Blockchain can facilitate secure, traceable digital transactions in real time, bypassing traditional financial institutions in the process. It has the power to dramatically cut costs while increasing efficiency and cause disruption across all industries.
As a result, it is no surprise that carmakers are watching blockchain with interest, including making some selective investments in the space.
While blockchain has the power to upset the established order in its own right, it can be of even greater relevance when used with the Internet of Things (IoT), big data and artificial intelligence (AI).
When all three are linked to vehicles that are Connected, Autonomous, Shared and Electric, blockchain can really make its disruptive presence felt.
What is blockchain?
“Picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet and you have a basic understanding of the blockchain.”
This explanation posted on the Blockgeeks website is about as simple a definition of blockchain as you are likely to find. A blockchain is essentially a system built on the idea that all participants agree to cooperate in the equal exchange of certain information.
Each block of information is given a unique digital fingerprint called a hash, and each block contains the hash of the previous block in the chain, hence the name.
The system is decentralized, so there is no central server to hack, and the chain means that if anyone attempted to change information in an older block of data, it would cause an alert because a block’s content and its hash would no longer match.
Therefore, blockchains are inherently secure by design.
Who created blockchain?
Blockchain was invented in 2008 by the mysterious person – or persons, as their identity remains a secret – known as Satoshi Nakamoto.
In a paper attributed to Nakamoto, blockchain was proposed as “a purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution.”
However, it only became more widely known when that cash or currency – Bitcoin – debuted a year later. While originally designed for financial services, the security and flexibility of blockchain technology means that new and innovative uses are beginning to appear.
How can blockchain be used in the automotive industry?
Here is a list of use cases and examples of how blockchain is being adopted by the car industry:
An OEM provides vehicles that are sold on a timeshare basis. Trips are logged on the blockchain, and transactions are automatically settled between owners, operators and third-party service providers through a single-source, usage-based payment system.
Ownership of the car is flexible and can be on a full or fractional share basis. All owners, including the OEM, get profit shares depending on ownership percentage.
- Example – Consultancy firm Ernst and Young offers EY Tesseract, a technology platform built on blockchain technology that enables true peer-to-peer interactions between owners and users, offers a reliable means of selling ownership shares of cars, and maintains and immutable record of ownership and usage payments
Vehicle mileages can be fully verified and secured using the blockchain, allowing drivers who don’t use their car often to receive discounted premiums.
- Example – University of Luxemburg has created a sub-department dedicated to researching how blockchain can be applied to industries like insurance. Its Services and Data Management (SEDAN) research group is working to develop platforms suitable for blockchain-based car insurance
Fleet users can track the location of all of their vehicles and their staff with RFID tags and data stored in the blockchain. This could allow for time and distance efficiencies to be gained, particularly in the package delivery industry.
- Example – Semiconductor firm NXP is developing a solution that uses its RFID and NFC technology, allowing embedded tags to sense their environment – be it location, weather, humidity – and upload that information to the blockchain. NFC is built into most new smartphones, giving near-ubiquitous access to the data with a simple tap
E-contracts are a huge asset that blockchain helps to power, allowing direct, secure transfer of money from a buyer to a seller, without using a bank or other intermediaries.
- Example – Researchers at the University of Waterloo in Canada have integrated the use of blockchain into energy systems, a development that could result in expanded charging infrastructure for electric vehicles.
- READ MORE: Automotive IQ Guide to Electric Vehicle Charging
EV drivers today have to hold a number of accounts in order to access public charging facilities. With blockchain, data about charge point availability, charger maintenance and charging speeds can simply and securely be shared to all stakeholders
Driver information can be safely and securely stored in the blockchain, allowing a rental car or carsharing vehicle to be quickly tailored to a user’s tastes, including settings for seats, mirrors, temperature and audio. The preferences stored also allow targeted marketing in shared vehicles via the infotainment system.
- Example – The Mobility Open Blockchain Initiative (MOBI) is a consortium formed in 2018 to harmonize the development of distributed ledger technology (DLT) across the smart mobility industry. Its members include BMW, GM, Ford, Hyundai, Honda and a host of Tier suppliers.
A key agreement so far is the development of a Vehicle Identity blockchain standard (VID) that creates a digital twin of each vehicle in the blockchain. In future, this could effectively make the car its own financial entity of sorts – paying out for using roads that are more congested, or receiving payment when green energy is used for recharging, or if the vehicle is made available to others to use as part of a carsharing scheme
Recalls and Vehicle History
A vehicle’s VIN number can be stored in the blockchain, meaning that if a recall is issued, owners of the exact vehicles with a fault can be contacted, dramatically reducing costs for manufacturers, and inconvenience for drivers.
Making a car’s logbook part of the blockchain makes forgery outdated. Second-hand car buyers benefit as the seller can share fully verified, incorruptible data about the car’s history, and the vehicle’s title can be shared to the new owner simply via the blockchain, too.
- Example – South Korean startup AMO is developing a blockchain platform that collects all types of automotive data and makes it available to any stakeholder. The idea behind the initiative is maximising data collection and dissemination for the world’s app builders, with one topic being improving the accuracy and efficiency of how recalls are managed. AMO is also a member of MOBI (above)
In order to ensure autonomous vehicles are safe, huge amounts of data needs to processed, analysed and transferred securely and quickly. Blockchain is a robust and reliable method of doing this, potentially helping speed up the arrival of Level 4 and 5 vehicles.
- Example – The Daimler Mobility Blockchain Factory has been in operation since February 2018, and is working on developing a platform that can scale blockchain’s application right across Daimler’s global vehicle fleet. This includes future projects that include Mobility as a Service (MaaS) provision, where a vehicle user can sign up for a driverless car scheme.
However, if Daimler cannot provide the vehicle as requested by the customer, a vehicle of a partner OEM can be provided, as that customer’s personal details are verified independently by the blockchain. This means the OEMs know they are providing service to approved customers, and customers are receiving a more convenient, comprehensive product
Not only can a car’s service history be held in the blockchain, the technology can be used to guarantee that only original OEM-supplied parts are being used to make repairs or replacements with a simple scan of a QR code. Information held in the blockchain can also be accessed by suppliers to enable efficient ordering of parts.
- Example – Toyota Blockchain Lab was formed in April 2019. It comprises six partner firms – Toyota Motor Corporation, Toyota Financial Services Corporation, Toyota Finance Corporation, Toyota Systems Corporation, Denso Corporation, and Toyota Central R&D Labs – and these are working to decide how and where blockchain technologies can be applied across the Group.
Although it is yet to share full details, one aspect of this research has been in vehicle lifecycles and how data gathered throughout a vehicle’s service life can be used to improve service and maintenance schedules. Blockchain is also being put to use in Toyota’s Woven City initiative in Japan
In the supply chain, blockchain can be used to verify the source of materials used in a car’s construction, right back to the raw material as soon as it is extracted from the mine.
This is of particular interest with the surge in demand for EVs, which currently use cobalt in their batteries. Around two thirds of the world’s supplies are sourced from Democratic Republic of Congo, where roughly one fifth of production comes from unregulated mines.
- Example – BMW Group has collaborated with London-based startup Circulor to use the latter’s blockchain-based mapping technology to find sources of cobalt that meet ethical guidelines. As a result of the project, BMW has announced that its batteries will use cobalt from approved sources in Morocco and Australia
Criticism of blockchain
Despite all of the perceived benefits of blockchain, plus significant investment from the industry, the technology is still very much at an early phase of development.
Dr. Harry Behrens, Head of Blockchain Factory at Daimler Mobility, explains, “you can’t use blockchain to optimize a simple process. Blockchain is almost always something you have to approach with a clean slate. It’s suitable primarily for new business models or for existing business models for which there is currently no appropriate software and which therefore still have to be controlled by means of a gigantic bureaucratic apparatus.”
Blockchain is also synonymous with Bitcoin and other cybercurrencies – some of which have been targets of hacks. However, while blockchains themselves are almost impenetrable – the Bitcoin blockchain has never been successfully hacked – people still store their data in centralized locations, as there is currently little blockchain-based alternative. This tends to be how information or cybercurrency is liberated.
That decentralization that makes blockchain so secure is also a concern in today’s increasingly environmentally aware times. For example, the energy required to run the bitcoin blockchain is significant. So much so, in fact, that the University of Cambridge has an online tracker of Bitcoin’s energy use.
At the time of writing, Bitcoin consumed 81.45TWh of electricity per year, or 0.31% of the total world supply – if it were a country that puts it at a little more than the Philippines, at 78.30TWh, and a little less than Belgium, at 82.16TWh per year.
Blockchain’s relatively immaturity also means it is a little slow when compared to current technology. For example, the processing time of a financial Bitcoin transaction can be just seconds, but the average is around 10 minutes. Encouraging people to switch to something slower than today is a tough sell, no matter how secure, although this will change.
As the industry continues to move towards autonomous, connected and electrified vehicles, blockchain could offer another method of maximizing the benefit of these technologies. Its use cases seem most applicable to the supply chain, financial services, and the safe, secure exchange of driver or rider data.
Its nascent nature means there are still kinks to work out, but given the investment from across the industry, blockchain has the power to disrupt significantly. Just like the early Bitcoin investors, you have to be in it to win it, and we will watch the uptake of the technology with interest to see who goes all in.