Crypto crashes, but the technology behind it can save billions of luxury brands

These losses can hurt both profits and reputation – that’s why some brands are now turning to technology to protect their products, brand value and consumers.

Despite being competitors, luxury brands conglomerate LVMH (LVMHF) went along with Prada (PRDSY)and Cartier in April 2021 to establish the Aura Blockchain Consortium, an ideal platform that creates a “digital twin” for designer products.
Blockchain is a digital ledger that cannot be edited, modified or tampered with. It is the same technology that underpins cryptocurrencies, which has seen their prices crash lately. But it has many other applications ̵[ads1]1; and Aura uses it to give luxury products a unique digital identifier that will help customers ensure that their purchase is the real deal.

“Blockchain is a technology that moves so fast, and it’s very complex,” said Daniela Ott, general secretary of the Aura Blockchain Consortium. “What Aura is all about is making blockchain easy for luxury brands.”

To date, more than 20 brands use Aura’s software, with over 17 million products registered on the platform, says Ott.

“These brands are competitors in all other respects, but they are collaborating on this technology to bring this about faster, in the safest way,” she says.

“Traceability and trust”

By creating a “digital twin” for physical products such as shoes or handbags, Aura’s software collects a ledger with information such as material type and source, where and when it was made, and how many were produced.

Ott says this will give consumers a higher level of proof and protection by acting as a digital authentication certificate that uses “bank-level encryption” and is “impossible to counterfeit” – preventing counterfeiters. Digital twins, which can be accessed via a website or mobile app, will provide more insight into the product’s origins, and improve “traceability and trust” around sustainability and ethical issues for conscious consumers, she says.

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However, blockchain has its limitations – the information is only as reliable as the person who submits it, says Ott, and warns that “if a brand does not have a good relationship with the supplier, blockchain will not help.”

Sustainability is a key concern for the consortium. As a private blockchain built from scratch, Aura says their platform uses less energy than public blockchains. The platform also gives brands control over what information they share and keeps brand and consumer data safe, says Ott.

Aura launched its cloud-based software in early 2022. Ott says their plug-in technology will allow brands to integrate the product into their existing business with “zero blockchain knowledge”.

And more brands are coming on the scene. The designer streetwear group OTB became a founding member in October 2021, and last month the diamond and gemstone specialist Sarine Technologies also joined the consortium. Founding members contribute to development costs and have more say in the management, says Ott, while all members pay a license fee for the software services and each digital twin that is produced.
Counterfeit goods, like the ones in the picture, cost designer brands billions every year - in addition to damaging their reputation.

Modern technology

Other fashion brands also use blockchain tools. Audemars Piguet and Vacheron Constantin have joined the Paris-based blockchain platform Arianee with open source code, while Karl Lagerfeld’s photographic archive is authenticated on Lukso Network’s public blockchain.
Creating a digital identity can become increasingly important for used luxury retailers, a rapidly growing market. Web platforms like Hardly Ever Worn It and Vestiaire Collective need to authenticate products before selling them – a multi-step process that involves both digital and physical controls, says Victoire Boyer Chammard, global head of authentication at Vestiaire Collective.
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“Counterfeiting has been around for decades and is on the rise,” Chammard said. Vestiaire’s team of 60 authentication agencies checks digital documentation, including photos, before examining each item. AI and blockchain can help speed up the digital authentication process, says Chammard, adding that this will help the human authentication bodies instead of replacing them.

“We will continue to require an expert to conduct a physical survey to verify all the digital data,” she says, adding that if luxury brands use the same technology, it will help retailers with easy access to and use of the information.

Blockchain can also be useful beyond fashion, says Ott: luxury sectors including art, cosmetics, perfume and furniture can benefit from it. In the future, Ott says that the general ledger can also contain information about product maintenance and upkeep, and help to better determine a product’s value for resale.

The latest addition to the Aura consortium is the German carmaker Mercedes-Benz, which joined as a founding member and plans to use the platform to explore various aspects of digital branding, such as creating NFTs (non-fungible tokens) for cars. digital art experiences.

“Our goal of success is to board all luxury brands,” says Ott.

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