A startup is using blockchain technology to tackle counterfeit milk powder – here’s how

Ever doubted the authenticity of a product you saw in a store either online or offline?

While there are pretty stringent controls on the goods sold locally, horror stories which pop up from time to time tell us that sometimes, even some of retail’s biggest brands cannot be trusted.

The situation is worse in certain countries such as China, where the spread of counterfeit and tainted products such as baby milk powder has fuelled illegal imports and the peer-to-peer ‘daigou’ culture.

Counterfeit milk powder has even prompted a startup in China to develop its own specialised RFID anti-counterfeiting label aimed at helping consumers determine if the product they are buying is authentic and trustworthy.

Utilising blockchain for consumer safety

The brainchild of Alexander Busarov and Yaroslav Belinskiy, both former consultants who are based in China, Walimai uses the combination of blockchain technology and a secure radio-frequency identification (RFID) anti-counterfeiting label to allow consumers to authenticate products with simple scanning done through a mobile phone app.

The Walimai app authenticating a can of milk powder.

“Our answer to the problem is to apply technology that gives the consumer a tool to tell apart counterfeits from authentic products at every step in the supply chain,” Mr Busarov, who is also CEO of Walimai, tells Business Insider via e-mail.

Unlike encrypted RFIDs or unique QR codes, which are easily cloned, Mr Busarov says Walimai is able to prevent counterfeiting of its own labels through dynamic codes, which can update data on both the chips and on the backend system.

“Whenever there is a change of custody, a product with the Walimai anti-counterfeiting label is scanned. Each scan updates the secret codes on RFID chips (and at the back-end), as well as capturing and updating geographical information in the system,” he explains.

Consumers will see the scanning record of the milk powder product they are holding by scanning the Walimai label with the corresponding app.

The labels are also destroyed once removed from products, or when the products are used by the consumer, thus preventing ‘refilling’.

A global problem

But the issue is not limited to just milk powder or China, counterfeit products are rampant across many industries and countries.

In 2016, the Organisation for Economic Co-operation and Development reported that the import of fake goods was worth $461 billion globally.

“There are many reasons behind the counterfeit problem. However, most are associated with human errors, whether they be intentional or unintentional,” Mr Busarov says.

And the persistance of the problem is due to a lack of a working solution “to disable the circulation of counterfeits from producer to point of sale and consumption”.

“Hence, none of the manufacturers or retailers have secure end-to-end control of the supply chain,” he says.

It doesn’t help that many e-commerce platforms and even offline retailers are willing to turn a blind eye to the situation.

Both Mr Busarov and Mr Belinskiy have themselves been victims of counterfeit products in China. Ironically, they were poisoned by fake whiskey bought from a big name chain store in Hangzhou at Walimai’s opening celebration party.

While Walimai’s founders are currently focused on the company’s growth in China, Mr Busarov says he has received requests to enter various markets including Southeast Asia (food), South America (wines), Europe (medical devices) and the United States (health foods).

ICO to take things further

To enhance its consumer experience and incentivise the scanning of its labels, Walimai will soon be linked to a crypto-token loyalty programme under WaBi Project.

Based in Singapore, Mr Busarov says WaBi Project is “dedicated to developing a remotely hosted, blockchain-based loyalty program. It will launch an initial coin offering (ICO) for its WaBi crypo-token on Nov 28.

Using the WaBi crypto-token, Walimai’s founders are hoping that customers will feel more inclined to scan their Walimai labels before purchase, and in turn contribute to the collective security of all Walimai users.