Counterfeiting: Digital Collectibles offer a solution to the problems of collecting

Counterfeiting: Digital Collectibles offer a solution to the problems of collecting

Collecting is a fun and enjoyable hobby. Collecting is a passion that unites people of all ages and all places. For some, collecting is an obsession, which prompts them to pay very high amounts for a collectible, and only those with the same passion can understand.

There is however a shadow on the world of collecting, the counterfeit market. A parallel market valued at hundreds of billions of dollars every year, frightening numbers that seem to grow without restraint.

The clothing sector is the most affected with bags, glasses, shoes and watches, but not only, fake products are found in an increasing number of sectors, from common consumer goods (cosmetics and toys) to chemicals (drugs) up to technological products (phones, tablets, PCs), to name a few.

Collectibles are also affected by the counterfeit market, from Pokemon to Magic cards, from comic books to Action Figures, from sports memorabilia to more expensive watches. Any tangible property as such can be falsified.

What are the damages that counterfeiting does to the collectors market? Is there a solution?

The counterfeiting market: data and growth forecasts

In 2016 the counterfeiting market reached a value close to 460 billion dollars, in 2019, a report by the Organization for Economic Cooperation and Development (OECD), speaks of a market of 509 billion dollars, equal to 3.3 % of global trade.

To give an idea of the economic damage, just think that the counterfeiting market has cost up to 2.6 million jobs, with an expected loss of jobs between 4.2 and 5.4 million by 2022.

Action Figures Pokemon

News of a Pokemon Action Figures seizure in Harrisburg, Pennsylvania, was recently reported, in which law enforcement officers seized over 86,000 products worth more than $ 600,000.

Starting from the analysis of the estimates of the OECD (Organization for Economic Cooperation and Development) and of the EUIPO (EU Intellectual Property Office) on the international trade of counterfeit goods, and combining these data with those on the forecasts of growth of imports and those on seizures customs, a report on the expected growth of the counterfeiting market has been prepared. This report highlights that the infiltration of counterfeit products or the theft of intellectual property is constantly growing, causing enormous damage to the global economy. Researchers predict that this market will reach $ 990 billion by 2022.

A single product, a double damage to the economy

What are the consequences of the counterfeiting market? Who pays for the consequences?

On the one hand, the manufacturing companies, victims of an image damage. Fakes of poor quality damage the brand’s stature and the company’s reputation, with a consequent loss of customers and turnover.

Sometimes it is the “advantageous” price that attracts the collectors, other times the false certifications and the counterfeit authenticity stickers.

This situation forces manufacturers to compete with scammers who steal their intellectual property, and take advantage of the use of poor quality materials for a production that does not comply with safety regulations and standards. All this is propagated on consumers, on the economy and on each countries.

Collectors who own them, more or less consciously, are also very damaged have poor quality and worthless products, sometimes even dangerous to health.

But above all there is economic damage. A fake piece cannot be used in a competition (Cards and Action figures), it cannot be sold or exchanged, as it would constitute a criminal offense, and no collector would pride himself knowingly, showing a fake piece in his collection.

Ralph Perullo, one of the world’s largest collectibles seller and collector, has been accused, following an investigation by NBC News, of selling counterfeit goods. Interviewed, the man declared himself surprised and shocked, he then said that he would have stopped his activity if this accusation had been true.

Fakes improve, recognizing a fake becomes almost impossible

If at the beginning it was easy to recognize a counterfeit product, an incorrectly written word, a different color gradation, more faded or too bright, today even a trained eye would struggle to recognize a well-made fake.Black Lothus

The first sign is certainly the price: an original, quality product should reflect it in the price. Production costs, costs for materials, sales costs (logistics, shipping) must be paid by an appropriate price.

You cannot rely on any authenticity or warranty stickers, even those that may be counterfeit.

The risk therefore is that even the most expert collector will exhibit a forgery among his pieces. Each physical product can be reproduced in a non-original form and unfortunately a technology that rapidly provides information on the authoritativeness or not of a piece is not yet widespread.

A collector who spends thousands of Euros on a single product must be sure of its authenticity and of the use it can make of it. In March 2019, one of the 1100 existing Alpha specimens of the Black Lotus, the rarest card in the well-known game Magic the Gathering, was sold at auction for $ 166,000. The buyer willing to invest these sums of money must be sure of the authenticity of what he is buying.

From offline to online: counterfeit pieces are bought on the web

On the web there are numerous guides and forums dedicated to the topic, which show how to recognize a fake and identify the main defects. However, if it is true that observing a product and touching it with your hand makes it easier to understand its originality, the problem arises when you choose to buy online.

Over 70% of counterfeit products are purchased online.

Even the big giants of online sales struggle to counter the counterfeit market, indeed, some of these have become famous for tolerance of counterfeit goods. Despite the changes and new sales policies, it is difficult to control such a large amount of products and sellers, some of whom make use of stratagems such as the periodic exchange of accounts or false advertisements that promote different products. Even social media are no different, with private groups, within which it is possible to find any product category. To date, every reaction does not seem appropriate to stop the phenomenon, since the problem seems to be caused by the physical nature of the good itself.

Material collecting appears to be losing the battle against counterfeiting. But is there a way to protect man’s innate passion for collecting.

Safeguarding collecting through digital identity

Some companies are experimenting with new authentication methods, through an app it is possible to verify the authenticity of a product thanks to a dynamic NFC chip inserted inside it.

Startup LuxTag invented a way to protect physical products by assigning them a digital identity registered through Blockchain technology. The data is recorded in an encrypted database and cannot be replicated or modified.

This creates a link between the physical product and the unique digital identity using a QR code printed on the label or through radio frequency identification stickers. The digital identity records the path of each object from production to purchase, when the owner’s name is also recorded.

This system could help fight the counterfeiting market given that every collector, before purchasing a product, can verify its authenticity by scanning the QR code and viewing the digital identity of the product. At the time of purchase, the certificate is transferred to the customer, this can only be done if it is the real owner who sells it at the time and the product is original. Furthermore, if more consumers tried to verify the serial number, suspicious activity would be detected and reported which would warn the manufacturing company.

At the moment it is the only solution, still in the experimental phase, to protect material collecting. But a basic problem remains. Although an original product is registered by a digital identity, nothing ensures that this asset has not been altered along its path from the manufacturer to the buyer.

Blockchain-based technologies certainly work best in the field of Full Digital services or products which, unlike physical ones, cannot be tampered with.

Digital collecting: the solution to collect safely

Not affected by the risk of counterfeiting is digital collecting which, thanks to the security systems used, offers maximum protection to collectors. Each item is unique and registered and cannot be replicated in any way. The digital collector cannot own a fake in his collection or use it during an online exchange.

Each product is recorded with its history and its transactions thanks to Blockchain technology, in a database that guarantees the validity of the products. There can be no manipulation by man and furthermore, being digital products, their very nature means that their use is linked to applications or services that would not recognize counterfeit products. The change of ownership itself may not work.

An image of a Bitmonds could be reproduced and worn in a “static” way on a smartwatch. But it would not be interactive content, it could not be included in the Album, it could not give access to the Loyalty Program, it could not be given away, added on the Showcase and the property registered on the Ethereum Blockchain. The transaction through official instruments would never allow the exchange of a falsified product.

While a fake physical collectible could be used like an authentic one.collezionismo digitale valore mercato

The very essence of usability of a digital asset, combined with the Blockchain, guarantees uniqueness and authenticity.

When collecting becomes digital, each piece of the collection becomes safe and verified, just like our money, which has been digital for several years now and protected within our current accounts. Digital products or services are secure and cannot be tampered with. The risk element moves one step further, on the security of access to your account.

Owning a Bitmonds means having in your collection a unique and inimitable collectible, of which an original or counterfeit copy cannot exist. At the time of creation, each Bitmonds is registered with its ID and owner data thanks to Ethereum’s Blockchain technology. Its characteristics are “branded” forever, so that no other Bitmonds can exist in the world.

This is the most advanced method to protect collectors and companies to date, but it is also a possible solution to reduce the counterfeiting market and let everyone experience the passion for collecting without fear. For some time now, major manufacturers have been following this example, Panini launched the Panini Blockchain brand in January 2020, to present its first collection of digital cards registered with Blockchain technology.

Being lovers of collectibles and enjoying the taste of completing a collection or owning precious pieces today requires a higher level of security, which only the digitalization of the sector can offer.

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Sources
CNN: https://money.cnn.com/2016/04/18/news/economy/fake-purses-shoes-economycounterfeit-trade/index.html
OECD Report: https://www.oecd.org/newsroom/trade-in-fake-goods-is-now-33-of-world-tradeand-rising.htm
International Chamber of Commerce: https://iccwbo.org/publication/economic-impactscounterfeiting-piracy-report-prepared-bascap-inta/
Pokemonnext: https://www.pokemonnext.it/curiosita/una-marea-di-action-figure-contraffatte-dipokemon-scoperte-negli-stati-uniti/
Hypebeast: https://hypebeast.com/2019/3/magic-the-gathering-black-lotus-166k-sale
Medium: https://medium.com/sealnetwork/70-of-counterfeit-products-are-sold-onlinec6eafe07083
Luxtag: https://www.luxtag.io
Panini: https://www.paniniamerica.net/blockchain.html