The automotive industry has seen a number of technological changes through recent years. From car makers using smaller and safer robots to work alongside humans on the assembly line, to connected smart cars thanks to the Internet of Things (IoT), to cars that utilize machine learning to enhance its autopilot like Tesla. While these emerging technologies will continue to have an impact on the auto industry, I think the next big disruptor will be blockchain. How might it work?
Let’s take a look at a use case example.
In IBM’s Blockchain for Dummies e-book, they explore a blockchain application for leasing a vehicle. Many of us have leased one at some point. While car companies make leasing a vehicle look easy, in reality, it can be quite complicated. The physical supply chain is usually integrated, but the supporting systems are often fragmented with each party in the network maintaining its own ledger which can take days or weeks to synchronize.
This method can be expensive due to intermediaries that charge fees for their services. It is inefficient due to delays in executing agreements and the duplication of effort required to maintain numerous ledgers. Also, it is vulnerable because if a central system (for example, a bank) is compromised due to fraud, cyberattack or simple human error, the entire business network is impacted.
Enter Blockchain
Every participant in the car leasing business network can access, monitor, and analyze the state of the vehicle regardless of where it is within its life cycle.
- Government regulator creates and populates the registration for the new vehicle on the blockchain and transfers ownership of the vehicle to the manufacturer.
- Manufacturer adds the make, model, and vehicle identification to the vehicle template within the parameters allowed by the smart contract which is a digital agreement or set of rules that govern a transaction.
- Dealer can see the new stock availability, and ownership of the vehicle can be transferred from the manufacturer to the dealership after a smart contract is executed to validate the sale.
- Leasing company can see the dealer’s inventory. Ownership of the vehicle can be transferred from the dealer to the leasing company after a smart contract is executed to validate the transfer.
- Lessee can see cars available for lease and complete any form required to execute the lease agreement.
- Leasing process continues between various lessees and the leasing company until the leasing company is ready to retire the vehicle. Ownership of the vehicle is transferred to the scrap merchant, who, according to another smart contract, has permission to dispose of the vehicle.
A car leasing business network with blockchain provides significant benefits:
- Time savings: Transaction times for complex, multi-party interactions take minutes versus days. Transaction settlement is faster because it doesn’t require verification by a central authority.
- Cost savings: Reduces expenses by:
- Less oversight is needed (network is self-policed by participants, all of whom are known on the network).
- Intermediaries are reduced because participants can exchange items of value directly
- Duplication of effort is eliminated because all participants have access to the shared ledger.
This is simply one of many use cases for the blockchain technology. Previously I have written about the Illinois pilot program to put baby’s first health data on blockchain and several initiatives that Sweden and the United Nations World Food Programme are launching. Stay tuned for upcoming posts regarding other blockchain initiatives.
And, to learn more about Blockchain, visit:
Resources for Learning about Blockchain
Blockchain Roundup – A Guide to ILTA & Non-ILTA Content