Blockchain and tokenization: Transforming ownership and the automotive value chain

Oh well, owning an autonomous car is not enough; the vehicle should pay for itself!

Wouldn’t that be an appealing proposition? While we are still ways out of seeing autonomous and connected vehicles going mainstream, the existing technology provides us with a glimpse of what’s to come and potential opportunities.

Autonomous vehicles are undergoing a lot of mobility and safety testing, with many new technologies developed and added to them. As such, by the time they eventually reach mainstream (yes, the “if” was ignored here purposefully), technologists predict these vehicles should be able to perform autonomously instant payment of services related to their operation.

For this to take place, it is necessary onboard secure and reliable driver identification and payment information. That is where blockchain comes into play. Some envision the use of Blockchain technology to enable machine-to-machine payments using smart contracts, which would allow for transactions of the likes of incremental on-demand payment of car insurance. Vehicles can potentially incorporate the capability for instant payment of all services associated with its use, such as paying tolls, software upgrade, refuel or recharge, registration fees, and repairs, etc. All these capabilities would unlock the possibility of having the vehicle driving other people when not in use by the owner and, consequently, generating funds.

Fractional ownership built over blockchain is another possibility, where multiple users could rent vehicles from a fleet owner or own/lease from an auto company. These possibilities can take place through a process of tokenization, i.e., in essence, the conversion of the value stored in some form of asset, such as a vehicle, into a digital token that we can manipulate over a blockchain system. Such conversion process enables us to apportion physical assets into digital shares, which we can then trade. Perhaps the most prominent use case currently is in the real state industry, exemplified by the East Village building in Manhattan, which contains 12 condos each now tokenized on the Ethereum blockchain.

In the auto industry, there are experiments based on blockchain and tokenization. For instance, the Toyota Research Institute is working with some partners through a blockchain mobility alliance specialized in different aspects of blockchain to make potential customers comfortable with the notion of shared automated driverless cars. General Motors is experimenting with a proof of concept of fractional ownership in its Maven platform. Interestingly, blockchain technology and tokenization can potentially remove the need for a central authority in the ride-sharing industry and enable the rise of peer-to-peer sharing companies.

Blockchain technology can enhance efficiency and collaboration by enabling synchronization, component traceability, record keeping of vehicle maintenance history, among many others, across the value automotive value chain. It can potentially increase efficiency and collaboration through the tokenization of assets, removing various intermediary office functions through smart contracts and enabling seamless peer-to-peer transactions. There are many blockchain-based automotive related projects, such as AMO Foundation, Autobay, and BitCar, or flow-of-goods related projects, such as CargoX.

Similar applications are spring up across industries, so it is stimulating to research the developments and reflect on the transformative potential for the logistics and supply chain industry. However, there are just as many exciting and significant questions claiming for answers as the technology shapes up and spread.