Fast and Furious. Is Blockchain the Next Big Thing in the Automotive Sector?

By: Karolina Zubel, Energy Economist

Many people know that blockchain, or Distributed Ledger Technology (DLT), one of the most known buzzwords of 2017, stands behind Bitcoin and other cryptocurrencies; however, this technology has a much bigger potential than just fintech. Blockchain, which has already disrupted the financial services, has at last arrived in the auto industry.

According to Frost and Sullivan, the automotive industry will spend about USD 169 billion on implementing new technologies by 2025, of which over USD 10 billion will be dedicated to blockchain. Applications of the new technology in the industry are numerous, spanning from accelerating autonomous vehicle development, enhancing security to streamlining the supply chain and business processes. Blockchain technology can also help to estimate the size of the market for unoriginal car parts. That is because thanks to the DLT, car manufacturers can verify proof of provenance for their spare auto parts and track the location of a particular car in their supply chain. Matthew Jones from IBM states that this will significantly reduce companies’ expenses related to recall activities.

Photo: Descryptive.com, Flickr, (CC BY 2.0)

On a different note, to date, more than one company has eyed blockchain as a possible method of facilitating the shared ownership of vehicles. In May 2017, the Toyota Research Institute partnered with Oaken Innovations, MIT, and a few blockchain startups to develop an Ethereum blockchain-based P2P car and ridesharing platform “in anticipation for the autonomous car future where the average consumer won’t own a car,” said Ethereum developer Hudson Jameson.

Nevertheless, before self-driving cars are commonly used, they must earn the trust of the public. Elon Musk once said: “I think one of the biggest concerns for autonomous vehicles is somebody achieving a fleet-wide hack.” Perhaps a technical response to such concerns prepared by Jim Milan, Communications Manager at Auto Accessories Garage, will reassure all concerned. According to Milan, DLT will in fact greatly decrease the risk of hacking attacks on autonomous vehicles as “instead of having all connected cars report back to a single server, blockchain data is distributed amongst all members of the network. Hacking the system would require hacking all vehicles on the network at the same time, a virtually impossible task.”

Speaking of security, Porsche is already working on a software where information on things like road conditions could be uploaded and distributed across the blockchain network. From there, other vehicles’ software connected to the system could access and analyze the information to provide warnings about traffic congestion or inclement weather. Porsche brings blockchain to its cars via a Berlin-based startup called XAIN, which won the first Porsche Innovation Contest in the area of blockchain. Prototype versions from XAIN in Porsche Panamera currently use blockchain to find the nearest charging infrastructure for electric vehicles (EVs) and available parking spots.

Other companies do not stay behind. Daimler is part of the Hyperledger project from the Linux Foundation, Toyota is pursuing its own research, and Renault has joined the R3 research consortium. The Blockchain in Transport Alliance (BiTA), by far the most recognizable of the alliances, “brings together leading companies in the freight technology industry that have a vested interest in the development of blockchain technology.”

On the other hand, the Mobility Open Blockchain Initiative (MOBI), which was launched in early May, focusses entirely on the automotive space and potential use cases rather than automotive as one of a number of industries. “Blockchain and related trust enhancing technologies are poised to redefine the automotive industry and how consumers purchase, insure and use vehicles. If you’re not in at the very start, it may be too late” Chris Ballinger, MOBI’s first chairman and CEO, said in a statement. The initiative brings companies that account for 70% of the world’s vehicle production, from mainstream (BMW, GM, Ford) to startups. The common denominator is the aim to ensure that blockchain-based services can cooperate with vehicles from multiple brands to avoid a scenario in which a car cannot transact with a system it is not compatible with.

Indeed, with a fixed uniform blockchain system at their disposal, it will be easier for companies to comply with regulatory requirements, but also address ethical concerns. In a statement to the Guardian, Tesla admitted the company has trouble tracing its nickel supplies down to its origin because its suppliers are “three or four layers removed from Tesla.” Despite the fact that this problem is not usually associated with the development of blockchain technology, that is precisely something DLT may solve, thanks to its supply chains records. In fact, a plan to begin tracking cobalt from artisanal mines in the DRC all the way to its final uses in EVs and electronics is already in place. Those efforts can certainly help, but they are closely linked to the socio-political and economic drivers that create windows of opportunity for unethically-sourced minerals. Blockchain may not be the whole answer, but it surely can be part of the solution.

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