Commentary: Will auto companies bring blockchain into real-world supply chains first?

At The New York Supply Chain Meetup we have
held several events focused on supply chain and blockchain. During each of
those events we have tried to figure out what it will take for blockchain, or
some other distributed ledger technology, to become widely applied in a real
world industrial supply chain. Naturally, an unspoken question during these
discussions is “Which industry will be the first to find an application for
which a blockchain-based solution is the best of all the alternatives

On Monday, October 14, the Nikkei Asian Review reported that five
automakers will begin field tests in the United States next month to test
blockchain-based identification systems that enable drivers to pay various
types of fees without using cash or credit cards.

The size
and scope of the global automotive manufacturing industry

According to IBISWorld, as of April 2019, the global car
and automobile manufacturing industry was trending towards:

  •  $3 trillion in annual sales for 2019.
  • 4.5% in compound annual growth for
    the five years between 2014 and 2019.
  • Employed 2,580,803 people.
  • Was made up of 1,760 businesses.

The exhibit below shows market share based on 2018 revenue.

To get a sense of how complex automotive
supply chains are – Toyota vehicles are sold in 170 countries and
regions. Those sales to customers are enabled by a network of 51 manufacturing
partners in 28 countries and regions.

The exhibit below shows the number of cars sold.

According to World Vehicle Population Rose 4.6% in 2016, by
Sarah Petit at Wards Intelligence, “The global vehicle population stood at 1.32
billion cars and trucks at the end of 2016, nearly double the volume 20 years
prior when vehicles-in-operation totaled 670 million in 1996. Coincidently, the
fleet grew at about the same pace in the 20 years through 1996 by roughly
doubling 1976’s 342 million.”

The exhibit below shows the number of vehicles in operation by region, between 2010 and 2016.

What is the potential impact of blockchain in automotive supply chains?

In Blockchain’s profound impact on the automotive industry,
EY states that blockchains and other distributed ledger technologies will

  • Peer-to-peer interactions between
    owners and users of vehicles.
  • A reliable means of selling and
    tracking fractional ownership in vehicles.
  • The maintenance of immutable
    records of ownership and usage.
  • Spare parts provenance.
  • Simplified and streamlined vehicle
    title transfer.
  • Other benefits in the procurement,
    manufacturing, distribution and service functions.

The article is based on EY’s Tesseract
blockchain technology platform, which is built for original equipment
manufacturers in the automotive industry.

are the reported field trials going to be testing?

According to the Nikkei Asian Review, the
trials will test a new vehicle identification system. This system is linked to
ownership information, as well as other information such as compliance with
service requirements. This system will also be used to identify vehicles on
highways, enabling transactions such as toll payments without the need for
external devices such as EZ-Pass tags in parts of the United States.

These trials are the outcome of work that is
being done by the Mobility Open Blockchain Initiative (MOBI), “a nonprofit
global foundation formed to accelerate the adoption of and to promote standards
in blockchain, distributed ledgers, and related technologies for the benefit of
the smart cities and mobility industries, consumers and communities.”

In a press release published on July 7, 2019,
MOBI said of its vehicle identification standard (VID): “In order to establish
existence, this first standard focuses on the “birth” of the vehicle as a
minimum representation of that vehicle’s creation. Subsequent VID phases will
add additional product definition, ownership history and a log of key events in
the vehicle’s lifecycle. The result will be a trusted and immutable master
record of the vehicle’s history and data usage.”

beneath the surface: What is a cyber-physical system?

The VID forms the basis for the creation of
digital twins of vehicles in which the technology is deployed. A digital twin
is a digital or virtual replica of any entity, that enables information about
the replicated entity to bridge the physical world and the virtual world – forming
a cyber-physical system (CPS), or a cyber-physical network.

According to the Ptolemy Project at the
University of California Berkeley
; “Cyber-Physical Systems (CPS) are
integrations of computation, networking and physical processes. Embedded
computers and networks monitor and control the physical processes, with
feedback loops where physical processes affect computations and vice versa.”

A digital twin must be connected to its
corresponding physical counterpart. This connection between physical
counterparts and their corresponding digital twins is made possible through the
industrial internet of things, pervasive computing and simulation, enabling
digital twins to be updated frequently to reflect the real-time condition of
their physical counterparts in space and time based on data collected from the
physical system. The feedback loops allow inferences about the physical
entity’s current and future operational states to be reached without the need
to interact directly or interfere directly with the physical processes unless that
is necessary in order to prevent a breakdown or some other interruption of

We are already surrounded by relatively simple
and primitive cyber-physical systems. The promise of the future is that
advances in information and computational technologies will make such systems
much more advanced than in the past. 

from the field

Michael Zargham is a complex systems scientist
and architect who has been a speaker at two events organized by The New York
Supply Chain Meetup on how blockchains and other distributed computing
technologies will transform physical supply chains. Michael holds a Ph.D. in
electrical and systems engineering from the University of Pennsylvania. He is
the CEO and founder of BlockScience, a consulting firm that works with
companies in legacy industries on the conception, design and implementation of
cyber-physical systems. He is also an advisor to a number of technology

I asked Zargham for some insights about the
economic potential of cyber-physical systems. He said,

“CyberPhysical Systems
are large-scale, coordinated systems enabled by advances in IoT, embedded
control and decentralized optimization. As our physical systems become
increasingly equipped with

internet-connected sensors and decision-making
systems, we’re seeing a trend towards intelligent infrastructure, e.g, smart
grids and autonomous vehicles. Higher combinations of automated decisions
systems require some level of trust between the entities sharing that
infrastructure, especially when sensitive information or high value assets are
being controlled. This is where distributed ledger technology brings great
value. The cryptographic guarantees provided by secure multi-party computation
can be used to govern access control rights to sensitive data, to automate
multi-stakeholder business processes, and to enforce adherence to agreed-upon
economic protocols. By bridging automated infrastructure with principles of
market design, our intelligent infrastructure is becoming more integrated with
our economy. Imagine a future where the digital twin of a truck not only
identifies a need for preventative maintenance but can follow all the way
through to confirming and paying for that work.”


According to Future Market Insights, the “global
cyber-physical system market is expected to witness a compound annual growth
rate of 8.7% during the period 2018-2028. The market was worth $55,075.3 million
in 2017 and is likely to reach a valuation of $137,566.0 million by the end of
This growth is driven primarily by the rapidly decreasing cost of sensors, data
storage, cloud computing and other related technologies. 

Recent advances in CPS have not eliminated the
uncertainties and risks that could slow the development and adoption of CPS. In
An Overview and Some Challenges in Cyber-Physical Systems, Kyoung-Dae
Kim and P. R. Kumar group the issues in four broad categories.

  • First: Stability, Performance and Safety – the recent
    fatalities involving Boeing’s 737 MAX provide an incontrovertible example of
    how the choices made by CPS architects have very real, and potentially deadly
  • Second: Sensing, Computing and Networking Systems –
    according to the authors, “due to the scale, structure and behavioral
    complexities of today’s and tomorrow’s CPS, it is an important challenge to
    develop extensible, scalable and adaptable software platforms that can operate
    in distributed, heterogeneous, time-critical and safety-critical environment.”
    Software and modern communications technologies are relatively immature in
    comparison to the engineering of physical systems and processes. It is
    important to ensure that the interaction and behavior of digital and physical
    systems embodied in CPS in practice matches what the people who design, build
    and manage such systems expect based on business R&D and academic theory.
  • Third: Modeling, Design and Development – according to
    the authors, “In tomorrow’s CPS, due to the increasing complexity and
    heterogeneity of systems, it is expected to be even more difficult to design,
    develop and debug computing systems, which will in turn result in significant
    increases in overall development costs.” As CPS becomes part of more complex
    processes and systems, the cost associated with developing, protecting and
    maintaining those systems could increase substantially.
  • Fourth: Others – Security, In-Network Information
    Processing and other related problems are significant concerns in the
    management of systems such as smart grids, autonomous transportation, as well
    as in medical and healthcare systems, among others.

As with many blockchain and supply chain applications,
the overarching challenge that CPS has to overcome is the ability to quantify
how the costs of such systems compare to the short- and long-term benefits that
customers and users will experience.

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