It may come as no surprise to many of you, but counterfeit watches truly are a scourge to the luxury watch industry. I’m not sure how easy it is to get accurate numbers on the impact of fake watches, but it’s estimated that the luxury watch industry loses over $1B per year. Manufacturers in China and other countries have gotten so good at reproducing Swiss and German watches, that at first blush, the fakes can be indistinguishable from the real thing. Now, if you fully inspect a watch (i.e., look at the movement), that should typically be a dead giveaway, however, there are many times where it’s already too late, and someone has been duped. If you’re thinking you’re safe because you always buy watches with box and papers, think again. It’s not just the watches that are faked; it’s the whole package. Luckily, there’s a new company looking to wipe the counterfeit market off the map, and it’s called ChainLink.
Last summer I was contacted by ChainLink Co-Founder, Adam Hayes, who was initially interested in seeing if I’d write an article about his new company. After getting a brief intro to what he was doing with ChainLink, I was excited to get involved beyond just writing an article. Since then, I’ve been helping ChainLink connect with various brands to test the viability of their product. However, my involvement shouldn’t detract from the point of this article, which is to get the information out that there’s potentially a solution to the problem of counterfeit watches.
Utilizing the ultra-secure blockchain, ChainLink has developed a digital certificate that is 100% tamper-proof. It might sound like hyperbole, but 100% really means 100% in this case. If you’re familiar with Bitcoin, you’ve likely heard of the blockchain; if you’re not familiar with Bitcoin, fear not, this isn’t a volatile digital currency. In short, the blockchain is the publicly viewable ledger where all Bitcoin transactions are recorded. Once data is embedded into the blockchain (whether a Bitcoin, a ChainLink digital certificate, or something else), the amount of energy required to change that data is so vast, the payoff is dwarfed in comparison. In effect, it’s virtually impossible to tamper with data that has made it to the blockchain.
So, how would ChainLink’s product work in practice? At the point of manufacture, watchmakers would create the digital certificates using the serial numbers of each watch. Wherever brands create the serial numbers – and presumably enter them into their internal database – would be the only point of issuance for ChainLink digital certificates. These points would be considered “Issuers of Trust”, leaving them as the sole creators of the given brand’s certificates. From there, the certificates are transferred, along with the corresponding watches, to the next step in the chain of ownership.
As an example, Rolex creates a Submariner and a digital certificate in Bienne. Next, the watch is shipped, and the certificate is transferred to the 5th Ave boutique in NYC. At this point the boutique owns both the watch and certificate. The boutique cannot alter the certificate; they are merely the holders of it. Sometime thereafter, a customer comes in to buy said Submariner, and at the point of sale, they are also transferred the certificate via ChainLink’s downloadable app. This chain of ownership is entirely viewable via the blockchain, and again, cannot be tampered with. If you’re worried about personal information, the end consumer’s identity is not revealed on the blockchain, only the unique transaction code. However, Rolex’s name will be shown as the issuer of trust, so the consumer can see where the watch originated. All watches purchased with a digital certificate can be stored and seen from the application, essentially acting as a digital watch box for your collection. And for what it’s worth, I’ve used the app; it’s incredibly intuitive and easy to use.
For the watchmakers, outside of punching counterfeit watches in the face, the benefits of using ChainLink’s certificates include up-to-the-second tracking of their inventory across the retail space, as well as storing warranty information and service history. The former could potentially hurt grey market dealers, as the brands wouldn’t be able to turn the other way to watches going out the back doors of retailers as easily. I’m not sure how all that would play out, but it would be interesting to watch. The grey market’s relationship with the brands is a topic for a different article, though.
For the end consumer, the benefits of digital certificates don’t stop at the point of sale. We all know that the secondary market for luxury watches is huge, and I’d be willing to be a lot of you are exclusively buyers of pre-owned watches. In this case, when buying pre-owned, the provenance of a digital certificate will be paramount. Assuming ChainLink’s technology has been adopted, you would demand that the digital certificate accompany the watch you want to purchase. Knowing the certificate cannot be fabricated or stolen from the current owner, it would act as the ultimate proof of provenance and title of ownership. These digital certificates would put to rest any worry of being duped by a random forum seller.
There are other companies looking to utilize the blockchain for similar applications, including medical instruments, fine art, as well as other luxury goods. At this point, ChainLink, with its working demo, is the furthest down the road in terms of development. Watches are obviously near and dear to me, but the blockchain will no doubt have a huge impact on the world in all sorts of areas (banking, healthcare, etc.). What you’re seeing with Bitcoin, and now ChainLink, is just the beginning. The challenge for ChainLink at this point is adoption. The luxury watch world isn’t exactly known for its desire to jump on technology trends. Hell, most of them still use handwritten paper certificates. Brands like Rolex and Hublot have moved onto printed cards that can be scanned at the boutiques and retailers, but those are being faked as well. Of course, only a legitimate one will scan properly, but that’s not going to help you when buying a watch from eBay or WatchUSeek. ChainLink’s certificates would bring watch authentication to the 21st century, and now it’s up to the brands to see that.
Please tell us what you think of ChainLink’s technology in the comments. Co-founders Adam Hayes and Craig Siel will be around to answer any questions you might have.
Feature photo courtesy of ArabianBusiness.com.by