Anti-counterfeiting blockchain start-up UCOT raises $4m from token sale

A Sydney-based start-up led by a former vice-president of Credit Suisse and chief technology officer of Deutsche Bank, John Baird, has raised $US4 million ($5.2 million) for its blockchain-based digitised supply chain ecosystem, through a private token sale to investors including CollinStar and Sapien Ventures.

The project called UCOT, which is being developed by Ultimo Digital Technologies in conjunction with UTS, claims its technology will stop criminals selling counterfeit products by tracking every step of the supply chain by embedding a unique digital identification microchip and sensor into the product’s packaging, adding an extra layer of transparency and accountability into the supply chain process.

Unlike other products on the market from companies such as TBSx3, UCOT will not require the product to be scanned at every step of the supply chain. Instead the product will automatically detect if it has been opened, letting the end consumer know via an app that there is a chance it has been tampered with.

It also tracks if a package has been dropped, or if it was not kept at the requisite temperature or other conditions.

The company is being supported by research from the University of New South Wales, the University of Technology Sydney and Monash University, which are behind the creation of its blockchain and sensor, and it utilises 5G internet of things telecommunications infrastructure.

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Mr Baird said he joined the venture in January after learning of the exciting possibilities offered by the project. 

“When you receive the item, UCOT lets you go back and query the blockchain via an app and confirm if it’s been opened. [It’s particularly important] when it’s a high-value or health-related product. We are ensuring what the customer gets is what the manufacturer put in there,” he said.

“I’d love to have the first sensors in the field in six to eight months. UTS is ready to deliver the blockchain in May and version one will be ready in the next month or two.”

The investment in the business by Sapien and CollinStar is part of a growing push into the sector from venture capital funds.

Seeking clients

In preparation to launch as early as August, Mr Baird said he was on the hunt for companies wanting to work with the business to design customised sensors to fit in their packaging.

“We’ll likely start at a bigger level, say a box of products … then as time goes by we’ll keep shrinking the device,” he said.

The intention is for the device to be placed in individual products such as a bottle of wine, or container of milk powder.

UCOT has already secured a number of memorandums of understanding for contracts with governments and corporates and it’s in discussions with a government in South America to use its product to protect insulin shipments.

The payment model of the company is such that the business earns a small amount of revenue each time a product self-scans throughout the supply chain journey. With its big-picture vision in mind, Mr Baird said it had decided to utilise tokens rather than cash as its form of currency to avoid overloading a bank with hundreds of millions of small transactions a day.

Token sale

This fact also motivated its decision to raise capital via a private token sale, instead of through traditional venture capital funding. 

“When we get down to individual containers there will be millions of transactions a day … the expense and functionality won’t let that happen, so we decided to release this digital currency where people can go to the exchange and buy it and then each time a transaction occurs a small amount is given to us. It’s basically pre-paying,” Mr Baird said.

Cognisant of the dubious reputation token sales have, in particular initial coin offerings, Mr Baird said there had always been bad apples in business who tried to exploit people. 

“If an offering looks too good to be true, don’t invest in it. Also ask how their technology works, why they’re using a cryptocurrency, how it works and what it’s for,” he said.

Correction: An earlier version at the story said the token sale raised $40 million, due to inaccurate information supplied by UCOT.

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