Imagine a world where anytime you feed your child, you are gambling on their life. This is the reality facing many of China’s newborns due to the existence of counterfeit milk formula.

In 2008 due to an estimated number of 54,000 babies being hospitalised and 6 dead, 22 companies were found to be adding the chemical melamine to their product in order to give off the appearance of higher protein contents. I mean, I don’t know about you, but I definitely check my milk for floaty proteins, the more the better right?

Even in the recent years, a decade later, confidence in the local market has not recovered (honestly if my child was hospitalised, I wouldn’t forget it in a hurry either), leading to an increasing demand in foreign products. So much that it is commonly reported on the news where a line of internationals strip the supermarket shelves bare and ship them back to China for a profit. They are the ‘Daigou’ and they have found their way to capitalise on the situation, resulting in the locals complaining about the lack of supply.

In fact, 40% of Chinese consumers regard food safety as a major concern. When you break it down in pure numbers, that means about 550 million people (the U.S. with the third greatest population count, is only at 330 million) regard it as an issue. Of course, as we well know, with demand comes a premium as well as those looking to profit off the crisis, leading to an increase in counterfeit foreign brands (if at first you don’t succeed…), potentially leading us back to the initial problem.

It was with this in mind that Techrock was conceived in 2013 and its brainchild, the blockchain project Tael was born.

What is Tael?

The project Tael (WABI) exists as two components, Techrock, formerly Walimai, and Tael which was formerly Wabi, which translates into frog money. Don’t ask me how it has anything to do with frogs.

WABI

… got rebranded to Tael

Techrock is a platform on which you can purchase products protected from counterfeiting. It operates on both a business to business (B2B) model and business to customer (B2C) model which is run on China’s WeChat platform (used throughout China as a method of payment for public transport, restaurants and many aspects of a regular Chinese citizen’s life). Tael is the loyalty point scheme that operates upon that platform.

Using the inherent immutable and tamperproof nature of the blockchain, Tael combats counterfeiting in the supply chain. Having originally held an ICO on the Ethereum network to distribute its tokens (WABI), it now utilises Hyperledger (an open source blockchain collaboration hosted by The Linux Foundation) in order to facilitate its product authenticity check. Eventually the Ethereum ERC20 tokens themselves will also move onto the newer Hyperledger blockchain to unite the two for performance, reliability and scalability reasons.

For example, Hyperledger offers 3000 transactions per second compared to Ethereum’s 15. As Tael’s adoption grows and the number of consumers and scanning frequency increases, the increase in speed will be necessary in order to not affect user experience. I mean, do you want to scan the product and wait for 5 minutes to see if it’s authentic before scanning the next one? Hyperledger’s near instantaneous transaction speed also allows users to gain instant feedback regarding the authenticity of the scanned product. It also offers the ability to encrypt sensitive data that may be used commercially. Lastly, unlike Ethereum, transaction fees are not required of the consumer, saving their loyalty points from being used up as gas fees for the network.

However, the true beauty of the project is that there is no need to know how blockchain actually works. Honestly, how many people understand that mumbo jumbo? In this situation, consumers merely need to download the app and scan the label in order to verify the product and be rewarded with loyalty points. When built in this fashion, the friction associated with blockchain has been lowered to the same level as any other loyalty program.

But hold on a minute, blockchain is somewhere floating around in cyberspace like the internet, like some sort of giant database right? How does it actually ensure any product’s authenticity? At what point can software authenticate physical products? This is where RFID (radio-frequency identification) labels come in.

RFID is already used in many industries, for example the planting of RFID microchips in pets and livestock in order to identify them and retrieve information. When your dog gets lost, the tag can easily be scanned for your information and have it safely returned to you. For this particular use case, Tael uses these labels in order to track the product through the supply chain recording all its checkpoints, from production, to the warehouses, to the delivery, all the way down to the end consumer, you.

The label is affixed at the at the originating source company and is made from materials durable enough to endure the journey (as long as they don’t transport packages like your postman) but also fragile enough to prevent tampering by breaking (although it is projected that the label will be integrated into the product packaging itself in the future in order to further make this a non-issue). The cost of the tag is relatively cheap, allowing it to be used in lower cost products, allowing them to be protected.

One must wonder though, how does this tag protect the product against falsification or copying? The label contains information holding the unique ID of the item, its geographical data as well as a secret code that changes with each scan of the product, similar to how Google authenticator or bank security works. If the code is constantly changing, it makes it impossible for the attacker to brute force (continuously guessing) the code.

Once scanned with the app developed by them, this data is sent off to be verified on the cloud and you are notified quickly thereafter whether the product is genuine. In short, by scanning the label, you can tell whether it is the real product.

What happens when fake products are inserted into the chain? When counterfeit products are sold, in order for the counterfeiter to actually make a profit, they are generally undertaken in one of two ways:

The product is copied and sold elsewhere

When the product is copied, the RFID must be replicated in order to create a convincing copy. Once a potential customer scans the RFID however, the ID will either already exist on the chain and the location and security code won’t match (because it already exists elsewhere on the original product) or the ID will not exist and thus can’t be verified (because they created a random ID), notifying the user that it is counterfeit.

The product is copied and sold in the same place

Due to the amount of work in copying not only the product, packaging and RFID tag, it does not make much financial sense to copy one and sell it without a premium. After all, does it make sense to spend so much time creating a convincing copy otherwise? However, if they were to create a large batch of the product using the same tags in order to save time and be profitable, then one scan would invalidate the entire batch, making them all worthless at once.

How is it kept secure?

There are a number of nodes that keep the blockchain secure by keeping an entire copy of the Techrock blockchain, which contains the data of all transactions and scans to verify the products, preventing private manipulation. There are three different types of these nodes: MasterNodes, TrustNodes, and EnterpriseNodes.

MasterNodes and TrustNodes are forced to stake and lockup a certain amount of Tael which removes them from circulation. In exchange they are rewarded with additional Tael for keeping the network secure. The difference between them being that MasterNodes are run by long term holders of the Tael token, and TrustNodes are run by holders of proven credibility.

As the blockchain is governed by many nodes, if they were to become bad actors and violate that trust, then the tokens they have staked will be put at risk. EnterpriseNodes are run by long term partners that contribute to the ecosystem via adding their own data, incentivised by the fact that they have access to more information on the chain and do not need to stake Tael, therefore increasing the strategic benefits to both entities.

Why are the tokens necessary?

In order to perform its original function, the Tael model requires people scanning their products to keep the system and data constantly updated to keep their products safe, as the secret code and data will not change otherwise. However, the danger of becoming a trusted brand in this scenario is that consumers may neglect to scan Tael products due to trust in the brand. In order to incentivise people into continuously scanning their products, the token Tael was created.

By scanning the products and helping secure the products you are acting as a miner and thus compensated with tokens. Purchasing products from Techrock will also reward you with tokens. The token acts as a reward in the loyalty program and can be exchanged for goods sold by Techrock, and eventually once set up, a payment system to be used to exchange for goods and services with other companies.

Incentives for holding Tael

As with all tokens, Tael exists in limited quantities, in this case, 100 million in number with no more to be created. Think of frequent flyer points but with a maximum amount.

In order to operate in China, which does not currently allow the trading of cryptocurrencies or loyalty points, a second set of tokens with more limitations called Shijifen was created. This token is what a consumer in China receives when they scan or purchase a Techrock product, instead of Tael. A corresponding amount of Tael are then purchased off the exchange and locked at a 1:1 ratio. As Shijifen can only be used as a rebate for the next purchase, the corresponding Tael is locked until they are spent, meaning Tael will forever be a dwindling supply.

Example:

Tael (unlocked) + Shijifen (unlocked) = 100 million (maximum)

Tael (locked) + Shijifen (locked) = 100 million (maximum)

Customer buys product at $100 and the current reward is 10%. $10 worth off Tael are purchased from an exchange. At $0.50 per Tael, this is 20 Tael

Tael – 20 (unlocked) + Shijifen + 20 (unlocked) = 100 million unlocked (maximum)

Tael + 20 (locked) + Shijifen – 20 (locked) = 100 million locked (maximum)

As more and more customers join the Tael ecosystem, more Tael is consumed permanently as they become permanent Tael holders indirectly through Shijifen. Even should the customer stop purchasing products afterwards, their unredeemed points are permanently ‘lost’ from the cycle as the points can not be transferred.

Other than speculators and people receiving them as rewards, these points are purchased by businesses in order to promote their products on the Techrock platform. Although not commonly known, businesses often spend about 20-30% of their budget on marketing in comparison to a much lower budget on IT, which is hoped to drive the demand of Tael up.

Incentives for businesses to use Tael

As mentioned previously, brands and merchants are also able to use the tokens to promote their products on the Techrock platform to gain a wider exposure to customers via the promoted sections which is responsible for a large portion of the purchases. This is the equivalent of a company using their marketing budget to buy advertisements to place themselves at the top of Amazon’s search.

Companies can also purchase the token to use as a marketing tool due to the fact that the token’s usage can be traced. At any point in the process, when the labels are scanned, valuable details are recorded onto the blockchain and can be used by businesses to obtain data into their customers’ consumption rate, time from purchase to consumption and habits in certain geographical regions. Think Google analytics for their products.

For example, a juice company may realise that their customers are consuming the entire product within a day in a particular region and can reduce the amount of preservatives in the product and thus reducing cost and improving quality of the product.

Expanding use case

Of course, Tael’s usage is not limited to just milk formula. This technology can be applied to many products that suffer from the plague of copies. The Chinese market currently spends 19 billion USD a year on milk powder, however, this vastly dwarfed by the amount spend on cosmetics (54 billion), alcohol (156 billion) and electronics (191 billion). Tapping into these markets gives them large room for growth.

Currently Tael has made partners of brands such as A2 milk, Swisse and Blackmores supplements, international brands that have faced serious demand from the Chinese market, causing a lack of supply for the local markets. Having just recently signed on with Rakuten, Japan’s equivalent of Amazon, they have committed to bringing authentic Japanese products to the Chinese market, as well as integrating with their loyalty system.

Why haven’t I seen Tael around?

At the moment they are concentrating on the Chinese market, which makes up almost 20% of the world’s population. Tael is already being used by thousands of Chinese consumers, even if they are not aware of the blockchain technology behind it. Through the Tael adoption page, you can see the number of cities where Tael has broken into market.

By tapping into the Chinese user base, Tael plans to eventually evolve into a payment system where the growing Chinese tourism market will bring it offshore to international partners such as hotels, taxis and shopping malls.

Although China is the main market they are targeting, this only represents a corner of opportunities in the market. For example, Africa is plagued with counterfeit pharmaceutical products and fake alcohol has killed many in south east Asia, areas that Tael can certainly make a difference in.

Taking on the market and competitors

Even though several projects exist in the space utilising anti-counterfeiting technology, the majority of them focus on business to business and the supply chain, leaving a huge gap in the business to customer market that is largely untapped.

Rather than spending resources marketing and convincing large prominent businesses to switch over to their protocol, Tael has decided to focus on the basics. While large companies require much effort to commit to large scale solution changes (we’re talking years), the customer market is simple: if the product is good, simple and cheap, it will be used.

The problem that is facing blockchain adoption is the amount of effort and knowledge that is required to actually benefit from the technology. By removing the necessity of that knowledge and only focusing on consumer benefits i.e. get real products for cheaper, Tael and Techrock now functions like any other business that is generating revenue rather than relying on funding and price speculation to fuel their project, which I believe is a step in the right direction.

Check out Tael and more details on the project on their page and medium here:

https://medium.com/@Taelpay/