Blockchain Technology and Automotive Industries John Wagster Co-Chair, Blockchain and Cryptocurrency Practice
What s the Big Deal About Blockchain? The Blockchain is a ledger Most ledgers are controlled by one party-centralized Blockchain is a ledger that multiple parties control or run-dececentralized Distributed Ledger technology allows secure, verifiable communication between trustless parties without a middleman Secure-The blockchain has never been hacked Verifiable-creates a permanent, immutable record of transactions Trustless-even those with adverse interests can share trust Public-available to all users Anonymous yet traceable frostbrowntodd.com 2
What s the Big Deal About Blockchain? Blockchain is not the same thing as Bitcoin! Don t be intimidated by the technology! Prepare for disintermediation! frostbrowntodd.com 3
What s the Big Deal About Blockchain? Blockchain technology today is like the internet in 1993 Consider the evolution in computing: Mainframe - LAN/WAN PC hosted servers cloud based server arrays distributed computing Distributed computing has no single controlling authority-it is controlled by the consensus of all users. Users can connect directly to the blockchain without third party assistance There are many different blockchains, and none have been hacked. frostbrowntodd.com 4
Anatomy of a Blockchain Block, Bitcoin Example All bitcoin transactions (purchases, transfers, etc) are submitted to the bitcoin blockchain Individuals (Miners) compete to verify transactions in groups known as blocks Once complete, a block is sealed and stamped with a hash containing a portion of the last block and a portion of the next block Each hash is time stamped, verifiable by all other Miners, and is immutable Transactions are anonymous but are traceable frostbrowntodd.com 5
How does the Blockchain remain secure? Proof of Work Example frostbrowntodd.com 6
What is a Smart Contract? Most Distributed Apps operate through mechanisms known as smart contracts Smart contracts are self-executing programs that take effect as the participating parties agree in advance. Vending Machine Example: Put $1 in, a soda comes out If you don t put $1 in, no soda comes out If you don t put $1 in, and a soda comes out, that s bad A smart contract controls digital assets using the predetermined conditions of an agreement. frostbrowntodd.com 7
Smart Contract Example A farmer wants insurance to protect against a drought. If the temperature is more than 100 degrees for 50 days in a year, he receives $50,000. Today, the farmer would need to collect information about the weather and submit it to the insurance company to make a claim. Must submit properly and on time Must wait to learn if he will be reimbursed With a smart contract, the conditions of the policy (# of days and temperature) can be automatically derived from acknowledged public sources and the payment would be automatically made to the farmer if the correct criteria are met. frostbrowntodd.com 8
How Can Smart Contracts Benefit Supply Chain? Letter of Credit v. Smart Contract LOC has 8-15 touch points and costs appx $8-15,000 frostbrowntodd.com 9
Container Shipment Example: US Arrival Trucks to Market $$$ Delivery of Funds Transfer Point Loading Dock Shipping Container (Climate Sensors) frostbrowntodd.com 10
RFID and IoT Devices RFID chip transmits information stored with radio waves to a reader (RFID scanner). Smart Contracts for payments/settlements Scanners send a signal to the chip, and reads the chip s response. IoT Devices: Think FitBit, Nest, Apple TV Inter-operable, connected devices sharing metadata frostbrowntodd.com 11
Example: Hyperledger Project Founded by the Linux Foundation, 1/22/2016 An open source operating system for marketplaces Communities of software developers building blockchain frameworks and platforms 180+ Organizations participating Several solutions for supply chain, from smart contracts, app development, payment protocols, and interoperability Track parts and service provenance, ensure authenticity of goods, block counterfeits, reduce conflicts frostbrowntodd.com 12
Mobility Open Blockchain Initiative -MOBI Founded by Renault, Ford, GM and BMW Now represents 80% of all automotive manufacturing Multi party cooperation to develop solutions for the industry Develop use cases and standards for automotive. Can prevent every automaker from developing its own unique solution frostbrowntodd.com 13
Blockchain and Connected Car Technology Simple definition of a connected automobile: facilitates connections between vehicle systems, driver and passenger devices, and external devices, networks, or systems employs Internet, Bluetooth, and evolving V2V communications technologies initiates communications with and responds to communications from IoT devices, both internal and external to the vehicle frostbrowntodd.com 14
The connected car will soon be the blockchain connected car A database is needed to track the billions of IOT connected data necessary for autonomous vehicle operation vehicle safety and data security supply chain transparency-counterfeit parts Manufacturing-WIP information for each vehicle automotive financing-automatically evaluate credit ratings smart contracts-automatically release purchase orders or award bids on predefined criteria frostbrowntodd.com 15
The connected car will soon be the blockchain connected car, cont Infotainment- automated payments and subscriptions IoT- an interconnected network of sensors and stored information Insurance- based on actual rather than historic behavior fleet management frostbrowntodd.com 16
Example: IBM and Walmart Collaborating using Hyperledger for a food safety verification system for a food safety event Currently, each sector (production, storage, transportation, inspection) has its own solution and does its own emergency analysis IBM s blockchain solution will allow each sector to measure in the same way (using RFID and IoT) and record in a transparent way Allows traceability and transparency When scaled, projected to save the industry $Billions frostbrowntodd.com 17
Example: Spinach E-coli Outbreak 10 years ago, hundreds of people got sick and 3 died from an unidentified e-coli outbreak. Due diligence took weeks, consumers stopped eating and buying spinach, restaurants took spinach off the menu Millions in revenue lost and unrecoverable Blockchain would allow instant verification of farm origins, harvest data, expiration dates, storage temperatures, shipping info and other data Save $, save lives, instill consumer confidence. frostbrowntodd.com 18
Example: BlockVerify Thwart counterfeiting: pharma, luxury goods Each product has its own identity on the Blockchain Tracks transfer of ownership and custody via QR codes Blockchain open and transparent for all to see frostbrowntodd.com 19
Example: Marine Transport International (MTI) Container Streams Systems RFID-equipped shipping containers supplier, shipper, load point, customs and terminal on a shared blockchain ledger Highly resistant to cyber attack frostbrowntodd.com 20
Example: Kouvola Innovation Addresses problem of hundreds of logistics packages that don t talk to each other RFID-equipped shipping pallets RFID Publishes shipping need (location, time, etc.) Carrier miners then compete to bid for shipping business Blockchain awards to the best bidder Shipment tracked and displayed via blockchain frostbrowntodd.com 21
Questions? Frost Brown Todd LLC John Wagster Co-Chair, Blockchain and Cryptocurrency Practice 615.251.5586 jwagster@fbtlaw.com frostbrowntodd.com 22