Now that you've decided to implement digital product passports (DPPs), it's crucial to select the right infrastructure to support them. Many brand executives frequently come to us with similar questions: Why should we use blockchain technology, and what are the strategic edges against traditional centralized databases?
In this article, we’ll delve into the properties of blockchain that makes it the best technology to deploy digital product passports.
Why blockchain?
There is more to blockchain than just a new technology. It's a transformative layer within a broader architecture, introducing new capabilities, coding languages, and layers. This encompasses cryptography, smart contracts, and distributed ledger technology, collectively often referred to as Web3.
Benefits of the blockchain technology include:
- Data that is resilient against breaches: Blockchain stores information in a way that’s hard to tamper with. Each piece of data is encrypted and linked to the previous one, creating a chain that’s almost impossible to alter.
- Auditable information: Everyone in the supply chain can see the same data, ensuring transparency and trust.
- Composable like legos: EVM-compatible platforms offer a composable framework, enabling developers to build and innovate rapidly by reusing existing components.
- Scalable and interoperable networks: Utilizing widely recognized standards like ERC721 for NFTs and EVM-compatible blockchains ensures seamless integration and interaction between systems and stakeholders. This promotes technology adoption and enhances ecosystem connectivity.
- Empower brands and users: Blockchain returns data control to brands and users, ensuring ownership of our assets, interactions and networks without reliance on Big Tech in the long run.
When it comes to relationships with customers, brands can leverage blockchain to create a new type of client data that is dynamic, evolutive, transferable, and shared between brands and users. This new data infrastructure is perfectly suited to a circular economy:
- An open world where circularity isn't solely managed by the brand
- Extending connection with the product owner beyond the initial purchase
- Enhancing transparency and trust throughout the product lifecycle with visibility into both upstream traceability and post-purchase events (read more here)
Let's take a closer look at how it differs from traditional centralized databases.
(In this article, the term "blockchain" refers specifically to public blockchain.)
2 main data architectures for Digital Product Passports
A centralized database is a type of database managed by a single entity, which controls access and editing rights, and oversees its costs, compliance, and operations.
A public blockchain is an open, decentralized digital ledger where anyone can participate, validate transactions, and access the data. It ensures transparency, security, and immutability, meaning once data is recorded, it cannot be altered.
Data can be encrypted and access can be restricted with permissions. In this case, it is usually the brand that issues a DPP and the owner of this DPP who are the only ones able to access all the data.
1. Cost in Setup and Maintenance
When adopting new technologies, cost-efficiency is crucial. Lowering expenses while maximizing operational effectiveness can significantly impact your company’s bottom line. Blockchains provide a compelling advantage.
🟢 Blockchains:
Lower Operational Costs: Public blockchain technology offers low initial setup and ongoing maintenance costs due to its decentralized nature at the infrastructure level, which spreads operational expenses across the network.
On-going Updates and Support from the Ecosystem: Utilizing widely accepted standards like Ethereum Virtual Machine (EVM) and ERC-721 protocols ensures interoperability and efficiency. These standards minimize the need for extensive custom development and integration, supported by a vast, global, open-source developer community that continuously advances functionalities and security—integrated as a core service within the technology.
⚫️ Traditional Databases:
High Customization Costs: Setting up and maintaining traditional databases can be expensive. Each security update and system enhancement requires substantial resources.
Ongoing Cybersecurity Investment: Centralized systems need continuous investment in cybersecurity to prevent data breaches, adding to operational costs. Traditional databases also require regular updates to remain compatible with new technologies, which can be both cumbersome and costly.
2. Privacy and Security
In an era of frequent data breaches, maintaining robust security and privacy measures is paramount. Businesses need to ensure their systems protect sensitive information without sacrificing transparency and auditability. Blockchains offer a unique balance.
🟢 Blockchains:
Auditable Yet Secure: Blockchains provide an auditable infrastructure that ensures transparency without compromising privacy. While the content and the events of DPPs live on brandʼs private servers, their cryptographic hash is stored on the blockchain. This hash can only be decrypted by individuals with the appropriate rights, such as the issuer or owner of the DPP, ensuring data privacy while maintaining the integrity and auditability of the records. This balance between openness and security is critical for maintaining stakeholder trust and regulatory compliance.
Flexibility: The decentralized nature of blockchain supports smart contracts, automating processes like ownership transfers and declarations of lost or stolen items. This reduces administrative overhead and enhances operational efficiency.
⚫️ Traditional Databases:
Limited Flexibility and Transparency: While they can associate data with individuals, the process is generally static and inflexible. Changes or transfers typically require updates to the database, making them less suitable for dynamic environments. This centralized approach can limit transparency and is less effective in providing the same level of data integrity and security as blockchain technology. Traditional databases lack auditability and interoperability.
Closed Ecosystems: These systems do not benefit from the continuous improvements provided by a global open-source developer community, limiting their ability to evolve and adapt.
3. Strategic Integration and Future-Proofing
As businesses look to the future, the ability to integrate seamlessly with evolving technologies and maintain long-term data integrity becomes increasingly important. Blockchains offer strategic advantages that help ensure your company is prepared for whatever comes next.
🟢 Blockchains:
Augmented utilities for DPP: Over time, more providers, on the front end experience will offer services compatible with standards like wallets and ERC-721. Blockchainʼs permissionless integration allows various stakeholders—from marketplaces to service providers—to easily add value and services without needing direct access management. This system facilitates seamless integration with end-user front-end experiences, making it easier and more cost-effective to incorporate digital passports into the user interface over time.
New business models: Blockchain enables brands to become platforms, offering services through decentralized applications (DApps), fostering ongoing engagement beyond mere transactions.
(Download our position paper: From A Production-Based to A Service-Based Economy)
⚫️ Traditional Databases:
Costly Custom Integrations: Traditional databases require significant customization for each new system or partner, which is both time-consuming and costly. This inflexibility can slow your ability to respond to new market opportunities.
Challenges in Long-term Data Management: Maintaining data integrity over the long term is challenging with traditional databases, especially as technology evolves because they lack the broad support and innovation of blockchains.
To sum up
For brands in the luxury industry, where cherished items are kept for generations, maintaining databases for perpetually valuable data necessitates ongoing support and upgrades. Blockchain addresses this challenge by preserving data integrity over long periods without requiring extensive system overhauls.
By choosing blockchain technology, brands can ensure their digital product passports are secure, transparent, and future-proof, providing unparalleled value to both the brand and its customers.
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