We take a close look at the applicational use in decentralised transportation systems
Many experts predict that blockchain technology will be the most disruptive technology since the creation of the internet. Given the amount of industries that face disruption by the distributed ledger technology, it is starting to look like this prediction will come to fruition. While the financial industry is already testing and implementing blockchain technology to improve operational inefficiencies and reduce the costs of financial transactions, there are many more sectors that face disruption as well.
According to report by RethinkX by “2030 and with regulatory approval of fully autonomous vehicles, 95% of all U.S. passenger miles will be served by Transport-as-a-Service (TaaS) providers who will own and operate fleets of autonomous electric vehicles providing passengers with higher levels of service, faster rides and vastly increased safety at a cost up to 10 times cheaper than today’s individually owned vehicles.
These fleets will include a wide variety of vehicle types, sizes and configurations that meet every kind of consumer need, from driving children to hauling equipment. The TaaS disruption will be driven by economics with the average American family saving more than $5,600 per year in transportation costs, equivalent to a wage raise of 10 percent.”
Mainstream interest in actually owning a car has been on the wane for some time – The UK Driving and Vehicle Standards Agency (DVSA) figures show that new license applications have declined by 28% over the last ten years, while the University of Michigan has found a pattern of decreasing US drivers which began as far back as 1983. The context for these changes certainly include new economic and social circumstances, but in recent years it is the influence of mobile technology that has fundamentally negated many of the fundamental reasons for car ownership.
Ride-sharing and transit services have reduced the practical need for cars in an urban context. Flexibility and immediacy are more valuable – from streamed content to flexible working patterns, the immediacy of online shopping, constant connectivity and customisation has redefined our values. In this light, the prospect of owning a car – complete with responsibilities of insurance, maintenance, commitment to financing a depreciating asset and, of course, driving it – seems more a burden than a benefit.
Urban public transportation will become increasingly complex and crowded in the future, as the importance of mobility services like Uber and Lyft grows (with an estimated $69 billion, and $7.5 billion net worth respectively), and more companies look to leverage self-driving cars to launch autonomous ride-hailing services in cities. Carmakers will soon see their core business model swing from private car ownership to subscription access to a suite of transportation options. Technologies like Tesla’s Self-Driving Auto-Pilot capability and Uber’s tiered ride sharing platform are accelerating this transition from private transportation to personalised transport.
Today’s ride-sharing technology do not rely on IoT connected cars. Instead, they rely on smartphones that connect drivers with riders. Uber and Lyft, which stand out as the most popular ride-sharing companies, serve millions of people every day. One estimate shows that Uber gives rides to about 40 million people each month worldwide. Lyft provides about 14 million rides per month.
As more cars become connected to the internet, you can expect to see more drivers rely on car dashboards rather than their smartphones. Recent infotainment systems developed by Ford, Honda and several other manufacturers integrate smartphone apps into the car dashboard through Apple CarPlay and Android Auto.
In May 2017, Toyota Research Institute announced that it teamed up with MIT Media lab, Oaken Innovations and Commuterz to explore how blockchain could be used to speed up the development of autonomous cars. The project focused on creating a digital environment where users are able to share data safely on every drive that the autonomous car goes. In addition to data sharing, users can also manage ride-sharing and carshare transactions more easily and without a third-party intermediary.
The rationale behind using blockchain in autonomous vehicle development is the need for large amounts of driving data from different users as also mentioned by Chris Ballinger, director of mobility services and CFO at TRI: “Hundreds of billions of human driving data may be needed to develop safe and reliable autonomous vehicles.” He also stated that blockchain allows the pooling of data from vehicle owners, fleet managers and manufacturers to decrease the time to reach safe autonomous vehicles and to increase safety, efficiency and convenience. Additionally, Toyota Motor Company also believes that blockchain will allow the company to lower costs and increase efficiency.
And with the decentralised nature of blockchain, this would also enable drivers and passengers to make P2P bids without centralised mechanisms that sets prices or takes a fee such as Uber. Indeed blockchain may disrupt the disruptors as consumers and service providers can meet without the need for a centralised bureaucracy. An added benefit of using a blockchain powered ride sharing system would be to enable drivers to keep the 20-25% fees that are typically charged by platforms.
What is Blockchain?
Blockchain is a distributed ledger system that maintains a continuously growing record of transactions, or blocks, where each block is linked to a previous block and cannot be altered or reversed once it is added to the chain, and which does not require a central administrator to guarantee the veracity of any transaction. It is essentially a technological solution to the issue of trust in a record or transaction. Blockchain is the underlying technology behind bitcoin, which is a digital token that allows one party to pay another anywhere in the world for goods and services, in some ways like cash. Just like a dollar bill, a bitcoin, once used, permanently passes to another person and cannot be reused or unilaterally withdrawn. With a dollar bill, this is because the bill physically passes to another party; with a bitcoin, this is because the transaction is etched in the public ledger and cannot be undone. Blockchain technology eliminates situations akin to receiving a blank check where there is no value in the underlying account or paying a seller for land that he does not own. Furthermore, because the transaction itself is secure, the cost of the transaction can be significantly lower when compared to traditional payment methods such as credit card payments, international remittances, or any situation where there is a third party guarantor.
Ethereum and the rise of smart contracts: The Ethereum public blockchain emerged in 2014 as an open source project and alternative to the Bitcoin blockchain — specifically designed to be ‘the world’s super computer’. Through the introduction of ‘smart contract’ capability, applications built on Ethereum can automate a range of business dealings between parties. In theory, without the need for human intervention from a legal perspective.
What are Smart Contracts?
A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are trackable and irreversible. Smart contracts were first proposed by Nick Szabo, who coined the term, in 1994. Proponents of smart contracts claim that many kinds of contractual clauses may be made partially or fully self-executing, self-enforcing, or both. The aim of smart contracts is to provide security that is superior to traditional contract law and to reduce other transaction costs associated with contracting. Various cryptocurrencies have implemented types of smart contracts.
These properties of blockchain, namely being decentralized, cryptographically secure, immutable and traceable may be a solution to some of the challenges associated with autonomous cars.
- Decentralized: Blockchain technology is based on a decentralized architecture, which allows a massive number of nodes (computers) to participate in reaching a consensus on the state of the database. The decentralized architecture eliminates the threat of a single point of failure. This is because even if the majority of nodes are not operative there will always be a few nodes which are able to keep the database running.
- Immutable: Once a transaction and data has been verified through consensus and added to the distributed database it is impossible for a hacker to amend or substitute the blocks in a blockchain.
- Encrypted: Although blockchains are transparent in that stored data is readily accessible to the public to monitor the combination of data storage and simple encryption allows for data to be only accessible by the owner of such data or by parties which are provided access by the owner.
- Secure: A major security problem of conventional technologies is the threat of hackers installing a modified, malicious software update which easily compromises the affected systems. Blockchain through usage of public key and private key functionality of cryptography, can require every software update to be signed by the exclusive private key which only the driver and software developer have access to.
- No Trust Needed: A by-product of the consensus algorithm of blockchain, transparency and its immutability properties means there is no need for a central trusted authority in the system. Counterparties connected by way of a blockchain network can interact with one another in a trustless manner.
- Reduced latency: Blockchains have many local nodes involved in their architecture which can allow for faster data collection and data transfer.