Blockchain for the Automotive Industry
Introduction
Ever since the bitcoin paper in 2008 rose to fame, a new industry, the blockchain industry has tried to find its usefulness in society. May it be supply chain, fintech or the auto industry, proponents of blockchain have found real life use cases. And these use cases exist, mainly for the following reason: providing end users with better security and ease of use.
Abstract
The idea is simple: When it comes to manufacturing cars, the biggest leap so far has been electric cars, which took 70 years to come around. But blockchain has the ability to shatter that record. Its brilliance lies in bringing a lot data together, securely, and running contracts which make life easier for the end user, a goal that is forever arching. I propose a blockchain based car connectivity /automotive system which will help users to unlock cars, record travel data on the blockchain, lease their car and pay for financial transactions [tolls, parking costs, insurance].
Background
When a user buys a car from the dealership, the user gets assigned a public key / private key combination and the user can use those keys for every transaction they make on the private company permissioned blockchain. Mentioned below, are the use cases about how auto companies can implement blockchain:
User friendly cars:
On a permissioned blockchain run by the manufacturer, the owner uses their private key to unlock or lock the car every time. There is only private key that will match the car’s public key and the owner will have access to it. With the use of smart contracts, owner can give temporary access to other users (family members) or to a parcel shipping service like UPS to place the parcel in the trunk of the car in their absence. All of these actions and the data associated with it is part of the permissioned blockchain i.e. only participants approved within the blockchain can interact. This gives high data protection and security to the owner. The opportunity to lease a car or even sell the car becomes relatively easy. Owners no longer need a third party; they can directly use smart contracts between the two to facilitate the transaction.
Data Management:
Drivers’ travel history can get logged on the blockchain, thus making it easier for insurance companies to grade them. Even for vendors, claim handling process becomes more streamlined on the blockchain, using smart contracts. Other minute details about the cars’ usage which the owner might not keep track of, can be recorded and tracked on the blockchain and car servicing becomes easier, since the service team has to only pull out the latest car record to figure out its condition.
Financial Transactions:
In a cars’ lifetime, there are several times when recurring payments take place e.g. car insurance, car parking or car inspection fees. These can be automated with smart contracts, thus reducing user intervention. Paying tolls can also be added to smart contracts with national toll agencies, easing this process as well. Electric car companies can also provide the option of charging electricity with crypto payments, adding better accessibility.
Differentiation and Feasibility
Coming back to my point earlier, providing users with ease of use, is the aim of most automotive companies and using multiple service integrated blockchain helps them do just that. It’s not only just that, with so much user travel data, manufacturers can improve their cars if they better understand how their users drive. If insurance companies start grading their insurances based on how users drive their cars, people will become more self-aware and drive responsibly, since they know that reckless driving will earn them a bad grade and higher interest rates. Third party car leasing services will no longer be needed since peer to peer connect within the blockchain will serve the purpose.
This seems utopian, or more like proof of concept for now, but there are companies which have implemented bits and parts of these services. I propose for an automotive system along with a mobile app which can facilitate each service as a transaction on the permissioned blockchain. Car owners can purchase tokens / crypto coins which they can then sue to transact with other service providers on the blockchain. The manufacturer will have to connect car owners with multiple agencies e.g. car servicing company, toll agency, insurance provider and so on. But the process is not expensive in terms of computing power since this process will be repeated in the same manner for each user / owner. What does seem infeasible right now is how can companies make sense of users’ travel data.
Note: Consensus protocol for this platform will be similar to Hyperledger fabric: A randomized version of both, lottery based and voting based algorithm that takes into account a transactions’ safety and liveness.
More on that: Hyperledger Arch WG Paper 1 Cosensus
Metrics
When it comes to measuring success with a new technology, the best metric is user acceptance.
-How many users interact on the platform or the blockchain in directly. [User Adoption rate]
-How many tokens are spent by users for for payments [User Spending]
-How many agencies sign up to provide service to the user [Company Adoption rate]
-No. of transactions per day
Risk Management
This project aims to completely change how car manufacturers operate, with customers and other companies. In an attempt to unify its offerings on a single decentralized ledger / database, there are risks, of varied nature. Some of the most common ones with a solution to tackle them:
- Whether the company should adopt the blockchain for its services. There is a possibility that users or service providers choose not to adopt transacting on the blockchain. We need a god amount of both parties on the platform because without service providers, car owners will have limited functionality on the blockchain and vice versa. The ideal solution is to come out ahead of this problem by being the first to launch the blockchain and provide both parties with incentives e.g. early bird tokens, upselling car products etc.
- There can also be regulatory troubles since there might be BMW (for example purposes) customers all over the world, transacting via tokens bought in their national currency. And hence tax exemptions or tax laws for BMW can vary based on operating costs in each country. As of now, there are no well-defined international laws in place for cryptocurrencies, so BMW can make the best of this.
- Once given entry into this permissioned blockchain, any service provider will have access to a whole lot of other data, apart from insurance data. This can be harmful in terms of car owner privacy. In order to support private transactions and confidential contracts, concepts similar to Hyperledger Fabric needs to be implemented to provide a modular, scalable and secure foundation for industrial blockchain use case. This will also provide a solution to data confidentiality risks which arise from this sort of big data on the blockchain.
- And lastly, the risk of losing your private key, the one piece of code that enables you to interact or make transactions on the blockchain. It is the most common risk when it comes to cryptocurrencies. And the solution is pretty simple: cold storage. Store on a hard disk or a piece of paper to make sure that it is retrievable in case you lose or forget your private key.
