Blockchain, Tangle and the Future of Mobility
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82% of all cars shipped by 2021 will be connected, according to Business Insider’s BI Intelligence. This growing trend in vehicle connectivity (“Internet of Cars”), pushed by an increasing consumer demand for connectivity and coupled with a regulatory crack-down on distracted driving (64% of all road accidents in the US involved cell-phone usage) will represent the next step in the evolution of the car from a method of transportation to an all-encompassing multi-media device.
Original Equipment Manufactures (OEMs) are very much becoming aware of this and have started to react, seeing it as an opportunity to increase their touch points with their customers (for example to promote their own dealer networks). OEMs will need to further adapt their business models and processes to capitalise on the fact that they will no longer just be selling a product, but a full-suite of services powered by the new-found connectivity of their products. The stakes are high: McKinsey expects that up to 40% of automotive revenues by 2030 will be made up from car data-enabled and shared mobility services, provided OEMs are able to put the required technical enablers in place.
Blockchain as an Enabler
Applying distributed ledger technology (essentially an immutable register which is constantly shared among all participants in a network) to embedded vehicle connectivity may very well be the enabler that OEMs need to unlock the Car as a Service business model. Using blockchain as the architecture for the Internet of Cars would allow sensor data to be recorded, stored and shared securely on a massive register (ledger) that would be made available to drivers, the OEM, insurers, dealer networks, leasing companies and any other party in an ever-increasing network of inter-connected stakeholders. The integration and seamless sharing of real-time data from connected vehicles would allow OEMs to unlock services such as usage-based warranties, peer-to-peer car sharing, as well as spare parts authentication and dynamic vehicle maintenance.
The integration of stakeholders and vehicles is the first step towards building the infrastructure that will power the connected cities of the future. Contextualising vehicle data with city-level operational data could allow, for instance, autonomous traffic flow direction via smart traffic lights. Blockchain in its current capacity however, would seem to be limited when you factor in the scale necessary to process the billions of data that would be generated when powering a connected city.
Next Step: IOTA and Connected Cities
The key shortcoming of Blockchain when it comes to Internet of Cars is its fundamental need for processing power to mine. “Mining” is the process by which a transaction on a distributed ledger like blockchain is settled (details of which you can find here) which requires a purposely built high spec CPU to centrally settle all of the transactions on the network. A connected city would generate hundreds of millions of daily micro-transactions, which would therefor overload the limited number of nodes (miners) of the network. This is where Tangle comes in. IOTA proposes to work alongside blockchain with directed acyclic graph (DAG, or “tangle”) technology which promises to address the processing-heavy issues of blockchain.
Where blockchain requires miners to verify every transaction that needs to be settled, IOTA proposes to require every participant to verify two transactions that need to be settled, effectively decentralising the settlement to every participant on the network. In theory, this means that the system is infinitely scalable as processing power is directly linked to the number of users (vs. Blockchain where processing power is linked to number of miners and inversely proportional to number of users). It’s therefor possible to imagine a future where smart traffic lights automatically reward a driver for deciding to take a longer route (but benefiting the overall traffic flow) or where micro-payments are automatically settled by the car and the parking space. In effect, the IOTA foundation is currently working on real-world applications, for its tangle technology, partnering with the International Transportation Innovation Centre (ITIC) to build a global alliance of smart mobility test-beds.