San Francisco-based startup Chronicled has completed a technical pilot aimed at demonstrating a new cryptographic method for transferring data and information related to trade items anonymously.

The pilot allowed multiple parties to verify an object’s identity and provenance using its Serialized Global Trade Item Number (SGTIN) without directly interacting with one another.

A Serialized Global Trade Item Number (SGTIN) is a universal identifier that provides a unique identity for physical object anywhere in the world, for all time. It allows for the identification of an item as it moves through multi-stage supply chains, which can often involve multiple custodians and geographic locations.

The pilot applied a cryptographic verification model developed by University researchers at UC Berkeley and MIT called Zero Knowledge Succinct Non-Interactive Argument of Knowledge (zk-SNARK) to enable secure and anonymous transfer of possession and/or ownership of SGTINs within multi-party supply chains.

Within the cryptographic framework, a SGTIN can be in possession of only a single trading partner at any given time. Any duplication alerts the network to the existence and location of a counterfeit asset.

Associated smart contracts allow a regulator to fully audit the provenance of an asset after the fact, without the need for prior knowledge, or the need for trust in the various organizations operating within the supply chain.

Blockchain for pharmaceutical supply chain

With the framework, Chronicled is initially tackling the pharmaceutical supply chain. A partnership with supply chain consulting group The LinkLab seeks to develop a blockchain-enabled system that complies with the Drug Supply Chain Security Act, a regulatory regime that requires full end-to-end track and trace of pharmaceutical products by 2023 on an interoperable system, and addresses the industry’s data leakage and privacy concerns.

“Our team has been working hard on this key privacy issue, and as a result Chronicled is now the first to successfully demonstrate this cryptographically secure method of anonymous physical asset identity transfer,” said Chronicled CEO, Ryan Orr.

“As an immediate next step, we plan to continue to work with industry partners to implement current supply chain workflows using this technology while optimizing for volume, aggregation, returns, recalls, and performance considerations.”

Chronicled said that the pilot represented the first step towards “full prevention and elimination of the entry of counterfeit products and components into the supply chain.”

Counterfeit and pirated goods are a global problem that’s costing US businesses more than US$200 billion every year.

Fake products crop up in everything, from handbags and perfumes, to machine parts and chemicals. Counterfeiting also produces knockoffs that endanger lives: auto parts that fail, pharmaceuticals that make people sick, toys that harm children, baby formula that provides no nourishment and medical instruments that deliver false readings.

According to the OECD and the EU’s Intellectual Property Office, imports of counterfeit and pirated goods are worth nearly half a trillion dollars a year, or around 2.5% of global imports.

The World Health Organization (WHO) estimates that as much as 30% of the medicines sold in parts of Asia, Africa, and Latin America are counterfeit. Worldwide, an estimated 10% of all medicines are counterfeit.

“[This pilot] is the first step in a longer-term plan to fundamentally improve the way assets move through supply chains by using blockchain technology to immutably track the provenance of any object with an SGTIN,” said Maurizio Greco, CTO of Chronicled.

Moving forward, Chronicled said it plans to apply the methodology to other use cases that “might include Internet-of-Things-based verification of physical custody of a physical shipment as a precursor to being able to transfer custody of an SGTIN to the next trading partner in the chain; or, immediate, secure fulfillment of contractual obligations, including, for example, automated payment upon delivery of a shipment.”

Chronicled is one of the many startups that are applying blockchain to supply chain. By creating an auditable and tamper-proof record of the journey behind all products across the supply chain, blockchain can improve the traceability of physical goods, and prevent the selling of counterfeits and other related crimes.

London-based Everledger uses blockchain to provide a permanent ledger for diamond certification and related transaction history. Provenance, another UK-based startup, enables physical products to have their own “digital passport,” which attests authenticity and origin.