In just about any other world, spending nearly $70 million on a JPEG would be seen as absurd. It’s a little bit crazy even in our world. But such is the reality of NFTs, digitized images that are being bought and sold for tens of millions of dollars every day.
NFT stands for non-fungible token, which is still pretty confusing. Essentially, it means that the specific image being bought or sold cannot be owned or duplicated by anyone else. So far, the biggest application for NFTs has been in the art world, where collectors are shelling out to claim ownership of unique virtual images.
But now, NFTs are finding a new home: the supply chain. No, supply chain operators have not suddenly become art collectors –– blockchain is nothing new to the supply chain, with companies like Maersk (OCTUS: AMKBY) and Amazon (NASDAQ: AMZN) having used it to track the movement of their products for years. But NFTs are opening up the technology to an entirely new set of uses.
Plenty of companies already use blockchain in their supply chains because it allows the various players –– shippers, carriers, retailers and others –– to set agreed-upon rules about what data is shared and who is allowed to edit that data.
“Blockchain is like a database that is shared across all the players related to shipment,” Tal Elyashiv, founder of SPiCE VC, explained to Modern Shipper. “And each one gets to update this database when it’s relevant to them, and each one of them gets the information that is relevant to them.”
Plenty of other industries were using blockchain before the supply chain. The finance, security and insurance sectors are a few examples, with blockchain being implemented to verify transactions, identities and claims, but as companies are beginning to find out, there are even more use cases in logistics.
As shipments make their way through the different touchpoints of the supply chain, information about things like location or delays is automatically updated on the blockchain. It essentially serves as a flowchart of a shipment’s journey, and it can be verified by any of the stakeholders of that shipment because any updates to the blockchain are immutable — nothing can be changed or obscured.
NFTs operate in the same way, using blockchain to verify a product’s ownership and transaction history. But the difference is that, when it comes to the supply chain, NFTs can be attached to individual products or crates rather than entire shipments, allowing supply chain operators to get a microlevel view of their goods.
Authentication
One of the biggest applications of NFTs in the supply chain so far is for authentication. Anyone who is into NFTs will likely be familiar with this idea already, as one of their most common applications today is verifying ownership of digital art. But they can be used to verify tangible goods too.
For example, luxury goods manufacturers like Prada and Gucci have begun linking NFTs to their products. Each individual item receives its own unique NFT, and when it sells, the customer receives both the product and the NFT. This allows both the customer and the seller to view the product’s path from production to sale, which is helping to fight against counterfeiting.
“Think about it as a folder with documents, if you will,” explained Elyashiv. “So you get the product, you get the NFT, and for the NFT all you need is a barcode. You’re getting a QR code, but this QR code links to a very specific NFT that was minted with that particular product. And you have the whole journey of this product from the manufacturing plant all the way to your hands.”
Scanning the barcode or QR code attached to an NFT will bring up that product’s history, which can help prove that it is what the seller says it is. For example, if a company is advertising wine made with grapes from Bordeaux, an NFT linked to those grapes would be able to tell you if they really came from Bordeaux –– or if they came from Martha’s Vineyard.
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By attaching a verifiable NFT to each product, these companies are mitigating the risk of losing money to imitation products because duplicates can’t be registered on the same blockchain. Even if the product is resold, the NFT is resold with it, so the product’s authenticity can be verified no matter how many hands it passes through.
“Once things are written into the blockchain, they’re immutable. And that’s very, very important because it means that whether you’re looking at an NFT or you’re looking at a series of transactions that they weren’t tampered with –– they cannot be tampered with. So you know that once we agree on a version of a truth, you can’t rewrite it,” said Elyashiv.
Data sharing
Data sharing is another key piece of the blockchain that NFTs can exploit to give supply chains a boost. Typically (and unsurprisingly) companies are hesitant to share their data, which often contains sensitive customer and financial information, with other organizations, but data sharing is essential for stakeholders to get a complete view of the supply chain.
NFTs can solve this issue –– while databases of information are normally managed within organizations rather than between them, the different stakeholders in the supply chain can use NFTs to predetermine what data is shared and eliminate the risk of oversharing.
For example, if a luxury brand like Prada or Gucci wants to share a product’s location and manufacturing data but withhold data about its final owner, it can set those parameters when it mints the NFT and allow the data sharing process to operate on autopilot. That’s much more efficient than manually sifting through and uploading information.
Tracking and visibility
NFTs are also helping to make tracking and visibility more efficient. For one, they can be used to ensure that products are being transported the way they were intended to be.
“If you take a crate, and you attach sensors to it, and you attach an NFT to that crate, and it gets scanned along the way –– and the sensors measure humidity and temperature and pressure, whatever is relevant to that merchandise –– then you can see along the way if the parameters allowed for this product have been exceeded,” explained Elyashiv.
Of course, the NFTs themselves can’t actually record things like temperature or humidity, but they can provide an overview of the status of individual products in real time. They can also tell stakeholders the location of the product, which is especially important when it comes to shipping.
For example, Maersk has been using blockchain technology since 2018 to track its ocean shipments, which is perfect for getting a macro-level view, but NFTs can provide visibility down to the level of the individual product. That’s particularly useful for companies that follow the ever-popular just-in-time manufacturing model, which often requires sourcing hundreds of parts from different sources and coordinating their movements so that they arrive at the same time.
With NFTs, companies can be aware of any delays, whether they encompass a brand’s entire supply chain or just a fraction of it, and they can get ahead of unexpected supply chain disruptions. That’s essential in today’s fragmented world of shipping, where anything can go wrong at a moment’s notice (see: the Suez Canal).
Already, plenty of companies in a variety of industries are making use of NFTs for that reason and others. Pharmaceutical companies are some of the biggest early adopters, using NFTs to verify that the drugs they’re selling are legitimate and were manufactured in the proper place.
Amazon has done something similar –– it has a patent for a system that uses blockchain to track and verify individual products, which figures to reduce the amount of fraudulent and counterfeit listings on the marketplace.
But NFTs lend themselves well to just about any product that is expected to be of a certain quality or of a certain source. Elyashiv likes to use the aforementioned winery example. Being able to verify if those grapes really came from Bordeaux makes all the difference in the world of wine, where customers are particularly conscious of quality. And according to Elyashiv, more and more industries will look to reap those benefits.
“Supply chain management is one of the very interesting frontiers for blockchain where the value proposition is very, very clear,” he said. “And I think as a result of this, we will see relatively quick adoption across the industry.”
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