Blockchain’s Hidden Power In The Supply Chain – Technology

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Blockchain’s Hidden Power In The Supply Chain

Blockchain technology, best known as the distributed ledger
platform that powers Bitcoin and other cryptocurrencies, holds
several potential applications for the automotive industry. Trends
toward automated and autonomous driving are changing the way
original equipment manufacturers (OEMs) collect and store data. The
disjointed nature of automotive production across geographies, time
zones and a myriad of suppliers creates challenges for OEMs hoping
to satisfy increasingly demanding consumers who are used to online
shopping and same-day delivery.

Some characteristics of blockchain technology offer solutions to
these automotive industry challenges:

• The authentication of car parts in real time with
  blockchain-based supply chain management systems




• Trustless communication across the supply chain with complete
  transparency to all parties




• The precise tracking of parts and repairs allowing for much
  more targeted recalls and less disruption for non-affected
  parties




• Fast and secure digital payments for automated leasing,
  financing, maintenance, and other procedures

These unique characteristics of blockchain technology can be
combined with other technologies to form automotive-specific use
cases. Combining big data computing and the ability to share
trustless access to network information could allow the secure
sharing of vehicle data between manufactures, dealers and owners
while providing the foundation for autonomous vehicle communication
networks. The location of the storage nodes and the nature of the
information being shared will have privacy implications in
jurisdictions with protections for personally identifiable
information. Embedding IOT devices, such as Radio-Frequency
Identification (RFID) tags, into an automated supply chain could
permit greater transparency between OEMs, suppliers and dealers, as
well as the instant authentication of parts and verification of
part availability. Combining artificial intelligence algorithms
with real-time engine data could result in more and better
location-based services.

Sharing these use cases with fleet providers, insurance
companies and other third-party providers opens a universe of
possibilities for custom services and digital payment options. More
specifically, distributed ledger technology could provide the
tracking and payments infrastructure that allows for the
permissioned monetization of the diagnostic and
infotainment-related big data coming out of today’s connected
vehicles. Basic maintenance and usage data are available to owners,
dealers or third parties to facilitate simple repairs. Blockchain
storage of a car’s parts inventory would allow for immediate
shipment of a verified replacement part to a local dealer within
seconds of a part malfunction report. Sharing data on driving
behavior with fleet managers or insurance companies could allow
usage-based pricing and incentives. Finally, payments for services
or options could be settled instantly in real time via smart
contract-based digital payments between owners, drivers, service
providers and OEMs. The sharing of data across such a broad
spectrum of participants will require the industry to rethink data
anonymization and the way it shares or disclaims liability for
automotive data used by the industry collectively.

While most automakers are engaged in their own blockchain
research, a number of industry players have launched the Mobility Open Blockchain Initiative
(MOBI) to collaborate on automotive blockchain work. BMW,
General Motors, Ford, and Renault were among the initial members
working in collaboration with leading blockchain and technology
startups, such as manufacturers Bosch and ZF, leading service
providers Accenture and IBM, and blockchain-focused organizations
Consensys and Hyperledger. Participants also include researchers
and scientists from academic institutions and NGOs. The
group’s goal is to generate a common system and application
programming interface in order to allow payments and
data-sharing between cars. The result could be a new digital
mobility system offering services ranging from ride-sharing to
self-driving vehicles, with innovations in between.

While many automotive blockchain projects are in their infancy,
early progress seems to indicate much more is yet to come. The
rapid growth of decentralized finance, which grew from less than $1
billion to almost $20 billion in total locked value in 2020, and
the achievement of new all-time highs for Bitcoin and Ethereum at
the beginning of 2021 are likely to continue to drive attention to
this fascinating technology. The increase in fintech applications
for blockchain and cryptocurrency have given rise to several recent
regulatory proposals in the U.S., including efforts to subject
certain cryptocurrencies to banking regulations. The Financial Crimes Enforcement Network
(FinCen) and the Office of the Comptroller
of the Currency (OCC) have also offered clarifications about
the application of anti-money laundering and know-your-customer
regulations to digital payments and the ability of banks to
interact with cryptocurrencies backed by fiat currencies. While the
application of new digital payment regs would certainly apply to
digital payment facilitators in the automotive space, the
automotive sector does not appear to face any burden that cannot be
addressed with traditional payments risk analysis. Indeed, the new
payments regulations appear designed to facilitate more innovation
rather than stymie new development.

There have been exponential increases in the use of blockchain
technology in automotive over the last several years, and the pace
of innovation will only increase.  Initiatives endorsed by
multiple OEMs are more likely to get traction than stand-alone
projects, but because the number of automotive use cases is
increasing so rapidly, it will likely be some time before winners
and losers are apparent. As the technology evolves, Blockchain
consortia need to stay abreast of legislative and regulatory
developments to ensure that promising blockchain innovation,
particularly in the payments space, is not stymied by regulation
targeted at the more volatile cryptocurrency arena.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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