Well-Considered Revolution

Consulting4Drive takes a systematic look at where blockchains do and don’t make sense

Blockchains are said to have great potential for completely transforming whole industries. It therefore comes as no surprise that many OEMs are also thinking hard about how to use this disruptive technology. However, up to now it has been relatively complicated to assess whether the blockchain is a valid, better solution in a specific case. And so Consulting4Drive, IAV’s management consultants, have developed a method for systematically examining potential applications in terms of their suitability for a blockchain solution.

There has been a lot of hype about blockchains following recent press and stock exchange reports about the digital currency bitcoin. Blockchain acts as a decentralized, public, tamper-proof ledger that records all transactions by bitcoin users, preventing repeated spending of the virtual money. “But bitcoin is not the same as blockchain“, says Alexander Nkoy from Consulting4Drive. “Blockchain is much more. It is a security technology, business model and mindset all at the same time.” Above all, the blockchain is a disruptive technology and the focus of intensive discussions in a wide range of different industries, from the financial sector via logistics all the way to automotive manufacturers.

Technology replaces intermediaries

The actual appeal comes from the transparency and security that the blockchain offers for management, transaction and storage systems. “It makes intermediaries superfluous, such as the banks in automotive applications”, explains Timm Kellermann, Managing Director at Consulting4Drive. “They are replaced by technology, with noticeable cuts in the transaction costs.” The direct, secure transmission of digital information comprises the backbone for a completely new internet technology. But this superficial view gives no indication as to whether the blockchain offers genuine added value for the automotive industry.

There are already numerous ideas in the industry for implementing the blockchain. The digital vehicle ownership certificate could use blockchain technology for secure, tamper-proof storage of data including registration document, repairs, mileage or owner, thus ruling out the risk of manipulations in used car sales, for example. Thought is also being given to digital car keys based on blockchain technology. As with digital coins, the blockchain would transfer vehicle access authorization to a smartphone. Other possible applications include autonomous vehicle payment transactions (at charging stations or car parks), smart contracts between trading partners and market places for data.

Systematic concept as the basis for decisions

There are plenty of ideas. But often it is necessary to ask whether the blockchain offers any real advantages in individual cases. And if so, what risks are involved? Therefore C4D has developed a new assessment tool. “Ad-hoc discussions can’t cover all aspects of this complex topic”, says Kellermann. “What’s needed is a systematic assessment concept to help our customers with their project teams and senior executives when decisions have to be reached.” Different aspects have to be taken into account when assessing the ideas. Do the benefits really justify the costs in terms of improved efficiency? Which risks are associated with using the blockchain? Is it mature and stable enough for mass use on a global scale?

The answers depend on the specific aspects of each case. A digital vehicle ownership certificate for example, would not require a high transaction speed. It does not matter if this takes a few minutes. Waiting a few minutes to access the car with a digital vehicle key on the other hand, would be totally unacceptable. Furthermore, any problems with the blockchain technology could prevent millions of car owners from using their vehicles, while this kind of problem would have far fewer consequences for the digital vehicle ownership certificate.

“In the course of our development work, we ask the potential blockchain users many key questions about how they plan to use the technology”, says Nkoy. “The answers give us important input for the analysis process. In the end, the tool helps us to decide whether the blockchain will be an option and at which point in the process”. The tool emerged from a Master’s thesis initiated and supervised by Dr. Sebastian Kahlbau, manager at Consulting4Drive. As part of the thesis, Nkoy conducted many interviews with experts in the blockchain and automotive industry.

Implementing blockchain technology at IAV

“In technical terms, the blockchain is one of several possible solutions”, summarizes Kellermann. “The main thing is to cut away all the hype and to take a rational look at the technology in the overall context.” If the Consulting4Drive analysis should reveal promising opportunities for using the technology, the experts at IAV are ready and waiting to put it into effect in viable solutions for the automotive industry. IAV’s engineers have been dealing with blockchain technology for several years, well aware of the huge potential it offers especially in terms of the increasingly significant role played by digital services in the automotive sector, as long as the solutions are prepared and implemented with all the necessary expertise.