It’s not surprising LVMH chose an enterprise variety of ethereum since it’s the blockchain which gave birth to the ERC-721 non-fungible token (NFT) standard. This allows for digital representations which are not only immutable but provide a hallmark of a one-and-only, unique item.

While the most famous example of NFTs is the whimsical game CryptoKitties, this kind of token has serious business potential.

For example, it could conceivably identify an individual handbag and trace the whole journey of its lifecycle from an alligator farm to the store where it was sold for the first time, and then the multiple chains of owners that have owned and sold it.

So I learned something about the gray market last week. It's basically a legal (or quasi-legal) arbitrage of trade tariffs; a bottle of French perfume could cost $17 to make and sell for $100 in Paris but $250 in Mexico City. Where things get fucked up is the profit on that bottle in Paris is $83 and could be as low as $10 in Mexico City because of all the tariffs and duties. Things are so fucked up in fact that duty free shops, which you've never really thought about before, account for 70% of all perfume sales in the world and 30% of all cognac sales (the most universal of liquor) even though the fees charged by airports are often greater than the cost of the product (in most cases fees from duty-free shops pay airports more than gate fees).

A luxury brand is also essentially required to do business in at least 20 markets, each of which levees their own licensing fees. A brand can expect to trademark their brand in every product category they will ever sell in, and some they never will, just to protect their brand integrity. At a minimum, US, Japan, France, Germany, Italy, Spain, and all of South America. In addition, they might make limited products outside of their categories and ship them to their distributors just to protect their patent. Montblanc may never make a perfume, but they still have to ship a case of Montblanc perfume to Venezuela just so that a local upstart can't sell perfume with a white star on it that says "Montblanc." This trade protection can run to $25m a year.

Now inject ERC-721 and an app. Scan the barcode. That handbag was made in France, sold to a distributor in your home country and never sold at retail before. That wallet, however, isn't even Louis Vuitton. Meanwhile that watch was sold to a distributor in Japan but then appeared on Chrono24 out of Karachi and then again on eBay and is now and forever foresworn by Rolex.

o avoid the sort of problems experienced by the blockchain venture between IBM and Maersk, LVMH will donate all intellectual property (IP) to a separate entity and that entity, in turn, will be owned by the participating brands, said the source, who added,

“So Gucci, for example, could decide to join the platform and be a shareholder – in which case their claim to the IP would be as great as Louis Vuitton’s claim to the IP. That is the main difference between this project and the IBM Maersk project, which hopefully makes it much more comparable to Komgo, the trade finance consortium.”

In addition, Quorum’s data privacy tools should ensure that no information will be leaked between brands or their customers.

Blockchain is more than currency for a luxury manufacturer. It's permanent, indelible control of margins and tariffs. That's worth something.

Microsoft, JP Morgan, and all this.