Reading time: approx. 20 min.A Blockchain OdysseyHow a decentralized, world-spanning database called blockchain could revolutionize the mobility solutions of tomorrow.
CHAPTER 1 – Implementation: The Curious Establishment
CHAPTER 2 – Inspiration: The Bold Masterminds
CHAPTER 3 – Disruption: The Ambitious Startups
CHAPTER 4 – Flashback: Ten Years – from Bitcoin to Blockchains
CHAPTER 2 – Inspiration: The Bold Masterminds
CHAPTER 3 – Disruption: The Ambitious Startups
CHAPTER 4 – Flashback: Ten Years – from Bitcoin to Blockchains
In the not-so-distant-future, some scenarios could happen very differently: An electric vehicle is identified at a toll station, and the amount is automatically deducted from the balance on board depending on the day and time, the weight of the car, and the number of occupants. A little later, the car rolls over a plug-free inductive charging station and logs in without any intervention from the driver, ensuring that the parking and charging fees are applied correctly.The city’s traffic control system can send reliable warnings to autonomous vehicles in real-time about an accident at the next crossing, while the car uploads its encrypted sensor data to the cloud, allowing insurance companies to adjust their premiums according to the mileage, and allowing the car’s software to learn from information uploaded by other vehicles. During a scheduled workshop visit, maintenance work, repairs and the identification numbers of spare parts are recorded in a continuous logbook, making it possible to verify exactly who worked on the vehicle when and where, even years later. The electronic logbook is also updated immediately whenever the vehicle changes owners.
All these transactions are already possible provided that customers have downloaded the relevant apps and providers have been keeping their databases up to date.However, for all these processes to run automatically – almost as if by magic – experts are turning to a new enabling technology known as blockchain, or in other words, the principle of a distributed ledger. This technology allows machines to communicate with each other seamlessly, clarify access rights, and to make trade and commerce easier and more cost-efficient than ever before.
Let’s start with a short crash course on blockchain. The technology is already famous (and also infamous) thanks to the excitement surrounding cryptocurrencies, especially Bitcoin – the first practical implementation of the blockchain concept.Yet Bitcoin is not synonymous with blockchain, and strictly speaking there is not just one single blockchain since the idea can be implemented in several different formats.
As the name suggests, cryptocurrencies are electronic currencies that allow encrypted transactions to take place at the click of a button between economic agents, even if they have never met. Since the transaction only takes place online, there is no traditional middle man like a bank that can conclusively determine that an amount has actually been transferred from A to B and not simply duplicated. Using the traditional system, both parties must trust a bank for reliable transfers.By contrast, blockchain technology removes the middle man and replaces it with a direct or peer-to-peer exchange of currency (such as 3.50 euro for parking) or any other type of data (such as the mileage of a car).But how does one solve the problem of establishing ad hoc trust between unknown parties? This is possible thanks to a distributed ledger, in which a specific number of transactions are combined and encrypted in digital information “blocks.”
As each new block is attached to the existing blocks, a continuous chain is created: a blockchain. This electronic ledger is shared redundantly across a distributed network, meaning that it exists as several copies and not on a single central computer. It’s this approach that makes the transactions transparent and verifiable for all parties involved. A transaction is only added as a block in the chain if the majority of all participants achieve consensus that a transaction is legitimate.Cooking the electronic books is difficult, if not impossible, with a distributed ledger.In theory, a blockchain is a transparent, redundant database stored on many different servers.
When everything works as planned, companies or banks can transfer millions, or workers in emerging countries can transfer small amounts of money securely and cheaply to the other side of the city, or halfway around the world. Beyond the financial sector, the scope of applications is unlimited, whether blockchain is used for global manufacturing processes, the sharing economy, inspection organizations or autonomous driving.As an infinite slide rule, experts confess that blockchain is by no means always the best solution.For some applications, not every blockchain makes sense. For example, if the blockchain network is accessible to everyone simultaneously in conjunction with highly complex security requirements, the proof-of-work (POW) consensus mechanism used by the Bitcoin blockchain is currently the most secure option. However, the POW mechanism is associated with significant computing and energy requirements. Nevertheless, blockchains offer a convenient and secure alternative to many existing solutions that are still too often limited to paper documentation or that cannot be completely digitized due to revision security and a lack of trust between transaction partners.
This is the vision that is currently being investigated by large corporations as well as hundreds of startups – from Silicon Valley to Stuttgart. The wide range of applications has the power to change entire markets and create new ecosystems.By 2025 the World Economic Forum (WEF) estimates that a tenth of all global economic services will be completed using blockchains rather than traditional bank accounts.
Chapter 1: Implementation: The Curious Establishment
CHAPTER 1Implementation: The Curious EstablishmentThere is practically nobody with more knowledge about this topic than Chris Ballinger. After a decade as the top manager at a global automotive group, he is now co-founder and CEO of the “Mobility Open Blockchain Initiative,” or MOBI. In May 2018, dozens of leading manufacturers from the automotive industry joined major suppliers, technology companies and startups, transport authorities and transport ministries to form this global alliance. The intention of MOBI is to encourage ideas and create standards to ensure that the creative chaos can be tamed into practical applications as quickly as possible.
Ballinger is happy to admit that blockchain technology is still in its infancy in 2018 and has a long way to go.“With a few exceptions – such as cross-border transfers – it can only do a few things better than what we already achieve with existing systems. Today’s blockchains are very slow and inefficient as far as data throughput is concerned.”Since each transaction is compared across the computers of all other participants and must also be entered in their copy of the ledger, blockchain platforms currently create three to ten booking transactions per second. That’s pretty slow compared to the large databases used by the Visa and Mastercard credit card systems, which process up to 24,000 transactions per second (and are theoretically capable of up to 65,000 transactions per second). Blockchain databases for real-time operations such as tolls, e-charging stations or even the lightning-fast exchange of information between autonomous vehicles are still a long way off. The security of apps, encrypted blocks and the process of reading data in or out for a user is also a sore point.
But Ballinger believes it’s all just a matter of time. “The Internet wasn’t very useful at the end of the 80s. It took time for it to develop from HTTP into the web and then to offer the great services that we rely on today.This time the development will happen much faster since devices are already online and communicating.Plus we have access to tremendous computational power. It is a software problem that can be solved because so many clever minds are working on it.” However, the MOBI boss is quick to point out that it makes little sense for every manufacturer to develop a range of different prototypes behind closed doors to explore their practical benefits. To do so would just be reinventing the wheel over and over again. By working together, manufacturers can focus their efforts, exchange experiences and carry out testing in realistic scenarios. With this approach, an ecosystem can emerge much faster, faster than even just a few years ago, which is what happened with the huge app markets for smartphones – the iTunes Store first and foremost. If the critical mass is there, the development work will pay off.
“At present,” Ballinger grumbles, “we are suffering from an incredible amount of confusion when networked vehicles, payment systems, transport authorities and many other providers try to communicate reliably and securely.” This particular problem comes from fundamental issues of trust in an increasingly interconnected world: Which system understands a different system?How can my vehicle trust another vehicle that is warning me about a hazard on the road ahead?How can I be sure that a software update is not infected with a virus?
The problem is only becoming more urgent, since the number of networked “Internet of Things” devices is rapidly increasing. There are approximately 20 billion IoT devices in use today, which will increase to as many as one trillion towards the end of the coming decade.“The blockchain can solve this problem if we bring all parties to the table and agree on standards,” says Ballinger.
Economist Ashley Lannquist, another co-founder of MOBI, who oversees the topic for the World Economic Forum, agrees:“Since all car manufacturers are doing research into blockchain, it makes a lot of sense to work together. With so many trial balloons being sent up – everywhere from Berlin to San Francisco – useful things will inevitably come of them.”To speed up this process, MOBI has launched an idea competition called the “Grand Challenge.” This name was intentionally borrowed from the first race to create an autonomous vehicle held by DARPA, the legendary research department run by the US Department of Defense, in 2004 and 2005. For the original challenge, teams of researchers from all over the world attempted to independently drive vehicles studded with sensors and novel software through the Mojave Desert. The result was mixed, but the robotic races did achieve one thing: They were the catalyst for car manufacturers and ambitious programmers to make autonomous vehicles a reality within the decade.
The MOBI Grand Challenge is set to do the same for mobility on the blockchain. The challenge is to create a system for guiding and steering vehicles more effectively within an urban area by 2021. The winner will receive a handsome cryptocurrency cash prize totaling one million dollars, as well as the admiration and attention of the entire industry.Ballinger’s group is by no means the only initiative bringing together as many companies and clever minds as possible to stimulate the development cycle and make this technology ready for the market. Dozens of forwarding agents, logistics companies, software companies and consulting firms have joined forces in the “Blockchain in Transport Alliance” or BiTA. Since August 2017, the initially small group of around 30 companies has grown to more than 3,000 members and currently has a waiting list of several thousand companies.
BiTA’s intention is to identify, develop and road-test new solutions for processing, tracking and paying for freight services –including “smart contracts”.These involve embedding conditions that trigger a specific action as a piece of software in the respective transaction blocks – for instance, a timely collection or undamaged delivery automatically triggers an invoice statement.
Chapter 2: Inspiration: The Bold Masterminds
CHAPTER 2Inspiration: The Bold MastermindsAnyone wanting to experience first-hand just how appealing a new, but still largely unproven platform like a blockchain can be, should visit the Berkeley campus of the University of California.
While an increasing number of prestigious US universities – from Harvard, Columbia and the Massachusetts Institute of Technology (MIT) on the east coast to Stanford in the heart of the Silicon Valley – offer undergraduate and graduate courses on blockchain,Berkeley has been developing a student-driven ecosystem since 2014 that has attracted attention from academics and businesses all over the world.Blockchain@Berkeley is also a good barometer for tracking the development of the topic from hype to hope. Founded in 2014 as Bitcoin Association, the student organization changed its name in the fall of 2016 to shed its association with the overvalued cryptocurrency. Today, the group consists of almost 100 students, from college beginners and MBA students to junior academics who want to work on the topic even after earning their doctorates.
“The number of interested parties has fluctuated as much as the Bitcoin exchange rate during the past two years, but over time, a group of between 80 and 100 active and dedicated members has developed; all of these people are really interested in the technology rather than just making quick money through Bitcoin,” says Anthony DiPrinzio, a 21-year-old student of economics and current leader of the organization.Speaking on behalf of the group, he describes the interest in blockchain as a mixture of altruism and personal ambition: “It’s a young industry where you can make a name for yourself and lay the foundations for your career. There are only a few experts with many years of experience, so people take you seriously if you have the knowledge, even if you’re a college student. This opens doors for us in many industries.”
To this end, the industrious group is focusing on several projects: further training, consulting for established companies and establishing startups.Responsibilities that belong to professors elsewhere are being handed over to students at Berkeley.They have developed a curriculum to teach a free undergraduate course about blockchain, which has been completed by around 100 students each semester since fall 2016. A second course for programmers goes into more technical detail. All materials are available for free online and have been downloaded by inquiring minds in more than 100 countries, often translated into other languages and sometimes even resold.
For special topics, students host workshops with experts every two to three weeks. These workshops attract around 50 participants to Berkeley itself and are livestreamed for hundreds of viewers online. Outstanding questions can be discussed on an online forum with more than 10,000 subscribers. Based on the successful work of the group, the university has even developed an online “Blockchain Fundamentals” course for its edX learning platform, which reaches more than 40,000 participants all around the globe.
“This shows that we have built up a brand. People all over the world, including academics here at Berkeley, recognize us as experts. No other university has that,”says Gloria Zhao, a computer science student who takes care of the group’s training program.
Respect for its member's expertise has a direct impact on the practical work completed by the group.Blockchain companies and large businesses including Airbus, ExxonMobil and Qualcomm are now entering into partnerships and consulting contracts with the students. The group received more than 15 requests from Fortune 500 companies looking for fresh expert knowledge in the fall semester of 2018 alone, reports Sanil Rajput (20), a prospective business economist who is responsible for external relations.
“Many companies realize that they need to catch up in order to assess the impact of blockchain on their own industry.Initially we were worried about whether we would be able to hold our own amongst other professionals, but to our surprise we realized that we were the real experts in these meetings.” Rajput is working hard to ensure that Blockchain@Berkeley is established as the first port of call when a company has questions about the topic. “We want them to know that they should come to us first because we have also built expertise regarding the future of mobility.”
Chapter 3: Disruption: The Ambitious Startups
CHAPTER 3Disruption: The Ambitious StartupsThis brings us to the topic of blockchain startups. As is only natural for such a young market in which new talent and serial entrepreneurs are experimenting with untried technologies, relative chaos reigns.
In addition to conventional venture capital, many startups collect their funding with the help of “initial coin offerings” (or ICOS). With this method, individual investors can inject capital in the form of various cryptocurrencies – along with all the risks associated with notional niche currencies on a blockchain.According to surveys carried out by market researchers from CB Insights in New York, approximately 3.2 billion dollars were transmitted via these channels to blockchain startups in the fourth quarter of 2017 alone.There is no shortage of exciting and sometimes absurd ideas that are already being tested.
For instance, supermarket giant Walmart has transferred around 1.1 million items in its range – from chicken legs to lettuce – to blockchain, in order to keep track of them throughout the supply chain.Multinational Danish shipping company Maersk is working with IBM to improve its container tracking via a blockchain.And technology enterprise Everledger has maintained a diamond logbook since 2014, which is used to document 2.2 million gemstones and is growing by around 100,000 additional stones every month. A Californian tech entrepreneur has gone one step even further and purchased a 271-square-kilometer plot in the Nevada desert to build a utopian blockchain city.
Clearly the 22-year-old founder and CEO of the Californian startup AutoComm hopes that his company will be among the survivors. AutoComm also emerged from Berkeley’s blockchain group and is an excellent example of how a decentralized logbook can make using varied data leaner and more efficient.“The mobility industry is particularly interesting because it hasn’t yet been significantly permeated by blockchain ideas, compared to other sectors such as financial service providers.There are relatively few large manufacturers and their partners whose systems need to communicate reliably and securely,” explains Haskins regarding the potential opportunities and challenges. AutoComm is therefore developing a secure computing environment within the vehicle where all possible vehicle data can be gathered together and evaluated, but where only the relevant insights make it traceably and reliably to the cloud as part of a blockchain. “Modern cars collect tons of data – sensors track everything from vehicle components to driver behavior, producing megabytes or even gigabytes of data every hour,” explains the mathematician.
He presents the business idea as a cost issue. For a manufacturer, it makes little sense to upload this amount of data entirely via a wireless network so that it can be evaluated by a data center with the ultimate aim being to train an algorithm for autonomous driving or to calculate risk factors for insurance. “The solution that we want to build would generate the results on board and send only those results to the cloud, allowing a manufacturer to save 75 percent of its costs for data transmission.”
AutoComm co-founder Sid Masih also hopes that blockchain technology – when it is ready – will solve two problems at once:increased security and data protection.
The vision of identifying a vehicle clearly and securely using a digital passport that literally augments its tasks has brought other startups onto the scene. Even in Germany, which experts regard as one of the blockchain strongholds. One such example is Berlin-based startup Xain, which outclassed 120 other startups from all over the world to win the first Porsche Innovation Contest in the summer of 2017.The concept presented by Xain is designed to make various operations on and in the vehicle faster and more secure. If a car is part of a blockchain, it can be locked and unlocked with an app faster than ever before, since the locking process is carried out directly without being diverted through a server in the cloud. Vehicle owners can even set up temporary access authorization for third parties without the need to install additional hardware, making it possible for a courier service to open the trunk and pick up or deposit a delivery with everything neatly documented. Electrical charging and parking would also be simplified by using a blockchain. Given its potential, both companies have tested in a cooperation, which applications are ready for series production.
For Anja Hendel, who leads the Porsche Digital Lab in Berlin, Xain is just one example of many that shows how blockchain technology can have a sustainable effect on mobility. Within the team of 20 based in Friedrichshain, there are five developers involved with multiple blockchain projects. A young company in which Porsche holds shares is Gapless. As the name suggests, the project is designed to facilitate gapless documentation of vehicles. Information that owners or workshops would otherwise enter (or not enter) manually, Gapless records automatically, and it does so in a way that is transparent and forgery-proof: every spare part, every repair, every change of owner.Since March 2018, the first target group has been testing Gapless on priceless collectors’ items, the owners of which are interested in having a complete history for the vehicle. So far, around 2,000 German-speaking users have entered more than 2,500 vehicles in the online ledger. And this is only the beginning: The platform is theoretically suitable for every vehicle, no matter how old, new or valuable it is, since it allows for better management of workshop appointments and recalls.
Manufacturers like Porsche also have high hopes for the effect of blockchains on the supply chain. Being able to trace all components – from the source to the finished vehicle – without gaps would be a significant benefit for production and quality assurance. The leather used to finish vehicle seats is a good example. This is exactly what developers at Porsche Digital Lab are currently testing. “The ability to trace leather back to an individual cow is an interesting approach for increased sustainability,” says Hendel about the concept. “The decentralized model offers many opportunities to test business models and open up markets without having to rely on a middleman. Blockchain still has many surprises in store,” says the Director of the Digital Lab. The current problems with mass deployment and slow processing speeds are solvable.“It’s just a matter of time. And perhaps it will be solved with technologies that emerge from the blockchain, but which aren’t even on our radar yet.”
Chapter 4: Flashback: Ten Years – from Bitcoin to Blockchains
CHAPTER 4Flashback: Ten Years – from Bitcoin to BlockchainsOn October 31, 2008, one or more unknown authors made history under the pseudonym Satoshi Nakamoto. On that day, a nine-page essay was published describing a peer-to-peer network for electronic payments.
The author – whom sleuths have yet to identify – imagined a system distributed across many computers without a central agent like a bank, but which was nevertheless secure and anonymous. The virtual currency was called Bitcoin, and for the past ten years it has fueled the imagination of technologists and speculators, gained the attention of businesses, and frightened and worried regulators and tax offices (who are puzzling over questions like whether value increases should be treated like a normal exchange rate or taxed like a securities gain).
While the price of the mathematically limited number of bitcoins skyrocketed between 2013 and 2017, it has since lost almost three quarters of its value and technologists and business people have turned their focus to something else: the database called blockchain behind the currency.Theoretically, there can be an unlimited number of blockchains, each of which can have (but, depending on the field of application, does not require) its own currency.
The most important platforms beyond Bitcoin today include Ripple, which is used by large banks and corporations to process international payments, and Ethereum, which handles transactions involving not only sums of money, but also small software programs called smart contracts. A third player is Hyperledger, the foundation on which many companies have based their first blockchain experiments.One thing has yet to emerge even after a decade of wild experimentation:A new, widely accepted currency that enables customers, as well as companies, to make payments that are faster, cheaper and more secure than the payments they make today with the dollar, euro or yuan.
More on the subject:
MOBI – Mobility Open Blockchain Initiative
MOBI is a non-profit organization that works with forward-thinking companies, governments and NGOs to make mobility services more efficient, affordable, greener and safer.
Xain
The startup is planning a kind of blockchain operating system for cars. For example, car owners can use the technology to grant other people temporary access to their vehicle.
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Steffan Heuer
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A Blockchain Odyssey
All these transactions are already possible provided that customers have downloaded the relevant apps and providers have been keeping their databases up to date.
Yet Bitcoin is not synonymous with blockchain, and strictly speaking there is not just one single blockchain since the idea can be implemented in several different formats.
By contrast, blockchain technology removes the middle man and replaces it with a direct or peer-to-peer exchange of currency (such as 3.50 euro for parking) or any other type of data (such as the mileage of a car).
As an infinite slide rule, experts confess that blockchain is by no means always the best solution.
Implementation: The Curious Establishment
“With a few exceptions – such as cross-border transfers – it can only do a few things better than what we already achieve with existing systems. Today’s blockchains are very slow and inefficient as far as data throughput is concerned.”
How can my vehicle trust another vehicle that is warning me about a hazard on the road ahead?
The problem is only becoming more urgent, since the number of networked “Internet of Things” devices is rapidly increasing. There are approximately 20 billion IoT devices in use today, which will increase to as many as one trillion towards the end of the coming decade.
“Since all car manufacturers are doing research into blockchain, it makes a lot of sense to work together. With so many trial balloons being sent up – everywhere from Berlin to San Francisco – useful things will inevitably come of them.”
Inspiration: The Bold Masterminds
Berkeley has been developing a student-driven ecosystem since 2014 that has attracted attention from academics and businesses all over the world.
Responsibilities that belong to professors elsewhere are being handed over to students at Berkeley.
For special topics, students host workshops with experts every two to three weeks. These workshops attract around 50 participants to Berkeley itself and are livestreamed for hundreds of viewers online.
Respect for its member's expertise has a direct impact on the practical work completed by the group.
“Many companies realize that they need to catch up in order to assess the impact of blockchain on their own industry.
Disruption: The Ambitious Startups
According to surveys carried out by market researchers from CB Insights in New York, approximately 3.2 billion dollars were transmitted via these channels to blockchain startups in the fourth quarter of 2017 alone.
“The mobility industry is particularly interesting because it hasn’t yet been significantly permeated by blockchain ideas, compared to other sectors such as financial service providers.
increased security and data protection.
“It’s just a matter of time. And perhaps it will be solved with technologies that emerge from the blockchain, but which aren’t even on our radar yet.”
Flashback: Ten Years – from Bitcoin to Blockchains
the database called blockchain behind the currency.
One thing has yet to emerge even after a decade of wild experimentation:
More on the subject:
