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Bitcoin disrupted the financial industry by building a virtual bank that operates with help from no intermediaries. This is made possible by its underlying technology, the blockchain. Since blockchain increases transparency and accountability, other industries started adopting it. In this story, we will see how Blockchain is disrupting the auto industry.

Before we get started with the use cases of blockchain in the auto industry, let’s understand what is blockchain.

In a blockchain, digital information is divided into blocks and linked back to one another. The content of each block is represented by a unique set of characters (called hash) in the succeeding block. If the content of a block is changed, there would be a mismatch in the hash of the succeeding block. This mismatch would break the chain, hence if one must alter a block, they need to alter all the successive blocks.

These blocks of data are replicated across the computers in the network. Hence if someone tries to tamper with their version of blocks, the network will only consider what majority say is correct. The data on a blockchain is thus public.

This is an innovation because before blockchain, data was controlled by a centralized entity. They released information on an ‘as-they-please’ basis.They also had the power to manipulate data. This is not possible on a blockchain, since it has inbuilt features of transparency and immutability.

Popular Use Cases of Blockchain in the Auto Industry

Parts Authentication

The parts used to manufacture automobiles must be genuine. Fake and inferior parts often fail after a short period of time causing damages to the automaker and the supplier.

The manufacturer tags each part with an id and digitally certify it on a blockchain. This information immediately gets replicated across the network. Once the part reaches automaker, he can cross verify the details on the blockchain.

Supply Chain Finance

It would take several weeks or months for the auto manufacturer to get paid. This happens because there is tedious paperwork between multiple parties like importer, distributor, dealer, etc.

Blockchain eliminates such paperwork since transactions between multiple parties are immediately reflected across the network. Such a system would help in faster processing of documents and hence faster settlement of payments.

Vehicle History

Earlier, there were no trustable records of driving behavior and vehicle’s service history. This information is crucial for an auto finance provider.

On a blockchain, such history is recorded for eternity. Since data cannot be altered, the auto finance provider can trust it.

Boosting Sales by Removing Middleman

Blockchain will be able to eliminate wholesalers and retailers. The automaker can post his product/car on the blockchain and mention the minimum number of orders required for production.

Buyers around the world can sign a smart contract with the automaker. Their money would be held securely on the blockchain. Once there are enough buyers the automaker can start the production. When the car is delivered to the customer, the automaker is paid. If there are not enough buyers, the money is refunded.

Since money is held in a secure contract, the automaker can be assured that buyers won’t back out. Customers are happy because they are charged only once the car is delivered. This process can decrease the cost for both automakers and the customers since the need of retailers and wholesalers are eliminated.

Faster Insurance Processing

Real-time vehicle dynamics can be recorded on a blockchain. The speed at which the car was going, the location of the car, the time of the accident, what happened to the vehicle during the accident, etc.

Since the data is tamper proof the insurance providers can trust the information to process claims. This process will drastically eliminate false claims and reduces the time required to process claims.

 

Examples from the Industry

Industry leaders have started collaborating with startups to move faster and reap the benefits of this innovation.

Porsche and XAIN 


Porsche is collaborating with a Berlin-based startup called XAIN. They claim to be the first automaker to test blockchain directly on vehicles. XAIN offers solutions based on blockchain and artificial intelligence. They are also exploring how they can use blockchain to provide temporary access authorization feature to their customers.

Toyota, BigchainDB and Oaken Innovations  

Toyota is working with startups like BigchainDB, Oaken Innovations, Commuterz to develop blockchain-based applications. Toyota’s R&D division is building a blockchain consortium. BigchainDB is a database based on the blockchain. Oaken Innovation has built a platform for IoT devices to share data securely on a blockchain.

Daimler AG, Bosch, and Hyperledger

Hyperledger is an initiative by the Linux Foundation. They have built several open source blockchain tools for different industries. Most industry solutions on blockchain are developed on these tools such as Hyperledger Fabric. Daimler AG and Bosch became a member of the Hyperledger organization to support its products.

Other industry leaders such as General Motors, BMW, Renault, Bosch, ZF Friedrichshafen have become members of the Mobility Open Blockchain Initiative (MOBI).

The Necessity of Blockchain Collaborations

● Blockchain needs a robust network with widely distributed users/nodes.
● A blockchain network must be cleverly eliminated to prevent attacks from bad actors.
● Increased network size will cause a congested network and slower processing of transactions. Hence the blockchain network must be architected to work at scale.
● Blockchain is not yet capable and handling complex computation and huge amounts of data.

Since it is a fairly recent technology, building a blockchain application from scratch is not so easy for the auto industry. Startups have already found a workaround for some of the above-mentioned problems. Hence, collaborations with startups who have experience in the field is crucial to deploy blockchain based applications efficiently to accelerate the time to market for the auto industry.

 

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