The automotive industry prides itself so much on innovation and transformation that many brands find it hard to keep up with the recent tech developments in the sector. It is not merely the vehicle-to-vehicle communication or the autonomous technology that the car manufacturers are trying to cope with; the industry is now facing another technology in the shape of cryptocurrency and blockchain. The blockchain technology has its reverberation felt across the automotive industry for a few years now, but not much has been spoken and written about.
In this post, we will discuss the impacts of cryptocurrencies and blockchain and how this technology will affect the auto industry. But before we divulge the nitty-gritty of cryptocurrency and the blockchain technology that underpins it, it might serve some of our readers well to understand the basic idea of a blockchain.
What is blockchain?
Blockchain is a distributed ledger and online database that can be accessed by anyone, anywhere around the globe with an internet connection. Initially, the technology was developed for cryptocurrencies like Bitcoin and Ethereum, but today it has found extensive applications beyond the digital currencies. Unlike the traditional databases which are owned by banks, influential firms, and governing bodies, the blockchain does not have a central governing authority.
The information in the blockchain is stored permanently as records in blocks across a network of personal computers. Each block has its timestamp and links to another block, forming a chain, which is where the name ‘blockchain’ comes from. As each user of the blockchain network looks after the information, the technology is hackproof, and it is almost impossible to tamper the data.
Today, blockchain technology is making waves in industries beyond cryptocurrency, and it is predicted that blockchain platforms will store nearly 10% of the global GDP within a decade. The auto industry particularly sees it as a major opportunity to enter a new era of digitization. Most of the popular auto brands have expressed their will to invest in the technology and bring changes to their business models.
The research conducted by Frost and Sullivan reveals that the auto industry’s total spending on blockchain technology is expected to cross one billion dollars by 2025. It further predicts that 10 to 15 percent of CV (connected vehicles) transactions will be on blockchain by the same time.
Below, we walk you through some of the recent cryptocurrency and blockchain developments in the automotive industry.
1. Fully autonomous vehicles
The autonomous vehicle technology has been in the news for some time, but it hasn’t become a reality as yet. Tesla has introduced cars with a built-in autopilot mode, and Google’s self-driving technology company, Waymo, has been testing autonomous vehicles across multiple locations in real-world scenarios.
Blockchain technology promises to speed up the development of driverless vehicles, as it guarantees collection and processing of a large amount of data.
The distributed digital ledger can allow quick transfer of valuable data between drivers, researchers, and car manufacturers. This is why Chris Ballinger of the Toyota Research Institute believes that the fully autonomous vehicles might hit the roads sooner than expected.
2. Supply chain management
The products we buy usually involves a chain of suppliers before they reach our hands. We only know the immediate seller, the producer, and the end consumer of the commodities. Whatever happens to the product in the middle remains a mystery. The automotive supply chain relies on hardware, software, regulatory agencies, firms, dealers, suppliers, and a plethora of information and activities, which makes the process incredibly intricate and complex.
Blockchain technology provides the necessary traceability and transparency that is required to keep a complete record of all the assets within the supply chain and secure the process for suppliers and consumers. It not only improves inventory management and customer-retailer relationship but also eliminates the risks of errors and frauds that happen in manual recordkeeping.
3. New ways of vehicle financing
The rise of cryptocurrencies and blockchain introduce new modes of payments by allowing users to buy or sell vehicles with digital currencies. It provides ease, security, and transparency to consumers and auto dealerships as there is little room for fraud. It is almost impossible to reverse or counterfeit a transaction, which are the greatest concerns for people using conventional payment methods.
Hence, many people have now started using services like autocoincars to purchase their favorite cars through cryptocurrencies. The adoption of blockchain technology will also simplify the complex process of vehicle financing.
It will eliminate a host of time-consuming verification steps such as customer bank validation, review of documents, as well as the multiple phases of payment setup and executions. For this purpose, an Indian conglomerate, Mahindra, has specifically created a blockchain incubator for the vehicle financing use case.
The shift to a cashless economy by adopting blockchain and cryptocurrencies is all set to revolutionize the buying and selling processes in the auto industry.
4. Auto insurance
The blockchain technology also has the potential to change the auto insurance landscape. The technology will quicken the process and automate insurance payouts by using private keys or smart contracts. Smart contracts will also reduce false claims as it will empower the insurers to detect duplicitous information before validating a submission. Car insurers will also be able to check whether a vehicle needed serious repairs before the accident or verify any information with the help of blockchain.
This will result in a fair insurance market where the quality of driving will determine the fate of an insurance claim. It won’t be surprising to see blockchain auto insurance solutions as some auto manufacturers have already partnered with tech companies to develop insurance apps using blockchain.
Cryptocurrency and blockchain are going to impact the fundamentals of the automobile industry and the way it functions. The reason why this hasn’t become the mainstream at the moment is that people aren’t yet fully aware of the benefits that cryptocurrency and blockchain have to offer.
Furthermore, the regulations regarding the legality of the technology are still unclear. As the exposure and knowledge about cryptocurrency and blockchain increase, more and more people will switch to the digital medium.