The Blockchain and the industry of watchmaking
In conversation with Fausto Dassenno, blockchain expert - Episode one
Gray and After Market: tracking is the problem
In several articles dedicated to industry, the last one related to the development of WatchBox in Europe, we've analyzed both gray and pre-owned markets and how these sectors are in full development.
The recent crisis in the watch industry, which was clearly and exhaustively analyzed, has generated several casualties, beginning with the swiss brands due to questionable sales policies boosting the grey market. Now imagine the need to fight off the perception of a diluted brand name and, at the same time, defend the pre-owned market fed by the same policies.
Blockchain, an unknown
While I write this article I also verified on Google that the word "Blockchain" generates about 274 million results. An impressive number taking into consideration that there is no, as yet, widespread awareness as to what it is; yet it's big enough to generate such level of interest. It is not easy to explain in a few common words what Blockchain actually is.
We dare say, before reading an expert's view, that Blockchain is already part of the watchmaking world and that, in basic terms, affords the tracking of a product or service from its creation to its, eventual, demise.
Hublot is among the firsts luxury watchmakers to have adopted Blockchain and its derivatives when in September it launched the MECA 10-P2P sold at USD 25,000 or its equivalent in Bitcoin, the crypto-currency which bases its existence on Blockchain technology.
Why use Blockchain
Any product utilizing this technology has a DNA that, not unlike a system where informations are shared by a community (the chain), updates itself as that product passes from entity A to entity B, giving to the holder of the product, in chronological order, a detailed mapping of its life-cycle.
Now imagine to be able to apply such technology to a watch; buyers, sellers, length of ownership etc. are embedded in a microchip or a bar code which will demonstrate the entire life-cycle of a watch since the day it was packaged for shipping to the store.
What is Blockchain? Let's ask an expert, Fausto Dassenno
Fausto Dassenno, for 15 years has gathered experience in the digital industry (here his Linkedin profile) and began as a developer, involved in e-commerce with e-Bay before moving in the forefront of at Gumtree, a hi-tech company in UK.
Fausto is one of the most convinced promoters of Blockchain and is often a guest speaker at conventions and netcasts and so we ask him to explain to our readership often confronted with concerns about used watches, what is Blockchain and how it can help the sector. To Fausto we also asked if he feels Hublot's experiment, a brand known for innovation, is an isolated case or perhaps the first of a series with Blockchain technology:
"Technology is in constant evolution and research to reach and achieve new solutions to old problems knows no limit. In the last few years the term "Blockchain" has jumped to the forefront of news by being the technology at the base of Bitcoin. Bitcoin is the first true example of digital currency rooted on mathematical basis ad not financial; a currency guaranteeing ease of use at low cost to transfer money without going thru a bank. Without going into too much detail we can say that Bitcoin has allowed the technology, which is at its base, the Blockchain, to tickle the interest of developers and businessmen around the world to expand both research and use.
Blockchain is not used only in financial markets. Being a powerful database able to store informations in an unmodifiable way and make decisions without intermediaries, it opens infinite possibilities in those cases where certainty and and non-partizan information is needed. The structure of Blockchain is a system of "blocks" linked one after the other, "chain" in an encrypted way; even a single minute modification of a single block will invalidate the entire sequence of blocks thereafter. Data are also distributed on a network of connectors or knots allowing verifiable information by anyone and without intermediaries.
Brokerage is one of the most interesting aspects tied to the world of luxury watches. In creating a system capable of tracking watches sold worldwide we should trust those who create and maintain that system if only for technical reasons. By utilizing Blockchain we no longer find a need for a fiduciary entity. Informations will only be verified at the input stage allowing addition directly from manufacturing and brands. From that moment on it will be available and verifiable by anyone in an unchangeable way without resorting to a broker.
Furthermore it is correct to add that the most revolutionary aspect of this technology is the ability to execute "programs" on the Blockchain, the smart contracts. These programs are executed in decentralized mode and once distributed they act autonomously guaranteeing unpartizan results. In future, our insurance will pay us automatically the policy after a hailstorm by simply using a smart contract, no paper or adjusters! The possibilities are endless for preventing fraud and protect one's investment, the same technology can be applied to signed handbags, paintings and artwork. After all many watches are real works of art."
How can an expanded application of Blockchain unite with the current architecture of some large groups, particularly high volume brands, that on volume invest a large share of their business? Is it acceptable that a high volume brand sells thru official channels items equipped with Blockchain technology while on the grey market the same item is sold without it? Could the brands use this technology to increase pricing, because of added value, to its clients? And, above all, how will the retailer respond when they decide to terminate a relationship with a brand and must dispose of its stock? We will try and analyse in the following episodes.
(Photo credit: courtesy of Hublot, Davidstankiewicz - Own work, CC BY-SA 4.0)
Gaetano C @Horbiter®