AI is worsening a €16bn tsunami of fake goods. The EU wants blockchain to help – DL News

Counterfeit goods cost European clothing, cosmetics and toy sectors €16 billion from 2018 to 2021, a recent study found.

Counterfeiting is a massive problem, especially in Europe, where luxury giants LVMH, Hermès, L’Oreal, and Dior rank among the region’s 10 biggest companies by market capitalisation.

And artificial intelligence is only exacerbating the problem. Cheap and effective AI tools are able to fake authentic documents, which are being used in remote registration processes.

That’s according to Joao Rodrigues Frade, head of the Building Block and Innovative Service in the European Commission’s Directorate General for Digital Services.

He told DL News that a lack of effective tools that verify products, certificates and documents could either lead to more counterfeiting, or to overburdened know-your-customer processes.

Blockchain is the antidote.

“If on one hand you have this powerful tool with which you can generate any document and images in a few seconds, you should also have another powerful tool to verify information,” Frade said.

Frade is among those developing a European Union-wide blockchain. It is part of the 27-nation bloc’s ambition that public services for citizens and companies will be digitalised and recorded on an EU-run blockchain by 2030.

Individuals’ digital identities would be linked to digital wallets stored on a blockchain operated by government-selected bodies.

Certifications and credentials could be verified across borders without heavy-footed paperwork.

“The problem that blockchain could help us solve was the problem of verification,” he said.

Essentially, Europe’s blockchain will help verify documents for citizens, legal entities and products.

“It is only logical that AI and blockchain together provide trust,” Frade said.

Pilot mode

The European Blockchain Infrastructure, or EBSI, has a wheelhouse of projects surrounding it. EBSI has been running as a technical project funded by the European Commission since 2018.

The project is still in pilot mode, because “we are still in the initial stage of these technologies, we are working on things which are outside of the normal. So we are careful,” Frade said.

But when it comes to functionality and security, the blockchain is ready to roll out.

‘Europeum’

Nine EU countries — among them Belgium, Italy and Portugal — have agreed to set up a political body to implement the EBSI. More countries may join.

The European Commission, the EU’s executive arm, has funded €347 million on blockchain-related research and innovation projects over the period between 2017 and 2022, DL News has reported.

But soon, each country in the consortium would operate at least one node, and contribute financially. Belgium’s state secretary for digitalisation Mathieu Michel, an avid proponent of the project, has dubbed it “Europeum.”

The political organisation could be launched as soon as this month..

This phase is about “going into production and about scaling,” Jose Manuel Panizo Plaza from the European Commission’s informatics arm, told DL News.

Proof-of-Authority

The node operators for EBSI are entities, like universities or internet service providers, trusted by EU countries in a proof-of-authority consensus mechanism that does not make use of mining.

“We only allow trusted entities to create information that is then available for everyone to read,” he said.

EBSI’s convenors are in talks with other blockchain infrastructure builders in Latin America and Canada.

The EU’s blockchain is designed to be interoperable with institution-run blockchains developed elsewhere.

“What we want is to receive a diploma from a Canadian university that can be validated in Europe, and the other way around,” Frade said.

Watch the live conversation with Joao Rodrigues Frade and Jose Manuel Panizo Plaza: