain technology has been receiving much attention over the past decade
and its numerous applications are being developed. Blockchain is a
decentralized system of shared, immutable ledger. It facilitates the process
of recording, trading and tracking assets over a business network thus
reducing risks and cutting costs for all involved. Hence, any application
using Blockchain as its base technology ensures that the data are tamper
resistant.

In this paper, a decentralized application system (DApp) has been introduced
that uses Ethereum blockchain technology in its architecture. The DApp
simulates a real world supply chain and ensures the ownership of product is
transferred and recorded in the blockchain network. Besides, the system
proposed here can also be implemented in Ecommerce and retail sites that can
considerably bring transparency in the virtual platforms for all consumers.
Though Radio Frequency Identification (RFID) has been used for research in
this sector previously, it has posed security and privacy risks which can be
efficiently dealt with using blockchain.

Figure 1: System Diagram

##  II Related Work

Various researchers have proposed different methods for establishing a
blockchain-based supply chain management system. One of them presented a
counterfeit product identification system using android application where a
product can be searched in the Blockchain network [3]. Another paper displayed
a fake product detection system using blockchain where SHA-256 Algorithm was
used to identify a product [4]. A fully functional anti-product forgery system
was designed by a group of researchers that uses digital signature for
verification [5]. In one of the papers, a blockchain-based Product Ownership
Management System was proposed. It displayed the use of blockchain-based
system over traditional RFID-based system [6]. Another paper presented a food
traceability system using IoT and blockchain collectively. In this model, they
used fuzzy logic to evaluate the food quality [7]. A paper displayed a system
where blockchain was used with RFID to remove the limitation in post supply
chain [8]. To improve the current supply chain method a paper used blockchain
combined with IoT to track product origin [9].

##  III Methodology

The system proposed here uses MetaMask cryptocurrency wallet for transactions
and and the smart contract here has been deployed in the Rinkeby Test Network
of the Ethereum Blockchain. The DApp is based on three major stakeholders, the
Manufacturer, the Seller and the Consumer.

###  III-A System Diagram

Fig. 1 depicts the system diagram of the proposed DApp. Every user of the DApp
has to be authenticated before logging in. This authentication system has been
implemented using Firebase which is a platform provided by Google for
developing interactive mobile and web applications. After successful
authentication, the manufacturer can add their company to the DApp and enroll
products of the company. The contract address of the company is provided to
the manufacturer and all the company data as well as manufacturer’s account
address are stored in the blockchain network. After a product has been
included in the blockchain, it is assigned a QR code for verification. The
sellers can buy products from manufacturer after registration. The ownership
transfer of the product can be tracked through the QR code.

###  III-B Manufacturer

The manufacturer’s functions include adding the company to the blockchain by
providing company name and setting the minimum registration fee to become a
seller or retailer for the company. The manufacturer solely preserves the
rights to enroll products in the network. The manufacturer can also control
the distribution status of products and transfer ownership after a seller has
bought the product stock.

Figure 2: Manufacturer’s Working Process

The manufacturer performs two major functions namely adding and distributing
products in this system. For adding a product Algorithm 1 is used.

Algorithm 1 Create Product

Input: Product Name, Product Price, Product Stock
Output: Added Product

if $msg.sender$ is not manufacturer then

throw;

end

else

insert product in product array

end if

For distribution of product Algorithm 2 is used. The product and order status
in the blockchain is changed through this.

Algorithm 2 Distribute Product

Input: Product ID
Output: Changed Product Status

if $msg.sender$ is not manufacturer then

throw;

end

else

change product status to ’Shipped’ and set order status as complete

end if

###  III-C Seller

A seller can pay the minimum fee set by the manufacturer and register for the
company. After registering once, the seller can buy any product as well as
track its distribution. A product status is set from ‘Ready To Go’ to
‘Shipped’ after the manufacturer ships it out to the seller.

Figure 3: Seller’s Working Process

Algorithm 3 here is used to make sure a seller pays the minimum registration
fee set by the manufacturer.

Algorithm 3 Seller Registration

Input: Minimum amount of registration fee set by manufacturer
Output: Registered Seller

if $msg.sender$ is registered seller or fee is less than requirement then

throw;

end

else

map $msg.sender$ is true

end if

Algorithm 4 here is used by the seller to buy or book products from the
manufacturer. It records the seller’s data in the blockchain.

Algorithm 4 Buy Product

Input: Product ID, Seller Name, Amount to buy
Output: Set Current Owner of product as $msg.Sender$

if $msg.sender$ is not registered seller then

throw;

end

else if $msg.value$ is less that required amount then

throw;

end

else

set product owner name as seller name and store account address of seller

end if

###  III-D Consumer

A consumer can scan the QR code provided with each product and verify the
transfer of ownership of product from manufacturer to seller. The consumer can
also verify the name of the current owner of the product and check its
distribution status.

Figure 4: Ethereum DApp Architecture

###  III-E Blockchain

Blockchain technology provides promising opportunities in the supply chain
management paradigm. Blockchain data is stored on nodes where each node has a
complete copy of the blockchain database. Orders, payments, accounts, price of
products etc. can be tracked, shared and secured using a blockchain network.
Some important features of blockchain technology in supply chain management
includes:

####  III-E1 Security and Privacy

Blockchain uses public key encryption method of cryptography for data
security. Users have public and private key pair which are used to validate
transactions and these transactions are immutable and permanent.

####  III-E2 Decentralization

As blockchain is a distributed ledger technology, it doesn’t rely on third
party or any centralized authority.

####  III-E3 Transparency

Data stored in Blockchain is public and anyone can enquire on their
transactions. The transactions can be governed by a set of rules known as the
smart contract.
The system proposed here uses MetaMask cryptocurrency wallet for transactions
and and the smart contract here has been deployed in the Rinkeby Test Network
of the Ethereum Blockchain. The DApp is based on three major stakeholders, The
Manufacturer, the seller and the consumer.

###  III-F Ethereum DApp Architecture

Fig. 4 here depicts the base architecture of the system. The user interface
(UI) here has been developed using ReactJS. If the user wants to interact with
the smart contract, the DApp will use Web3.js which communicates with MetaMask
through its provider. MetaMask creates a transaction and signs it with the
user’s private key. This transaction is then sent to Ethereum network. The
transaction is processed, verified and added to a block in the network. The
private keys of the user are never recorded in the process so user can safely
interact with the network.

##  IV Result Analysis

Sending data to the Blockchain comes with some cost referred to as transaction
cost. Miners tend to prioritize transactions with higher costs. Transaction
cost is measured in gas and gas fees are paid in Ethereum’s native currency
ether (ETH). The table indicates the transaction cost and gas fees required
for the proposed system.

TABLE I: Cost Calculation Sl No. |  Function Description |  Transaction Cost (gas) |  Gas Fee (ETH)
---|---|---|---
1 |  Deploy Contract of our system | 133405 | 0.001333
2 |  Adding New Company | 1068597 | 0.001069
3 |  Seller Registration | 45755 | 0.000046
4 |  Product Enrollment | 208571 | 0.000209
5 |  Buying Product | 41581 | 0.000042
6 |  Product Distribution | 55578 | 0.000056
Total=0.002755 ETH/ $8.56
Deploy= $4.14

Here CoinMarketCap [10] was used to convert Ether to US dollars. Remix which
is a web browser IDE for developing DApp was used determine the gas needs.
MetaMask was used for contract interaction and determining the costings. The
cost for deploying our contract in the Rinkeby Test Network is 0.001333 ETH
which is equivalent to 4.14 US dollars. The overall costing for the system is
less than 10 US dollars which proves the cost effectiveness of the proposed
model. The product ownership transfer as well product quality assurance costs
are also reduced here compared to current market trends to verify product
authenticity. A consumer can scan the QR code and verify the ownership
transfer of the product. The manufacturer’s account address, the seller’s
account address and name as well as the status of product is recorded in the
QR code. If the product status is ‘Shipped’, the product transfer is genuine
and the order is set to ‘complete’ in the blockchain. The QR code is provided
with copy-sensitive digital image pattern.

##  V Conclusion

Ownership tracking system is being reshaped through distributed ledgers of
Blockchain technology. Due to rapid changes in the Ecommerce and business
sectors, the current trends of supply chain are being affected. The DApp
developed here ensures greater transparency in the supply chain management and
can also be entrusted for use in Ecommerce. As such, administrative costs and
complicated procedures are eliminated by this process. Besides, the cost for
enrolling each product in the proposed model is only 0.000209 ether which is
equivalent to 0.65 US dollars that can sufficiently reduce costs for large
chain stores. The model also ensures end-user verification system through a QR
code and transactions here can be verified on Etherscan too. As future work of
the proposed model, the functions included can be improved further to bring
reliability in the supply chain management.

## References

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