Can Blockchain Technology Improve The Used Car Industry?
In today's world, the used car industry is renowned to be notorious because of the low trust and high occurrences of fraud. This makes it an industry that needs severe innovation to curb all the destructive acts and restore trust in the industry. The used car industry needs to adopt an effective technology that is enough to prevent fraud and contain costs.
Buying a previously owned car without worry about the history of the car is the dream of anyone going for a used car. When you don't have to worry about the state or accurateness of the mileage, service history, vehicle inspection history, and plenty of other factors critical when assessing a car's condition is a dream come true. Not also being bothered whether the details were secure from errors or not, or intentional fraud by the seller is relieving.
Notwithstanding, the used car industry is taking a large part of the automobile market and it presents new opportunities to vendors. The problem of trust however is still rampant. But the used car industry is infused to the extent that an individual or corporate body purchasing the car is faced with the same dilemma. The same question of "if the car will be in the exact state the seller described" rules over the thoughts of buyers because of the low level of trust in the industry.
We can use mileage as a significant parameter to assess the condition of a used car. This allows us to know how used the preowned care is. This also allows us to evaluate the right price to pay for the car. When the mileage is low this means that the price of the car will be on the high side and if the price is low then that means the mileage is high. When mileage is such an important indicator of how used the car is, it is critical that the reading of the odometer is correct.
Unfortunately, the car mileage is sometimes tampered with to conceal the levels of mileage. An instance is when the body of the car does not give away the level of mileage, a buyer might be drawn to it thinking it'll have low mileage and the seller might play on the naivety of the buyer by rolling back the odometer.
This and other forms of fraud have been consistent in the used car industry. The repercussions of putting poor, inadequate and bad vehicles in the same category as “straight” vehicles have led to unfair and misleading prices.
So, what can be done to solve this problem? This is where blockchain technology comes in. Blockchain, a technology famous for its application in cryptocurrencies like Bitcoin, is being explored by automakers as a way to improve security in increasingly connected vehicles.
What is Blockchain Technology and How Does a Blockchain Work?
This is a distributed database. It means that the storage devices for the database are not connected to a common processor; instead, it maintains a growing list of ordered records called blocks. Each block has a timestamp and a link to a previous block, making it impossible for an individual block to be altered without also changing the rest of the blocks behind it. Users can edit parts of the blockchain that they “own” by possessing the private keys necessary to write to the file. Cryptography ensures that everyone’s copy of the distributed blockchain is kept in sync.
Blockchains are secure databases by design, making them excellent prospects for recording things like medical records, financial transactions, identity management, and proving provenance. Blockchain offers the potential of removing the middleman in trade and transaction processing
Blockchain is a transparent and secure technology capable of preserving the integrity of data, which addresses the common issue of inaccurate or missing information plaguing the automotive industry and adding to its costs.
Ways Blockchain can be used to enhance the used-car industry includes;
- Accurate determination of vehicles’ resale value
- Determination of spare parts’ authenticity
- Accurate and cost-efficient insurance claim management
- Optimizing insurance operations
- Compliance monitoring with business partners
- Payment and enforcement of contractual relations with partners, stakeholders and customers
- Inventory management and forecasting
- Sustainable manufacturing and cleaner production
Record In-vehicle payment
If you are not so familiar with blockchain technology, you have probably heard of the cryptocurrency named Bitcoin? Blockchain is, in short, the technology on which Bitcoin is based. When Blockchain first landed in the public consciousness as the technology supporting cryptocurrencies, such as Bitcoin; cryptocurrency remains the primary arena in which blockchain technology is used. Car owners can use blockchain to pay for the electricity to charge electric cars. Imagine if every time you charged your vehicle, the action triggered a smart contract on the blockchain that took the appropriate amount of money from your account and sent it to the charging station. The same could go for your monthly parking cost, your insurance, and any other financial transactions involving your vehicle.
Safeguarding Information/Data
A blockchain ledger records every sequence of Bitcoin transactions from beginning to end. As each transaction occurs, it’s put into a block. Each block is connected to the block before it, and the one after it. Groups of transactions are blocked together and a fingerprint of each block is added to the next, thus creating an irreversible chain. The technology makes it ideal for recording.
The ledger is distributed - it works as a shared form of record keeping. This ensures no one person or organization holds complete ownership of the system. As a product progresses through its life cycle, everyone involved can be permissioned to have a copy of the complete digital record, and no additional transaction can be added to the chain without consensus from all participants. This means no single person can add to or alter the blockchain without it being permanently recorded. This renders the system tamper resistant and highly secure, eliminating the risk of fraud and error. No one, not even a system administrator can delete it.
However, the technological principles which enable and make Bitcoin transactions secure can also be utilized in many other areas. As the technology and consultant firm IBM explains, blockchain offers parties involved in any business network a secure and synchronized record of transactions.
Prevent Fraud in Warranty and Insurance Claim
Information gathered through blockchain can be used to prevent fraud in warranty and insurance claims. Aside from increasing customer trust, the information generated by the platform can also be used to prevent fraud in warranty and insurance claims. In the case of mileage fraud, blockchain technology has the potential to solve a huge problem. The current car owner would be able to check the actual mileage and compare it to the in-vehicle display. Furthermore, when the car is sold, a completely auditable and verifiable record of information about the mileage of the vehicle can be handed over to the new owner as a certificate of accuracy.
Tracking Vehicle Usage and Engine Health
Adding an IoT layer to a vehicle would assist in monitoring the vehicle’s engine health as well as emissions. If a vehicle is not regularly maintained, its tailpipe emissions would grow more toxic over time. Furthermore, a lack of regular maintenance can damage the engine and other components within the vehicle and degrade its resale value. The IoT layer would alert the user to a vehicle’s deteriorating engine health and note it on the blockchain so future prospective buyers have an accurate picture of what they are getting.
Increasing Consumer Confidence and Product Value
The automotive industry is complex and involves multiple and connected transactions, so it is ideal to have an immutable database to record these transactions while allowing information to be shared and updated securely. This is achievable through blockchain’s distributed ledger.
By using this technology to build up confidence in its products, the automotive industry will also improve the efficiency of the car market at large. If people know there is an active market for used cars and vehicles that maintain value longer, they’ll feel more comfortable purchasing a pre-owned car as it can be quickly resold in a trusted market.
Implemented alone, blockchain already has many practical uses for improving efficiency and lowering costs. However, the industry can reap even greater benefits by integrating blockchain with other technologies such as artificial intelligence, IoT and big data.
With the rapid advances in blockchain technology, the automotive industry’s current challenges and issues may well be solved by blockchain’s implementation. It is expected that blockchain will be fully adopted across the automotive industry globally soon.
The potential of blockchain technology is enormous. Only a lack of imagination and creativity will limit how and where it can be used. And if we use blockchain technology wisely, it truly has the potential of bringing a high degree of accountability and therefore security. Not only for individuals dealing in the used car market but for people and organisations in many and various other industries. Reducing fraud and errors, creating more trust, and in the end, saving society and businesses billions.