By now, most of you have come across the term ‘cryptocurrency.’ There are many cryptocurrencies out there, most notably Bitcoin which everyone is now aware of thanks to its boom over the past few years. But have you stopped to wonder what exactly Bitcoins or other cryptocurrencies actually are and how they work?
What is Cryptocurrency?
Cryptocurrency was created by Satoshi Nakamoto, using something called blockchain technology in 2009. It is basically a digitized monetary unit, but with some game-changing differences compared to regular money. For starters, the fact that it employs the use of blockchain technology means the system is decentralized with a peer to peer review system. The data cannot be corrupted by outside influence as it is spread over multiple systems. There is, therefore, no need for a middleman such as a bank. Blockchains are inherently stable and secure as well as providing further security. Data may be added to the record, but it may never be changed. Once an event, like a monetary transaction, is recorded in the system, it cannot be removed or adulterated.
For these reasons, the use and applications of cryptocurrency have risen substantially since its creation. One industry which can benefit greatly from its use is the automotive sector. Here are some of the cryptocurrency’s advantages in this area:
Buying of parts:
A car manufacturer has to buy several parts during the process. There is a potential of receiving a fake or subpar product. It can take a lot of time and effort to ensure the validity of a part. This problem can be tackled if cryptocurrency is used for the payment to vendors.
This way, safe transactions that are fully traceable can be made to suppliers. All you have to do is open the data and follow the trail of money down to the correct merchant. If your money is reaching the desired person, you know the source of your products is genuine.
Smart contracts could be set up which computerize the entire process. For example, you could design it such that the payment is made to the concerned person automatically as soon as the part is received and logged into the system. This would decrease the demand for manpower and save the manufacturer a lot of money, increasing profit margins. This will in turn also help decrease the price of cars for the end consumer.
Easier transaction in sales:
Cryptocurrency can be used for safe and secure payments to the dealer when buying a new car. As mentioned above, once the transaction is made, the data cannot be corrupted or changed. The buyer can use the cars blockchain ledger to check for the manufacturing history of the car such as date and site of production along with the source of all the parts. Thus, a buyer can have the peace of mind of knowing he is getting a genuine product.
From the seller’s perspective, the amount is received immediately and efficiently without going through a bank. The transaction is automatically logged on to the ledger which makes accounting a relatively easy task for the company. In case of an audit, the data is transparently and easily accessible too, thus streamlining the process.
Another area where cryptocurrency shines is in transactions of second-hand cars. At present, where buying a used car, there is some amount of doubt surrounding the cars condition and previous users. Paper-based documents can easily be falsified, and one can be duped to believe he is buying a single owner driven car when it has actually gone through 3 owners (for example).
Cryptocurrency data doubles as a receipt that show the buyer exactly how many owners the car has had. This receipt can be added to but not changed, so there is complete transparency in the process. The buyer also knows if the seller is actually the true owner of the car, thus putting a dent on the auto theft trade.
If maintenance work is also paid via cryptocurrency, one effectively has a complete record of the condition of the car at hand. This can help purchasers get cars at a fair price, and it may also help insurance companies set premiums on the vehicle accordingly.
The cars that are manufactured today are more than tools for transportation. They are expected to be a complete infotainment system on wheels. An increasing number of vehicles are now connected via the internet of things (IoT). These cars have state of the art computers which just like others, come with options to purchase apps, music, movies, etc.
As more and more cars become part of the IoT, cryptocurrency will become useful if not completely necessary. It can be used for the microtransactions mentioned above along with payments for fuel, maintenance and so on. As always, this mode of payment is much more efficient and secure than the conventional methods.
As you can see, cryptocurrency has a lot to offer to the automotive market, just as it does to other aspects of life. Most of the uses mentioned above of cryptocurrency are already in play. For example, when we buy cars today, we have services such as the autoblock which lets you purchase a car using their own cryptocurrency called ‘AutoCoin.’ This site also provides other facilities such as a free advertising platform for their clients and a car valuation system. So to all the readers out there, welcome to the future!
Evie harrison is a blogger by choice. She loves to discover the world around her. She likes to share her discoveries, experiences and express herself through her blogs. Find her on Twitter:@iamevieharrison