Preliminaries
Automotive Blockchain Market is projected to grow from USD 0.35 billion in 2020 to USD 5.29 billion by 2030, at a CAGR of 31.19% during the forecast period. Increasing focus on reducing manipulation of data, better quality control, and the need for faster business transactions have triggered the growth of automotive blockchain market. The increasing need for transparency and immutability in the complex automotive ecosystem and significant testing of blockchain use cases in automotive applications are expected to play a significant role in the growth of automotive blockchain market. The smart contracts segment is projected to be the fastest growing segment in the global market, by application. Smart contracts have a significant number of applications in the automotive industry, such as title transfer, dealership management, and B2B contractual agreements.
A blockchain is a distributed database, maintains a growing list of ordered records called blocks. Each block has a timestamp and a link to a previous block, making it impossible for an individual block to be altered. Users can edit parts of the blockchain that they “own” by possessing the private keys necessary to write to the file. Cryptography ensures that everyone’s copy of the distributed blockchain is kept in sync. Blockchains are secure databases by design, making them excellent prospects for recording things like vehicle records, financial transactions, identity management, and proving provenance. Blockchain offers the potential of removing the middleman in trade and transaction processing. Here are the ways blockchain has become a disruptor in the automotive industry.
How Blockchain Works
Blockchain works through a time-stamped series of data records, managed by a group of computers not under the ownership of any single entity, individual, or corporation. The blocks of data, referred to as “blocks”, are bound to one another with cryptographic principles, forming the “chain.” each block mainly has three elements:
- Data: The type of data depends on what the blockchain is being used for. In Bitcoin, a block’s data contains the details about the transaction including sender, receiver, number of coins, and so on.
- Hash: A hash in blockchain is something like a fingerprint or signature. It identifies a block and all its content, and it is always unique.
- Hash of previous block: This piece is precisely what makes a blockchain! Because each block carries the information of the previous block, the chain becomes very secure.
Public blockchain ledgers are primarily managed autonomously and are used in peer-to-peer networks to exchange data between connected groups of parties. In this, there’s no need for an administrator. The users work together as a collective administrator. Another form of blockchain is permissioned or “private” blockchain, allows an organization to both create and administer transactional networks that can be used with partners, either internally or from one company to another.
Every blockchain transaction goes through the same steps regardless of whether it’s used for financial transactions or product tracking. The basic principle of the operation of any blockchain can be broken into four distinct, contiguous steps:
- A record is made of each transaction. This record, which contains certain details of the people making the transaction, is authenticated using the digital signature of each.
- Each transaction is verified to ensure its validity. This verification process is completed by the computers connected to the network, each of which independently checks to ensure that the trade is legitimate. Because this is a decentralized process, it means that every node in the network needs to agree before the process can be completed.
- Once verified, each transaction is added to a block that gets hashed. “Blocks” are basically groups of transaction records, and each one is unique. Each block also carries a code known as a hash value (or hash digest), which both uniquely identifies it and calls out its position within the blockchain. The hash also ensures the integrity of the data to show that it has not been modified since it was recorded in the block.
Once complete, the block is added to the end of the blockchain. This brings us to the end of the blockchain creation and verification process. Once one block is complete, another block will soon follow — typically within just a matter of minutes.
Here are five of the top blockchain platforms:
- Ethereum - Ethereum is one of the oldest and most established blockchain platforms. It provides a truly decentralized blockchain that is comparable to the Bitcoin blockchain network. It enables true decentralization with support for smart contracts. Its key weaknesses include slow processing times and higher transaction processing costs compared to other platforms. It has its own cryptocurrency called ether.
- IBM Blockchain - IBM Blockchain is a private, decentralized blockchain network that has been the most successful with enterprise clients who are less risk-averse. It offers to link it into enterprise cloud and legacy technologies more seamlessly than is possible in other decentralized networks. IBM has a user-friendly interface to simplify critical tasks, such as setting up, testing and rapidly deploying smart contracts.
- Hyperledger Fabric - Hyperledger Fabric helps create blockchain applications championed by IBM and The Linux Foundation. It has a rich ecosystem of components that can be plugged into a modular architecture. It works well in closed blockchain deployments, which improve security and speed. It also supports an open smart contract model that can support various data models, such as account and unspent transaction output models.
- Hyperledger Sawtooth – It is another open source blockchain initiative by Hyperledger and the Linux Foundation. Hyperledger Sawtooth uses a novel consensus mechanism called Proof of Elapsed Time that can integrate with hardware-based security technologies to allow "trusted execution environments" of program code to run in secure enclaves, which are protected areas of computer memory.
- R3 Corda - There is dispute whether R3 Corda is a blockchain or an alternative to distributed ledger as Corda describes it as "both a blockchain and not a blockchain.". It uses a novel consensus mechanism in which transactions are cryptographically linked but does not periodically batch multiple transactions into a block. In this, all transactions are processed in real time, which improves performance compared to other blockchains. R3 consortium provides an attractive approach for financial transactions and smart contracts with strong security. Leading proponents include Bank of America, HSBC, Intel and Microsoft.
Industry Use Cases
4.1 Vehicle Utility Charges Payment
Car owners can use blockchain to pay for the electricity to charge electric cars. After the driver charges the vehicle, the action triggers a smart contract on the blockchain that charges the appropriate amount of money from driver’s account and send it to the charging station. Similar process is applicable for monthly parking cost, insurance, and any other financial transactions involving vehicle management. Researchers at the University of Waterloo in Canada have integrated the use of blockchain into energy systems, that could result in expanded charging infrastructure for electric vehicles. EV drivers today must hold several accounts in order to access public charging facilities. With blockchain, data about charge point availability, charger maintenance and charging speeds can securely be shared to all stakeholders.
4.2 Self-Driving Vehicle Data Management
Self-driving cars rely on sensors, GPS technology, and highly sensitive cameras. To ensure safety of autonomous vehicles, huge amounts of data shall be processed, analyzed, and transferred securely and quickly. As a self-driving vehicle navigates, the blockchain could be instrumental for recording data about the details associated with the trip. This localization data could include information about road, infrastructure details or traffic patterns. Other vehicles in the network could then access this information and trust that, since it has been processed through blockchain technology, it is accurate and secure. Only authorized parties would be able to access this data in real-time because it is cryptographically secure.
4.3 Peer to Peer Decentralized Ridesharing
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. MOBI is a consortium (include BMW, GM, Ford, Hyundai, Honda) harmonizing the development of distributed ledger technology across the smart mobility industry. Blockchain removes the intermediaries between rider and driver while establishing more secure maintenance of data. By basing payment on predetermined conditions and installing them in a smart contract, drivers will get paid only when they have delivered a rider to their destination. If a rider cancels, the contract could release a small portion of the funds to the driver to account for their time instead of an arbitrary cancellation fee. Riders could connect directly with drivers on such a platform, viewing individual reputations and choosing a driver based on price, quality, and other free-market factors. It can be an alternative for many drivers fed up with the current ridesharing pay structure associated with companies like Uber.
4.4 Supply Chain Monitoring
The transparency offered by distributed ledgers safeguard that manufacturing, shipping, and suppliers see the same supply chain, making it impossible for the insertion of counterfeit parts. Multiple blockchains manage the mass amounts of data generated and monitored by automotive manufacturers and suppliers daily: one blockchain might contain bills of lading for vehicle components, another could contain quality-inspection records created during the manufacturing, and another could store WIP information for each vehicle assembly from start to finish. Smart contracts embed manufacturing blockchains to automatically release purchase orders at certain phases of the manufacturing process, can be automatically awarded to the supplier with the largest inventory on hand. Hyundai has announced a new partnership with IBM to use blockchain technology and cloud-based AI and create a supply chain financing ecosystem using open source Hyperledger Fabric.
4.5 Vehicle Location Tracking
Auto manufacturers must coordinate huge fleets of vehicles to conduct their business. From supply trucks to sales staff, tracking vehicle usage is paramount to any auto manufacturer. The current systems in place rely heavily on paperwork submitted by employees and combined with GPS information. By using the consensus capabilities in blockchain technology, auto manufacturers could now track huge fleets with ease. This data could then be used to determine where expenses can be cut and more efficient means of conducting business could be introduced. Fleet users can track the location of all their vehicles and their staff with RFID tags and data stored in the blockchain. 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.
4.6 Vehicle Ownership and Recall Management
Vehicle Identification Number (VIN) can be stored in the blockchain, meaning that if a recall is issued, owners of the exact vehicles with a fault can be contacted. Making a car’s logbook on 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. Volkswagen’s blockchain-based tracking system will prevent odometer fraud and make sure that dishonest car sellers can’t manipulate odometers to produce deceptive mileage values. Platforms such as CarFax.com have earned millions in profits by providing people with the ownership history of their vehicle prior to purchase. Users can see the true history of their vehicle prior to purchase. They can also verify and transfer ownership of their car through the platform.
4.7 Service Lifecycle Management
Car’s service history can be held in the blockchain and 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. Toyota Blockchain Lab was formed in April 2019 and researching on how data can gather throughout a vehicle’s service life can be used to improve service and maintenance schedules. Blockchain is also being used in Toyota’s Woven City initiative in Japan.
4.8 Cargo Shipping
Shipping industry remains complex due to its tremendous volume of point-to-point communication between transportation providers, freight forwarders, customs brokers, governments, ports, and warehouses. All data about shipping a particular cargo is stored in the shipping company’s silos. Maersk, a worldwide cargo shipper, has partnered with IBM to use blockchain to ensure trust and transparency in its supply chain, and make shipment data accessible to all supply chain members at any time. They started using smart contracts to ensure the automation of most paperwork, including the creation of agreements, and signing contracts. Smart contracts will eliminate hundreds of point-to-point communications with their automotive supply chain members and make the cargo shipping process more efficient and cost-effective. With the blockchain, any supply chain member can review shipment information, including who has submitted documents, where the cargo is, who is in possession of it, and where it is going at any given moment. The blockchain offers a secure data exchange and a tamper-proof repository for cargo documents and shipping events.
Conclusion
Blockchain has the potential that make it possible for the automotive industry to leap forward into the new era of smart vehicles. Whether it is by securing financial information or making shared ownership more trustworthy, blockchain can revolutionize the way data is managed in the vehicles of the future – and it is worth paying attention to. As the industry continues to move towards autonomous, connected and electrified vehicles, blockchain could maximize the benefit of these technologies in use cases 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 the industries, blockchain has the power to disrupt significantly.
