Blockchain in the Fashion Industry
More often than not, the term that we associate with the word “blockchain” is “Bitcoin.” And while it’s true that blockchain technology was initially created to account for cryptocurrency transactions, it can be applied in so many other settings. A blockchain is a digital ledger that records transactions in ordered records called “blocks.” Each new piece of information is added to the record chain chronologically so that the blockchain reports the entire history from start to finish. This technology is being utilized in almost every single industry, and the fashion industry has adapted it to its own specific use, as well.
Blockchain and the Supply Chain
The fashion industry initially jumped at the chance to use blockchain technology because of its unique ability to accurately record transactions from multiple different sources. The supply chain in the fashion industry can be extensive – it begins at the raw materials sourcing and ends when it makes it into the hands of the customer. With so many steps in between, it’s no wonder that there was a need for a more transparent tracking system.
However, asserting that blockchain is simply a sophisticated tracking software is downplaying its impact on the industry. While blockchain technology does track processes through the supply chain, the real value comes from its reliability and the transparency that it offers. By providing a tamper-resistant and verifiable record, blockchain eliminates the opportunity for human interference and encourages honesty from all those involved. This means:
• Disagreements about distribution terms will be easily resolved by looking at what was promised and what was delivered.
• A wholesaler will know if the product they are purchasing is counterfeit because its origins will be verifiable.
• Consumers will know where the product was sourced and can adjust their ethical buying practices accordingly.
Removing the waste that human meddling can introduce into the supply chain promotes greater efficiency for everyone involved.
Blockchain and Intellectual Property
Inspired by what was happening in the music industry, the fashion sphere has begun to utilize blockchain to protect its intellectual property rights. In both industries, the players are hoping that blockchain can provide transparency and promote fairness in how their royalty payments are calculated and collected.
Royalty payments are notoriously difficult to verify. They can come from multiple different sources, and the calculation for such payments can be burdensome if the information it’s based on is imperfect. With blockchain, the sale of branded goods can be tracked so that royalty payment information is easily certifiable.
Many of the difficulties with royalty payments begin with the licensing agreements themselves. Maintaining accurate licensing agreements can be a struggle. With the help of blockchain technology, licensing agreements can be easily transferred to the correct parties once the blockchain history can prove that they have fulfilled their promises. Lawyers will still be needed to formalize these contracts, but blockchain can help keep reliable records for the legal team to use.
Before you implement your own blockchain application, first you must decide what your needs are. Do you need help cleaning up your supply chain? Do you want your consumers to make more ethical shopping decisions? Do you need help collecting lost royalty payments? These are questions that our team of advisors can help you with, along with helping you to achieve your ultimate goals.
For more questions about employing bitcoin in the fashion industry, contact Stuart Mayer