Blockchain

Is blockchain the “token” to unlock the potential of digital passporting for products?

Published

4 months ago

11 July, 2024

But what exactly is a Digital Product Passport (DPP)? Essentially, it is a digital record that accompanies a physical product, containing vital information about its lifecycle.

By 2030, every textile and fashion product sold within the EU will require a Digital Product Passport, and a recent report by technology intelligence firm ABI Research confirmed that over 62.5 billion DPPs will be issued for clothing worldwide by 2030. However, many fashion companies are already starting to introduce DPPs into their supply chains.

Camille Le Gal, co-founder of traceability solutions provider Fairly Made, explained how frustrating it was not to have the right tools and means to communicate with customers, even before the regulation, at the recent London Future Fabrics Expo trade show.

“That’s why we developed these QR codes: to attach images, comments and certifications along supply chains, so brands can feed them back into their system,” he said, noting how digital product passports can make complex supply chain information accessible to the average shopper.

Given the questions circulating about the environmental impact of DPP, the challenge of tracking products through multiple lifecycles, and the integration of recycled materials into traceability systems, innovations such as blockchain technology were suggested at the fair as a promising solution for DPP, particularly in the luxury sector.

Blockchain: The Traceability Token for the Digital Product Passport

The potential applications of a Digital Product Passport are vast. Benoit Aubas, innovation manager for Web3 and metaverse at the luxury brand LVMH Group introduced blockchain as a potential “backbone” for DPPs and envisioned it as more than just information repositories. “Our definition is enriching the product experience,” he said, pointing to possibilities like embedded warranties, insurance services, and streamlined gifting workflows as a recipe for value.

LVMH sees the DPP as a tool for authentication and improving the customer experience to combat the highly counterfeit luxury industry. “We wanted to understand what we could offer in terms of value in the DPP,” Aubas explained, describing the luxury brand’s embrace of blockchain technology as a way to record information.

Through this, LVMH has formed a blockchain foundation called “Aura Blockchain Consortium” with other luxury groups such as Prada, Cartier and Richemont to standardize approaches.

The intersection of Digital Product Passport with emerging technologies like blockchain presents both opportunities and challenges. While blockchain can improve traceability and data integrity, there are still concerns about its environmental impact. Aubas reassured that their chosen consensus mechanism is “pretty efficient, it’s like managing a database.”

The story continues

But he acknowledges that challenges remain in the user experience and the digital-physical connection. “How do you connect the digital piece to the physical product?” Aubas asked, emphasizing the need for solutions that can last as long as the luxury products themselves, potentially a century or more.

One of the most intriguing aspects of a Digital Product Passport is its potential to support circular economy initiatives. Aubas painted a future where DPP could facilitate product deconstruction and material recycling. “We don’t have the solution for that yet,” he admitted, “but we have material innovation and product information, so we should be able to deconstruct it at some point.”

The “opaque” challenges of the industry

Despite industry enthusiasm, consumer engagement is still in its infancy, and the road to widespread adoption of Digital Product Passport has left the industry facing very “opaque” challenges in recent years, Le Gal said.

Data collection and standardization emerge as significant challenges, especially in today’s production timelines. For fast fashion brands, this could mean gathering all the necessary information within two weeks, while established brands might have a three- to four-month window.

Le Gal also spoke about the complexity of collecting primary data from the various stages of production, not only manufacturing but also dyeing, spinning and raw material sourcing.

Fairly Made adopts what Le Gal described as “upstream traceability” to help brands that want to go a step further: they provide assistance with resale, repair and rental services to give the brand’s end customers access to additional services.

“We’ve done a lot of work and created a traceability pipeline to make it available on a brand-safe platform,” he said, emphasizing the need for scalable solutions that can handle thousands of product references.

He went on to say that, due to the impending legislation, it is crucial to “embrace and launch” on all brands, whether small, medium or large, as it is no longer about valuing a few items or a collection, but “providing this information on a large scale.”

The impact of DPP on consumer behavior is still evolving. While adoption rates vary, there is optimism about future engagement. “In five to 10 years, 80% of our customers will be digital natives and will accept that type of experience,” Aubas predicted.

Aubas went on to say that in a best-case scenario, around 40-50% of customers interact with DPPs, but this percentage drops to around 10% for products without a full range of associated services.

Le Gal offered a more optimistic view, citing “100,000 clicks or views on DPP on Fairly Made per week,” suggesting a growing consumer interest in product transparency. She shared that Fairly Made helps create “brands of love” by deepening relationships with existing brands to help them build customer loyalty.

European Union vs. France: A Tale of Two DPP Approaches

Leonore Garnier, head of sustainability at the Federation de la Haute Couture et de la Mode, said: “In 2022, the European Commission published a strategy for sustainable and circular textiles.” This strategy positioned the DPP as a crucial tool for monitoring and recording product information.

Garnier outlined the EU’s ambitious strategy for sustainable and circular textiles. At its heart is the Product Environmental Footprint (PEF), a standardized method for measuring the environmental impact of a garment through 16 indicators.

The PEF, which has a distinctive score composed of 16 indicators, has so far been the reference method in the development of the proposed EU Green Claims Directive and the tool is now being integrated into the DPP.

Meanwhile, France launched pilot projects to prove Green Claims 10 years ago and recently accelerated the process by developing a tool, EcoVadis, a system that goes beyond environmental factors to include non-physical aspects such as branding practices and reparability.

The French attach an “environmental cost” to textile products, which means that each product is priced according to its impact on the environment.

The unit of measurement is fictitious and takes into account various indicators, such as environmental impact, non-physical durability, ecotoxicity and microfibres, which are not yet included in the PEF unit score.

“We need a harmonized method,” Garnier said, noting the challenges of creating a system that works for both luxury brands and mass retailers.

What is clear is that the journey to a fully realized DPP is just the beginning. As Aubas said, “We are at the beginning of the journey. We have not yet found a solution for everything.”

“Is Blockchain the ‘Token’ to Unlock the Potential of Digital Product Passporting?” was originally created and published by Just stylea trademark of GlobalData.

The information on this site has been included in good faith for general information purposes only. It is not intended to amount to advice on which reliance should be placed and we make no representations, warranties or guarantees, express or implied, as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.

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Blockchain

Bitcoin (BTC) Price Crashes as Donald Trump’s Win Odds Dip

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Markets received nominally good news on Thursday morning, with the US ISM manufacturing PMI for July falling much more than economists expected, sending interest rates to multi-month lows across the board. Additionally, initial jobless claims in the US jumped to their highest level in about a year. Taken together, the data adds to the sentiment that the US is on the verge of a cycle of monetary easing by the Federal Reserve, which is typically seen as bullish for risk assets, including bitcoin.

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Blockchain

Terra Blockchain Reboots After Reentry Attack Leads to $4M Exploit

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Terra Blockchain Reboots After Reentry Attack Leads to $4M Exploit

Please note that our Privacy Policy, terms of use, cookiesAND do not sell my personal information has been updated.

CoinDesk is a awarded press agency that deals with the cryptocurrency sector. Its journalists respect a rigorous set of editorial policiesIn November 2023, CoinDesk has been acquired from the Bullish group, owner of Bullisha regulated digital asset exchange. Bullish Group is majority owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant digital asset holdings, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial board to protect journalistic independence. CoinDesk employees, including journalists, are eligible to receive options in the Bullish group as part of their compensation.

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Blockchain

$6.8M Stolen, ASTRO Collapses 60%

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

In the latest news in the blockchain industry, there has been a turn of events that has severely affected Terra and its users and investors, with the company losing $6.8 million. The attack, which exploited a reentry vulnerability in the network’s IBC hooks, raises questions about the security measures of the once celebrated blockchain protocol.

A web3 security company, Cyvers Alerts reported that the exploit occurred on July 31st and caused the company to lose 60 million ASTRO, 3.5 million USDC500,000 USDTand 2. 7 BitcoinThe flaw was discovered in April and allows cybercriminals to make payments non-stop by withdrawing money from the network.

Earth’s response

Subsequently, to the hack employed on the Terra blockchain, its official X platform declared the Suspension network operations for a few hours to apply the emergency measure. Finally in its sendTerra’s official account agreed, sharing that its operations are back online: the core transactions that make up the platform are now possible again.

However, the overall value of the various assets lost in the event was unclear.

Market Impact: ASTRO Crashes!

The hack had an immediate impact on the price of ASTRO, which dropped nearly 60% to $0.0206 following the network shutdown. This sharp decline highlights the vulnerability of token prices to security breaches and the resulting market volatility.

This incident is not the first time Terra has faced serious challenges. Earlier this year, the blockchain encountered significant problems that called into question its long-term viability. These repeated incidents underscore the need for stronger security measures to protect users’ assets and maintain trust in the network.

The recent Terra hack serves as a stark reminder of the ongoing security challenges in the blockchain space. As the platform works to regain stability, the broader crypto community will be watching closely.

This is a major setback for Terra. How do you think this will impact the blockchain industry?

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Blockchain

Luxembourg proposes updates to blockchain laws | Insights and resources

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Luxembourg proposes updates to blockchain laws | Insights and resources

On July 24, 2024, the Ministry of Finance proposed Blockchain Bill IVwhich will provide greater flexibility and legal certainty for issuers using Distributed Ledger Technology (DLT). The bill will update three of Luxembourg’s financial laws, the Law of 6 April 2013 on dematerialised securitiesTHE Law of 5 April 1993 on the financial sector and the Law of 23 December 1998 establishing a financial sector supervisory commissionThis bill includes the additional option of a supervisory agent role and the inclusion of equity securities in dematerialized form.

DLT and Luxembourg

DLT is increasingly used in the financial and fund management sector in Luxembourg, offering numerous benefits and transforming various aspects of the industry.

Here are some examples:

Digital Bonds: Luxembourg has seen multiple digital bond issuances via DLT. For example, the European Investment Bank has issued bonds that are registered, transferred and stored via DLT processes. These bonds are governed by Luxembourg law and registered on proprietary DLT platforms.
Fund Administration: DLT can streamline fund administration processes, offering new opportunities and efficiencies for intermediaries, and can do the following:
- Automate capital calls and distributions using smart contracts,
- Simplify audits and ensure reporting accuracy through transparent and immutable transaction records.
Warranty Management: Luxembourg-based DLT platforms allow clients to swap ownership of baskets of securities between different collateral pools at precise times.
Tokenization: DLT is used to tokenize various assets, including real estate and luxury goods, by representing them in a tokenized and fractionalized format on the blockchain. This process can improve the liquidity and accessibility of traditionally illiquid assets.
Tokenization of investment funds: DLT is being explored for the tokenization of investment funds, which can streamline the supply chain, reduce costs, and enable faster transactions. DLT can automate various elements of the supply chain, reducing the need for reconciliations between entities such as custodians, administrators, and investment managers.
Issuance, settlement and payment platforms:Market participants are developing trusted networks using DLT technology to serve as a single source of shared truth among participants in financial instrument investment ecosystems.
Legal framework: Luxembourg has adapted its legal framework to accommodate DLT, recognising the validity and enforceability of DLT-based financial instruments. This includes the following:
- Allow the use of DLT for the issuance of dematerialized securities,
- Recognize DLT for the circulation of securities,
- Enabling financial collateral arrangements on DLT financial instruments.
Regulatory compliance: DLT can improve transparency in fund share ownership and regulatory compliance, providing fund managers with new opportunities for liquidity management and operational efficiency.
Financial inclusion: By leveraging DLT, Luxembourg aims to promote greater financial inclusion and participation, potentially creating a more diverse and resilient financial system.
Governance and ethics:The implementation of DLT can promote higher standards of governance and ethics, contributing to a more sustainable and responsible financial sector.

Luxembourg’s approach to DLT in finance and fund management is characterised by a principle of technology neutrality, recognising that innovative processes and technologies can contribute to improving financial services. This is exemplified by its commitment to creating a compatible legal and regulatory framework.

Short story

Luxembourg has already enacted three major blockchain-related laws, often referred to as Blockchain I, II and III.

Blockchain Law I (2019): This law, passed on March 1, 2019, was one of the first in the EU to recognize blockchain as equivalent to traditional transactions. It allowed the use of DLT for account registration, transfer, and materialization of securities.

Blockchain Law II (2021): Enacted on 22 January 2021, this law strengthened the Luxembourg legal framework on dematerialised securities. It recognised the possibility of using secure electronic registration mechanisms to issue such securities and expanded access for all credit institutions and investment firms.

Blockchain Act III (2023): Also known as Bill 8055, this is the most recent law in the blockchain field and was passed on March 14, 2023. This law has integrated the Luxembourg DLT framework in the following way:

Update of the Act of 5 August 2005 on provisions relating to financial collateral to enable the use of electronic DLT as collateral on financial instruments registered in securities accounts,
Implementation of EU Regulation 2022/858 on a pilot scheme for DLT-based market infrastructures (DLT Pilot Regulation),
Redefining the notion of financial instruments in Law of 5 April 1993 on the financial sector and the Law of 30 May 2018 on financial instruments markets to align with the corresponding European regulations, including MiFID.

The Blockchain III Act strengthened the collateral rules for digital assets and aimed to increase legal certainty by allowing securities accounts on DLT to be pledged, while maintaining the efficient system of the 2005 Act on Financial Collateral Arrangements.

With the Blockchain IV bill, Luxembourg will build on the foundations laid by previous Blockchain laws and aims to consolidate Luxembourg’s position as a leading hub for financial innovation in Europe.

Blockchain Bill IV

The key provisions of the Blockchain IV bill include the following:

Expanded scope: The bill expands the Luxembourg DLT legal framework to include equity securities in addition to debt securities. This expansion will allow the fund industry and transfer agents to use DLT to manage registers of shares and units, as well as to process fund shares.
New role of the control agent: The bill introduces the role of a control agent as an alternative to the central account custodian for the issuance of dematerialised securities via DLT. This control agent can be an EU investment firm or a credit institution chosen by the issuer. This new role does not replace the current central account custodian, but, like all other roles, it must be notified to the Commission de Surveillance du Secteur Financier (CSSF), which is designated as the competent supervisory authority. The notification must be submitted two months after the control agent starts its activities.
Responsibilities of the control agent: The control agent will manage the securities issuance account, verify the consistency between the securities issued and those registered on the DLT network, and supervise the chain of custody of the securities at the account holder and investor level.
Simplified payment processesThe bill allows issuers to meet payment obligations under securities (such as interest, dividends or repayments) as soon as they have paid the relevant amounts to the paying agent, settlement agent or central account custodian.
Simplified issuance and reconciliationThe bill simplifies the process of issuing, holding and reconciling dematerialized securities through DLT, eliminating the need for a central custodian to have a second level of custody and allowing securities to be credited directly to the accounts of investors or their delegates.
Smart Contract Integration:The new processes can be executed using smart contracts with the assistance of the control agent, potentially increasing efficiency and reducing intermediation.

These changes are expected to bring several benefits to the Luxembourg financial sector, including:

Fund Operations: Greater efficiency and reduced costs by leveraging DLT for the issuance and transfer of fund shares.
Financial transactions: Greater transparency and security.
Transparency of the regulatory environment: Increased attractiveness and competitiveness of the Luxembourg financial centre through greater legal clarity and flexibility for issuers and investors using DLT.
Smart Contracts: Potential for automation of contractual terms, reduction of intermediaries and improvement of transaction traceability through smart contracts.

Blockchain Bill IV is part of Luxembourg’s ongoing strategy to develop a strong digital ecosystem as part of its economy and maintain its status as a leading hub for financial innovation. Luxembourg is positioning itself at the forefront of Europe’s growing digital financial landscape by constantly updating its regulatory framework.

Local regulations, such as Luxembourg law, complement European regulations by providing a more specific legal framework, adapted to local specificities. These local laws, together with European initiatives, aim to improve both the use and the security of projects involving new technologies. They help establish clear standards and promote consumer trust, while promoting innovation and ensuring better protection against potential risks associated with these emerging technologies. Check out our latest posts on these topics and, for more information on this law, blockchain technology and the tokenization mechanism, do not hesitate to contact us.

We are available to discuss any project related to digital finance, cryptocurrencies and disruptive technologies.

This informational piece, which may be considered advertising under the ethics rules of some jurisdictions, is provided with the understanding that it does not constitute the rendering of legal or other professional advice by Goodwin or its attorneys. Past results do not guarantee a similar outcome.

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