Use Case #2 — Vehicle Provenance and Tracking

In 2010, I was in Moscow building another bank for a different automaker. It turns out that when business isn’t going well or a dealer is shady, car dealers all do the same thing. They sell a showroom vehicle off the lot and then fail to report the sale to the bank, who had provided them a loan to get the vehicle. This means that they are using sale proceeds as working capital to bridge payroll and suppliers.

When a bank catches wind of this, it’s a huge red flag that requires immediate action. Who knows how many vehicles have been sold and remained unreported?

There have been multiple incidents where $10 million worth of cars were sold before the scam was discovered. Since the cars were legally sold, the bank had no claim on the vehicles, which had been used as collateral. Meanwhile, the financing to the insolvent dealer has already been spent and needs to be written off.

Is there a way for automakers to track vehicles so that this fraud can be stopped?

It turns out that the same technology that can detect fraud could also arm consumers with irrefutable proof of how a car has been driven. With access to data, the asymmetry in information that plagues every used car buyer goes away.

Used Car Dealer — Source: Ridelust.com

I began advising a startup from the UK that had created a tag, track and trace system that used RFID tags that you could stick to the body of the vehicle. They built a custom reader device with an embedded SIM card that would read the RFID tag and then transmit the GPS coordinates (to the nearest 3 cellular towers) into a centralized database.

It was envisioned that RFID tags would be attached to the vehicle at the factory and all the stakeholders along the supply chain would use their iPhones to scan the RFID tag as it passed various choke points:

Car custody flow

All points of a vehicle’s lifecycle would then be captured and stored in a centralized database that the startup controlled and managed. Based on the data captured, a complete geo-location history of the vehicle could be constructed by uploading the data into Google Maps, giving the vehicle a provenance history.

It was a brilliant idea that used state-of-the-art technology to verify the location of a vehicle. There were however several problems that made the solution impractical for creating a full history of a vehicle:

1. Every stakeholder along the chain needed to participate, so that there was no data loss. Getting everyone to agree at the same time was nigh impossible. The benefits for everyone wasn’t clear or calculable.

2. The data was centrally stored, under the control of a 3rd party.

3. Access rights to the data was unclear — who owned the data? The manufacturer, the bank, the dealer, the car owner? It remained unresolved.

Today, we have blockchain.

Instead of forcing every stakeholder to opt-in from inception to make the whole concept work, blockchains allow for even just two counterparties to start sharing data immediately and gain value. As the value of the network is demonstrated, other stakeholders can opt-in to get value and give value to the network. A further incentive to attract stakeholders is the tokenization of the network — where stakeholders get tokens for supplying data — more on that later.

Because the datastore is a blockchain database, no single entity lords over the data. Each participant controls their data and can grant access to others using key encryption or tokenized read permissions. Datasets can even be transferred, for instance, in the case when the car is sold.

One by one, the insurmountable challenges faced in 2010 have melted away because blockchains bring unparallelled control to users and complete transparency within a decentralized network.

It’s curious that the company leading the charge to provide car histories is an energy utility. innogy, first appearing in Use Case #1, is building a platform to provide car histories, in collaboration with Volkswagen Financial Services and BigchainDB.

The Carpass project aims to give consumers more power by providing a digital wallet to track a vehicle’s “life events.” It integrates telematics data that tracks how and where a car has been driven — mainly highway miles or in alpine settings where the engine has been worked hard. Based on the car history, artificial intelligence algorithms are able to confidently predict the resale value of the car at any moment in time.

Being able to track a vehicle from assembly to disposal means that governments can better enforce environmental laws and audit manufacturers to improve car safety. It means that manufacturers can offer value-added data services to customers, while receiving subscription fees for those services. Consumers won’t get ripped off by sleazy used car salesmen. Service centers will be able to replace parts before they wear out, so cars can be safer.

Everyone wins when data can be stored and shared in a decentralized database.