Blockchain-based QR-codes to replace the excise stamps

The goal of the project was to use the blockchain technology to replace the excise stamps with QR-codes. This would provide immense benefits:

reduce the spending on creating the excise stamps by approx 90%,
reduce the risk of fraud and counterfeit to 0,
increase the tax revenues by nearly 100%

For example, the percentage of counterfeit alcohol sales can reach up to 55% of the country’s official statistics (about $450 million a year in the case of Ukraine).

Project requirements

The QR-code should be used the same way an excise stamp is used nowadays, just without the possibility to forge it. It should be issued by the governing body and store the date and location of producing each unit of excise goods. As, an example, the QR-codes for cigarettes would look like this:

The code on the pack contains the details of the production location, date and batch number
The code on the block contains the hashes of all the pack QR-codes within
The code on the box contains the hashes of all the block QR-codes within
The code on the pallet contains the hashes of all the box QR-codes within
The code on the batch contains the hashes of all the pallet QR-codes in it

Project results

The system works as follows:

The regulator prints the QR-codes
The manufacturer marks the goods with QR-codes and packs them
The tokens are put into “packaged” state
Once the wholesale distributor splits the batch, the tokens are updated and the pallet codes are activated
The same process goes all the way down to a single pack of cigarettes
The customers can scan the item QR-codes to ensure their validity
Once the item is sold, its token is put to “sold” state, closing the block

Due to the immutability of blockchain ledger, the counterfeit goods are identified at once during scanning. All the textual details are stored in the cloud, only the transaction hashes are stored in the ledger. The scanning takes milliseconds and the data uses literally no disk space.

Location: Ukraine

Partnership period: September-October 2017

Team size: 2 – 4 people

Team location: Kharkiv, Ukraine

Services: Blockchain development, cloud architecture, web development

Expertise delivered: AWS cloud administration, DevOps services, blockchain development, cloud infrastructure management

Technologies: Ethereum API, Laravel, Node.js

Product Overview

Client’s goals

The main goal of the project was to guarantee the validity of the goods and remove the chance of counterfeit. This would ensure the increased tax revenues and provide the efficient means of control over the goods delivery.

Transparency — due to the blockchain architecture, the system is able to highlight the status of each item, whether it is “packaged”, “delivered” or “sold”
Immutability — the open ledger ensures the records cannot be altered and the destination of each item can be tracked
Legitimity — the codes cannot be forged, as scanning a forged code will reveal the fact of counterfeit at once

Feasibility — replacing the expensive (and forgeable) excise stamps with inexpensive (yet unforgeable) QR-codes would ensure both cutting the stamp production costs and increasing the tax revenues from the distribution of excise goods.

Implementation and challenges resolved

IT Svit team has a wide experience in developing blockchain-based solutions for multiple industries. We leveraged this knowledge to accomplish all the tasks of the project:

Using Ethereum smart contracts allowed us to deliver a flexible and highly configurable platform that can interact with multiple third-party software modules through API
All the textual details are stored in the MongoDB in the cloud, and only the transaction hashes are stored within the blocks. This leads to minimal usage of system resources and allows the transactions and checks to happen in milliseconds.

We delivered both a web portal and a lightweight blockchain wallet for checking the QR-code status through a mobile device