This month, Bitfury® engineers Yury Yanovich, Ivan Prokhorov, Darya Korepanova and Sergey Vorobyov were published in scientific research journal Informatics alongside the Center for Computational and Data-Intensive Science and Engineering at the Skolkovo Institute of Science and Technology (Skoltech); the Laboratory of Data Mining and Predictive Modeling at the Institute for Information Transmission Problems; the Department of Geography of World Economy at Lomonosov Moscow State University; and the Higher School of Economics for their work designing a blockchain-based supply chain to prevent stamp counterfeit.

Highlights from their research paper can be found below, and the full paper can be downloaded here (abstract here).

Check out the Exonum-based prototype described in the paper here on GitHub.

Situational Analysis

Stamp counterfeiting is an expensive and wide-ranging problem for postal services all over the world. A number of factors can complicate protection measures — for example, if stamp creation is not owned by a single entity; if the postal service has high-traffic; if stamps do not expire; and/or if counterfeit stamps present as technically legitimate but have not been paid for. All these listed issues can be found in the postal service in Russia. Our engineers decided to research the problem of stamp counterfeiting and designed a blockchain system that could address these issues. While their prototype was designed specifically for the Russian postal service, this solution could be deployed in any country.

About the Russian Post

The Russian Post uses the following stamps: meter stamps, postage stamps and printed postage impressions. This prototype was designed to better secure the operations of postage stamps, as it is one of the most counterfeited types of stamp.

Postage stamps are stamps manually stuck on mailings and are mainly used by individuals and small corporate clients. This large market for postal stamps in Russia creates opportunities for fraudulent schemes, the most common of which are the selling of counterfeit postage stamps, some of which appear technically authentic to postal system scanners.

This issue is further complicated by the fact the Russian Post does not have a monopoly on selling postage stamps in Russia. The Russian Post manages the production and distribution of these stamps, but (similar to the United States) these stamps can be bought in many places such as grocery stores and markets (called a “secondary market.”)

When counterfeit stamps are used, they are hard to detect. It takes considerable time to verify a postage stamp and the Russian Post handles thousands of these mailings a day, necessitating a high processing speed. In-depth verification of each mailing cannot be performed without causing significant delays.

Stamp fraud puts not only Russian Post at risk, but also the senders, as mailings with discovered counterfeit stamps are detained for investigation by law enforcement.

Our Solution

The solution Bitfury designed is a private blockchain on Bitfury’s open-source Exonum framework, with the process flow focusing on postage stamps circulation and accountancy. The blockchain will store a record of stamp purchase (on both primary and secondary market), mail acceptance and stamp cancellation, thus guaranteeing the circulation of only officially recognized stamps. The suggested system operates with the crypto token Stamp– a digital asset which follows the physical stamp along its way through the supply chain. The only way to issue a token is by letting physical stamps into circulation.

The proposed solution includes the following participants:

Transaction validators – The computing centers of Russian Post. Validators check compliance of transactions entering the network with formal blockchain rules; compose blocks from the correct transactions and participate in the consensus process on adding new blocks to the blockchain.

Token issuers – Entities that have been assigned the status of a postage stamp vendor by Russian Post.

Postal acceptance inspectors – Russian Post employees who are responsible for mail acceptance and stamp cancellation of both physical stamps and blockchain tokens.

Clients – All legal entities participating in the stamps market. Clients in the system can receive tokens from Russian Post or any other client who has purchased tokens from Russian Post. Clients can also transfer their tokens to other participants of the network and can create transactions for the provision of postal services.

Auditors – Representatives authorized by Russian Post and any other organizations who have been assigned the role of auditor. Auditors make sure that the system operates correctly.

Only validators and auditors have read access to all the information stored in the blockchain. Other parties can only receive cryptographic proofs of the presence and position of known transactions in the blockchain — thus, they can verify the authenticity of their stamp.

Sample Workflow: