Nike’s Patented Anti-Counterfeit Blockchain Shoes
Nike now holds a patent that leverages blockchain technology to combat counterfeit shoes, while also enabling consumers to generate digital representations of their shoes. This is Nike’s first step into utilising blockchain technology, which, if successful, could impact how high-end brands combat counterfeiting.
What is the Blockchain?
Put simply, the blockchain is a secure digital method of storing data about transactions. Within a blockchain, information such as time, date, location, company and person are stored in “blocks”. Each block connects with another block of information to form a chronological “chain“. There are complex mathematical and technical features of the blockchain which make it highly secure and able to record all transactions in sequence.
Nike’s Patent Prevents Blockchain Counterfeiting
There is new interest in the blockchain within the retail and apparel industry because of Nike’s involvement with the Chain Integration Project (CHIP) and Nike’s newly patented blockchain compatible shoes, “Cryptokicks“. CHIP is a project run by Auburn University RFID Lab in collaboration with 6 apparel and retail companies, including Nike, testing the use case of blockchain in their supply chains.
Counterfeiting is a huge issue for Nike and other large retailers. It is estimated by CHIP that it costs the retail supply chains $98 Billion due to counterfeiting and the “Gray Market”. Customers want to buy products like these but find it hard to afford them, so that is why some will turn to ‘counterfeit’ shoes so they can save their money.
It is doubly important for brands such as Nike to be able to prove authenticity to buyers, as their coveted limited-edition Air Jordans (and other collections) can sell for thousands of dollars. The most expensive Air Jordans ever sold went for $104,000. The increase of “sneakerheads” and “hypebeasts“, people whose hobbies (or jobs) are to collect designer streetwear to sell or wear, has resulted in a rise of counterfeit products entering the market as well.
How Does Nike’s Patent Work?
Within Nike’s patent for “Cryptokicks“ (US10505726B) the invention is described whereby the physical pair of Nike shoes receive a unique ID code which is also associated with a digital version of that same shoe. This ID and digital shoe use the technology to cryptographically store information about the owner of each asset, any transaction history and proof of authenticity. The digital version can be stored in Nike’s online shoe “locker” for resale or collection, and even used to customise virtual game characters!
How Nike’s Blockchain Use Protects Their Supply Line
As a prominent player in the exponentially growing sneaker industry and a manufacturer of limited-edition luxury shoes, Nike has good reason to adopt blockchain technology to protect their supply chain and deliver proof of authenticity to their high-paying customers. Where there is high demand, there is often a subsequent rise in counterfeit goods.
The loss of sales for Nike, and other high-end brands, due to counterfeiting is in the hundreds of millions every year. Nike’s patent describes a framework in which blockchain technology is employed to link cryptographically secured digital assets with a tangible product, letting their shoes be authenticated and ownership tracked. The implementation would mean it would be easy to check whether a product was counterfeited or not, which will help Nike with loss of sales, as well as help customers wanting to buy authentic products.
How Blockchain Technology Could Help Other Sectors
During the COVID-19 crisis, there has reportedly been an increase in fake pharmaceutical goods circulating the market. Blockchain technology provides a method of preventing sellers from passing off imitation items as legitimate, and can be used in virtually any industry’s supply chain management.
Global Blockchain Trends
Nike has strategically partnered with Alibaba’s Tmall for some of its distribution in Asia. Using PatBase, we can see that Alibaba is the most active company filing for blockchain patents. This makes sense, as Alibaba manages a lot of transactions from independent sellers direct to consumers via their e-commerce website. The blockchain offers a highly secure solution for their supply chain and transaction management.
Among the top patent assignees for blockchain–related patents are blockchain specialists, technology companies, financial services companies and retailers, namely Alibaba and Walmart. This demonstrates that Nike’s patent is not an anomaly in the blockchain patenting world as a retailer, however, what makes it different is its unique use case of blockchain for luxury apparel. If Nike’s patented Cryptokicks and utilisation of the blockchain proves to be successful, we could start to see more companies and other high-end retailers start to utilise the blockchain like Nike has.
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