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Keep an eye on Blockchain

“Blockchain is inherently about distributing trust. We want new companies to come in and use this platform for their service and enter this new automotive world.”
Andreas Kind, IBM Research Photo credit: AUTOMOTIVE NEWS ILLUSTRATION

In the tech world, sometimes an esoteric concept or program becomes so useful and handy that it gets pulled out of the shadows and into broader public use. Email, for example, began in 1969 as a way for computer scientists to send messages from one computer to another.

There’s another technology emerging that could have a significant impact on the auto industry. It could affect how automakers pay suppliers across the seas, how consumers pay for car-sharing services and even possibly how dealerships handle legal paperwork.

The technology, called blockchain, began as a way to make payments with the digital currency bitcoin. This new payment system is starting to show up in the auto industry. At the Frankfurt auto show this month, auto supplier ZF and IBM announced they are jointly developing a payment platform for vehicle services based on blockchain technology. Dubbed Car eWallet, the ​ platform would allow for a variety of services, from car-sharing to in-vehicle purchase to dealership repairs, to process payments simply and securely.

Toyota, consulting firm EY and French carmaker Renault also are researching applications for the technology.

So here’s everything you need to know about blockchain: how it works, its history in the shadowy world of digital currency and why it may be key to launching shared, self-driving fleets of the future.

1. What is it, and who uses it?

Blockchain is a global financial database that anyone with an Internet connection can access.

“We use it in quite a range of industries,” said Andreas Kind, a blockchain expert at IBM Research. “Shipping, loyalty programs, finance, international settlement.”

It is perhaps best known in relation to bitcoin, a pioneering digital currency that exists outside the control of governmental and financial institutions. A blockchain platform acts as a public exchange that allows anyone to purchase and sell directly with anyone else, bypassing banks and warding off the threat of illegitimate or counterfeit bitcoins entering the market.

It has been associated with money laundering and other crimes but has in the past few years emerged as a legitimate way for companies to do business. In 2015, Goldman Sachs told investors in a research note that blockchain “can change, well, everything.”

2. How does blockchain work?

Blockchain, a name derived from how data is structured in linked units or “blocks,” is kind of the equivalent of Google docs for payment ledgers. Google docs is a word processing program that many people can be in at one time, and the edits and changes show up live on every version of the document. That eliminates the need to send new versions and updates to a group of people.

Blockchain is like that — changes made by one user are visible to everyone — but the key difference is that users cannot change information that is already in the document. New versions are time-stamped and encrypted and are supposedly impossible to counterfeit. Nefarious actors would need to alter every copy of the ledger that’s been created.

“The record is literally a string of numbers and figures,” said EY’s John Simlett, a blockchain expert working on Tesseract, the consulting firm’s blockchain platform.

3. Why does the auto industry care about blockchain?

In the near term, blockchain could enable third-party companies to easily offer services in the car.

“At the moment, all OEMs are working on in-car services,” said Alexander Graf, a ZF executive developing CareWallet. The platform “connects services and users directly.”

The supplier is working with parking and fueling companies on piloting its payment system in 2018.

In the long term, as more people move away from car ownership, experts say blockchain will be the key to managing fleets of robo-taxis that will generate revenue through transportation subscriptions.

“As cars get more and more technology and potentially get more expensive to buy, then [blockchain] provides a great way of making [self-driving] vehicles ubiquitous,” said EY’s Simlett.

Here’s how the auto industry would make it work:

Imagine a mobility company wants to operate a fleet of robo-taxis in a city. Currently, the company might create software that manages the location and usage of every vehicle in the fleet. Users would need to register a credit card or debit card that would be charged whenever a vehicle is utilized.

Blockchain would make it easy for fleet managers to monitor usage and payment across the entire fleet through a single record. Passengers could use one blockchain-enabled card that lets them take private shared cars, hail a robo-taxi or take a public bus.

4. This sounds like a lot of hoopla for a payment platform.

Excitement around blockchain comes from its potential to offer a neutral platform for collaboration to occur among the auto, financial and retail industries. The ability for cars to offer services such as ride-hailing, pizza delivery and entertainment increases the number of companies involved with the everyday passenger. While carmakers still could control what services are offered, blockchain would ensure that transactions are executed fairly and transparently.

“Blockchain is inherently about distributing trust,” said IBM’s Kind. “We want new companies to come in and use this platform for their service and enter this new automotive world.”

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