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Lawyers are gearing up to advise on blockchain as adoption accelerates among top brands
The luxury sector is next in line after currencies to reap the benefits of blockchain technology, a webinar heard.
Although the technology is no magic bullet and has been overrated, it has already been implemented by leading brands to authenticate their supply chains, speakers at the event hosted by the Luxury Law Alliance in association with Bird & Bird confirmed.
The online event, chaired by Bird & Bird of counsel Frederick Mostert, saw the participation of Dr. Henry Franks, chief software officer of PowerX Technology, Calogero Scibetta, head of business development of London-based blockchain startup Everledger, and partners Bird & Bird Jonathan Emmanuel and Martin Von Haller.
Mostert, who is president of the Luxury Law Alliance, which is affiliated with The Global Legal Post, highlighted the compatibility of the technology with the industry given its potential to “protect, track and trace supply chains, authenticate products and combat piracy and counterfeiting “. He provided examples of the current implementation ranging from Kering, which uses blockchain to certify its watches, to purebred chicken farms in China electronically tagging their birds for verification in top restaurant kitchens.
Franks defined the blockchain as a carefully constructed digital database in such a way that no single person can unilaterally change the data once it is added. It said its power and disruptive potential comes from the fact that blockchain data is transparent and verifiable, thus allowing more organizations to collaborate securely.
One blockchain start-up already targeting the luxury market is London-based Everledger, which helps retailers verify the provenance of their products. He has worked with suppliers of diamonds, colored gemstones, wines and spirits and luxury clothing.
Scibetta took the example of Alexander McQueen, who created a digital twin for each item in his MCQ-branded range. “When you buy the product, you register it on your MCQ account,” he said. “This gives you a digital version of the asset, where you can prove its provenance.”
He said authenticating products at every stage from producer to consumer added significant value, with resale markets also benefiting from increased credibility.
Another example of how luxury brands can apply blockchain technology was provided by Von Haller, co-founder of Copenhagen Hyperledger, an open source collaborative project to advance cross-sector blockchain technologies. He said retailers could form consortia to collectively market their products on their own e-commerce platforms by completely eliminating the “Amazons and Alibaba of the world” from the equation.
In this case, the blockchain replaced the intermediate retailer without any company having sole control of the data, he said.
When it comes to negotiating contracts with blockchain providers, Emmanuel said there were no existing contractual models; nor have many resellers figured out how to proceed with secure procurement of the technology, despite a growing appreciation of its potential.
“Brands wishing to operate or participate in blockchain networks will often work with blockchain vendors that provide the backend blockchain technology and can also help develop the user-facing app that communicates with the blockchain technology,” he said.
“In such circumstances, brands need to be careful to avoid technology blockages in order to ensure continuity of service should things fail with the incumbent. The user app should be built in a way that it can be easily used with a replacement provider’s blockchain technology and the data should be accessible in a non-proprietary format so that it can be transferred to the replacement provider. “
As for the few well-publicized examples of security breaches, speakers agreed that the fault was more often than human error. Information entered incorrectly – commonly referred to as “garbage in, garbage out” – or poor private key management are two commonly cited examples of this, they said.
Meanwhile, more regulation of the technology is on the way. Mostert said some industries are coming to see the technology as “beyond the proof of concept stage.”
“We have had similar wide-eyed libertarians to the advent of the Internet,” added Von Haller, the reality is that blockchain will become “more regulated than you could ever dream of.”
Martin Von Haller is a speaker at a seminar hosted by Bird & Bird at Tomorrow’s Luxury Law Summit Americas that will explore the use of emerging technologies in the luxury industry. Click here to reserve a seat for virtual summit delegates or email [email protected] for more details.
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