What Blockchain Technology is Used in Luxury Supply Chains

Imagine a field full of uniquely numbered blocks connected by tunnels. You can send and store information on the blocks anonymously. Once you’ve sent data through a block, the next block knows where it is from, but doesn’t know who it is from. This is the fundamentals of blockchain technology. 

As an organization, you can easily track where the information (in your case, products) was last recorded through the block embedded records connected through hash values. 

A general misconception surrounding blockchains is that it needs miners to function. Miners are individuals who use computation power to record the transactions in the blockchain ledger. While in the case of tokens (Bitcoin, ETH) the miners are an essential element, in private blockchain architectures, they aren’t viable. 

Blockchain is decentralized. This means that the technology doesn’t have a centralized supervision and modification system in place. The users keep track of the transaction through digital ledger technology. 

The luxury supply chains require planning, sourcing, manufacturing, logistics, and returning. Depending on the products and nature of the business, some aspects may be added or removed. But the fundamentals remain the same. 

In the whole process of luxury supply chain management, authentication, certification, and security play important roles. The traditional approach to these is quite basic and lax. 

The authenticity certificates often depend on physical numbers or chips embedded in the products themselves. Which can be subjected to fraud and counterfeiting. Blockchain technologies are used in luxury products, especially in the diamond industry, to mitigate these issues and much more. 

Data Management

Blockchain technology ensures that every data transaction including customer data is encrypted and recorded. Blockchain ensures that the granular sourcing of physical goods spanning national and international borders is traceable and constrained. 

The provenance of luxury goods is maintained through blockchain by delivering product information, origin, and authenticity of each raw material. Moreover, diamond supply chains employ the core functions of provenance and consensus algorithms through the Hyperledger Sawtooth project to ensure a secured and traceable supply chain. 

Since the blockchain technology consists of nodes that we call blocks, the whole supply chain can be viewed as a real-time map. The nodes work as junctions in this map. With the map, the bottlenecks can easily be found with careful supervision.  

The luxury supply chain provenance uses blockchain to store critical information, secure them, and ensure role-based access to the data. 

Enhanced Security

Blockchain, equipped with authentication, privacy, access control, data provenance, and integrity assurance, caters to luxury supply chains with robust security and anonymity. Risk control analytics frameworks are also formed using blockchain technology to analyze the connections among businesses and partners. 

The diamond industry thrives on the clarity and size of the gems. The authenticity of your diamond is ensured by tracking back the piece to its mining or manufacturing source. 

As a buyer, you can check the cultivation, refinement, and appraisal of your lab grown diamond through blockchain technologies. Lab grown diamonds are different than synthetic diamonds. Whereas lab grown diamonds hold similar physical and chemical properties to natural diamonds, synthetic diamonds differ a lot from their natural counterpart. 

Scalability of the blockchain technology is a plus for luxury brands that require robust risk management. The jewelry industry, being a risk-prone sector, is particularly inclined toward using blockchain as its mean of digitalization. 

IoT is used in diamond supply chains a lot. From laser cutting to inventory management, IoT has proven to be the game-changer for luxury brands. However, the always-connected approach to IoT has made it vulnerable to cyber-attacks. Especially device identity fraud.  Blockchain technology ensures higher security for IoT devices by securing data storage and transmission. 

Products talk to each other through their journey through collaborative intrusion detection systems. These systems are particularly vulnerable to tampering and code alteration. Blockchain technology can be used to resolve the issues by ensuring integrity and data storage.  

Tracking Transparency

Transparency between parties is critical in luxury supply chains. Increased traceability of products increases the trustability and integrity of the products and the business relations. RFID is primarily used in luxury supply chains for traceability. 

Blockchain improves the RFID system by increasing transparency, data protection, and cost management using a lightweight mutual authentication RFID protocol. IBM and Walmart use blockchain technology to track consumer products through RFID. 

Inventory and asset management are ensured with blockchain through its “proof of concept algorithm”. Blockchain improves customer-order-process management (COM) through improved transparency, reliability, and efficiency of the orders.

With a more transparent tracking system, process automation becomes more secure and effective. 

Improved Response Time

Blockchain improves product cycle time, quality, and productivity. It helps to open new business opportunities and promotes effective product deletion. Price tracking through multilayer data management and automated decision-making through real-time tracking in the luxury supply chain. 

Product deletion processes are employed by an organization for various reasons including fewer sales, low profits, products being obsolete, or declining market share. Product deletion is a strategic decision that is fueled by the extensive availability of data on the product and the market. 

Since blockchain provides a more transparent node-to-node data on every operation in the supply chain network, circular economy and product deletion strategies become more effective with blockchain. 

Several factors that affect product deletion associated with sourcing, manufacturing, logistics, usage, and returning are supported by blockchain. For example, reliable information derived by blockchain from source and manufacturing processes on outsourcing, energy usage, financial control, resource efficiency, and facility costs influences the product deletion decision. 

You can facilitate this information with traditional approaches. But using blockchain improves the response time.

Smart Contracts and Diminished Intermediaries

Smart contracts on blockchain work as regular contracts on steroids. Smart contracts on the supply chain automatically execute the predetermined intended programs without any intermediary sabotaging or delaying the process. 

The information gap between stakeholders results in decreased business performance and trust issues. Proper smart contracts with requests and modifications of payments or services automatically trigger process flows to promote speed, trust, and improved performance.  


Blockchain is immutable. Every transaction is recorded on the digital ledger deeply integrated into the core of the technology. Although modification requests can be made and executed, the records of modifications can’t be altered. With proper access management, blockchain can increase trustability between partners in luxury supply chains. 

Virtual Intellectual Property Management

Virtual properties like logos, images, and patients often get stolen and used illegally. These non-fungible assets can be secured in the blockchain with a unique ID and hash values. 

The Bottom Line

Blockchain is a decentralized technology being employed by luxury supply chains quite frequently. Data is collected from blockchain nodes to improve performance. Product and payment tracking are enhanced with blockchain to improve response time. Smart contracts and immutability help supply chains make trusted decisions without intermediaries. The protection of virtual assets is also improved with blockchain.