Investors and consumers have become increasingly interested in the circular economy, understanding the entire lifecycle of a product from the origins of its source raw materials to what happens to it at the end of its useful life—especially where there is potential to recycle. As auto manufacturers move to offer greater EV options, it has become a very important topic since the rare minerals used in the lithium-ion batteries are sourced in unstable countries, and there is not yet a viable solution for recycling them. Close to 80 million vehicles are sold each year, and, with chip shortages, many buyers are purchasing pre-owned vehicles. CARFAX reports provide useful data about vehicle life events, but they don’t cover the full product lifecycle.
Blockchain, used in conjunction with in-vehicle telematics, can track a car’s experiences from birth to death and can make the vehicle finance process easier and more transparent for lenders, manufacturers, dealers and consumers. Blockchain can facilitate secure, traceable digital transactions in real time, giving each vehicle an identifiable DNA. It holds the power to dramatically cut costs by removing intermediaries thereby increasing efficiencies. It not only can create major benefits for consumers but also for carsharing services, insurers, fleet users, lenders and more.
So what exactly is blockchain, and who created it?
Many people think of blockchain and cryptocurrency as one and the same, but they are not. Digital assets, such as cryptocurrency, can be used with blockchain, but blockchain can also be used in other applications that do not involve bitcoin and other forms of digital currencies. The idea of blockchain has been around for more than a decade. Satoshi Nakamoto, a person or maybe even persons whose identity and location is secret, proposed the idea in a paper in 2008. Nakamoto called it “a purely peer-to-peer version of electronic cash” that would allow online payments to be sent directly from one party to another without the use of a financial institution. That currency—bitcoin—appeared in 2009 and has become a trading phenomenon. But much like the use of the internet in its infancy, the marketplace is still working on how blockchain itself will add value.
Imagine an omnipotent spreadsheet shared across a vast computer network. Each block of information is given a unique, time-stamped digital fingerprint called a hash, and each block contains the hash of the previous block in the chain, thus the name blockchain. This continues on and on like a long string of DNA.
Blockchain is intrinsically secure by design. Participants cooperate in the exchange of information, and that information can’t be altered without revealing itself. Each unique blockchain belongs to the item being tracked. If anyone tries to change the information in any older block of data, a block’s content and hash would no longer match exposing the falsification. This is one of the most important features of blockchain, but also somewhat controversial due to the high amounts of computing power required.
There are dozens of use cases for blockchain around mobility. Carmakers are just one sector considering how to use it. The Toyota Research Institute has been studying how to improve ride-sharing with blockchain. In April 2021, Toyota bought the self-driving research department of Lyft, which is expected to utilize blockchain.
Ever since in-vehicle telematics brought the automobile industry fully into the information age, a vast amount of information is available via wireless networks. Cars can communicate with each other or with receptors along their routes. Since they are essentially rolling computers, a vast amount of data is being generated. Imagine how much we could understand about each car if blockchain were employed and we knew that information was trustworthy. The blockchain data on a car would reveal manufacturing details, mileage data, prior registrations, titles, service records and damages. Telematics can automatically inform insurers and body shops in the event of an accident, providing both real-time and highly accurate information about the nature of damage. Emergency teams could be dispatched automatically. Blockchain can record these events, as well as routine maintenance and titling, to inform future buyers.
In the brave new world of blockchain:
On the Road Lending is currently exploring creating a new end-to-end blockchain-based fintech platform for the benefit of our borrowers. All of the activities related to originations, underwriting, vehicle sourcing, loan administration, and servicing can be done on chain, eliminating intermediaries, such as backup servicers, to enable us to bring down costs. Through partnerships with BNY Mellon and Goldman Sachs, we are even exploring doing our bond issuances on chain using digital assets.
At our sister entity, On the Road Garage, we are interested in pairing blockchain with in-vehicle telematics to record vehicle life events, including ADAS calibration and real-time accident information.
The possibilities are truly endless.