Blockchain has the power to transform processes throughout the automotive industry, and yet, many remain unsure about how blockchain works and how it can be applied. Nick Pudar, Director of Corporate Strategy at GM, provided a simple tutorial on blockchain and how it’s already being put to work in the sector.
While the internet allows the secure transfer of information, until recently it has been challenged to allow the secure transfer of assets as well, Pudar said. In particular, security is compromised because assets, once digitized, can be copied.
“This notion of something of value being replicated to multiple copies, that just makes things break,” he said. “That’s why today when we do digital money transfers, we always rely on a middleman… who can help make the transaction and control the verification.”
For example, an electronic transfer of money between two people using PayPal is more complicated than it appears on the surface, involving PayPal’s ledger, two banks and their clearinghouses, and personal ledgers as well, all due to a lack of trust between the many parties.
“Everybody has to reconcile and synchronize and audit and verify that nobody’s cheating, that no mistakes were made,” Pudar said. “The amount of energy and costs associated with this process is high. It also takes a lot of time.”
But blockchain allows all parties to have an identical copy of one “distributed” ledger, creating a “single version of the truth for all users,” he explained. When one party adds a transaction to the ledger, all parties see the same information, and no permissions or middlemen are required. “When Alice wants to send Bob some money, she makes a transaction to her copy, and this distributed ledger updates Bob’s copy and now he has the money, and there isn’t a set of clearinghouses and banks.”
Pudar simplified it even further. “Blockchain is just a database. But it has some superpowers, and those superpowers are that there is autonomous synchronization across the network that it is append only. You can add a transaction, but once you’ve made that transaction, you can’t delete it. You can’t edit it. Nobody can change it.”
Ethereum, an early innovator of blockchain technology, gave rise to the concept of “smart contracts,” which incorporate code that can be triggered by certain conditions.
In Pudar’s example, a smart contract for cryptocurrency could automatically allow the transfer of assets from an owner to an heir with the confirmation of death based on published obituaries. This eliminates the need and cost for lawyers and probate courts. Smart contracts are being applied to supply chains, such as to determine the provenance of conflict minerals, or the source of auto parts to guard against counterfeits.
Meanwhile, blockchain-enabled “smart property” can protect the rights to shared assets. This capability could come into use as the shared economy continues to expand, car owners lend their vehicles for shared use, and consumers increasingly consider partial over full vehicle ownership.
In geo commerce, blockchain can enable payments for ride sharing, tolls, EV smart grid usage and fuel, parking, and more. Audit services also can use blockchain to prove that a document or transaction existed at a specific date and time.
And finally, blockchain assists with identity services. In the auto industry, such electronic verification can be used in finance, including for payments and for service and vehicle history.
“These tools are pretty powerful, and when you understand the technical aspects of how they work, you can begin to see where they might be applied,” Pudar said.
While blockchain offers exciting opportunities, Pudar suggested that organizations need to follow a chain of logic to determine if blockchain is really necessary for their needs.
The first question to ask is simple: Does the organization need a database? “If you don’t need a database, you don’t need a blockchain,” he said. Organizations also don’t need blockchain if the following hold true: shared write access is not required, all the users who need to write to the database are trusted and their interests are unified, or a trusted third party is required to handle disputes.
If organizations conclude that blockchain could improve their processes, they then need to determine what type would be best for their applications.
Public blockchains run on protocols without a point of control, while a cartel of interested parties run private blockchains to reduce costs and improve security. Meanwhile, hybrid models are emerging that leverage the public blockchain to lock in the truth. “From an auditing standpoint, it is really hard to falsify anything.”
Nonprofit MOBI, a consortium of OEMs seeking industry standards for blockchain applications, is exploring a digitized or tokenized “birth certificate” for vehicles that can incorporate the maintenance and accident history.
“All of these things become part of the health record of the vehicle,” Pudar said. “This notion of immutability says that nobody can falsify it, ever.”
He also described the use of blockchain in a subscription model, such as shared vehicle ownership among an aging, less-mobile population. “You can imagine a retirement community having a fleet of vehicles that they have fractional ownership of. If [drivers] want to go beyond what those rights are, they can pay for it like they would in a rental service. Then the revenues through smart contracts automatically get distributed back to the owners.”
GM began exploring blockchain approximately two years ago, bringing on a chief blockchain architect and supporting a team to develop applications, Pudar said. However, don’t expect the automaker to make waves about the technology.
“When they do come into production, are you all going to hear about great blockchain applications? No, because it’s the stuff in the background. It’s just going to make it more effective, it’s going to be cheaper, it’s going to be more secure. And the customer experience will be enhanced because of what it can do.”