August 10, 2018

Blockchain – How Consumer Choices Can Make a Big Difference

An integral piece of the march towards blockchain technology is today’s raw computing power; up to 20 quadrillion calculations per second [1]. Indeed, the flow of transactions from the Ethereum main network is relentless, with each ferrying important financial information along an interconnected network of smart nodes to various entities and individuals. Whether you’re a miner, bounty hunter, or entrepreneur, the future is about to get significantly more exciting.

Decentralization [4] and Tokenization are important pillars of the blockchain ecosystem. Decentralization is necessary as every aspect of our lives, from tool automation to convenience solutions, involves the meaningful use of data. The economy that we currently inhabit is local and not permanent – nor is it directly within our control. Tokenization [5] enables us to participate and share in a globally connected economy where our individual choices matter. But to make choices, we rely on information; to participate or not, we debate the value and utility. While the later may not be universal, it does lead us to an important question: What is utility and how do we derive value?

In economics, value is designated by the worth that attached to a product or service, such as your car. The utility that the product or service provides is similarly judged. Both are closely related, but they’re often subjective and hard to calculate. Fortunately, we have economic approaches promoted by Daniel Bernoulli and von Neumann-Morgenstern to assist us with these choices and rationalize decision making. While these models are theoretical, and often built on objective assumptions and stochastic distribution, they do provide a foundation to maximize results from our preferences between goods and services in the presence of limited or no information.

Say you’re considering buying or selling a car; the model [2] can be a simple set X containing the two choices and price: X = {Car 1, Car 2, Price} where the prospective payoff is calculated based on the probability of finding a vehicle that matches your criteria, knowing that price could vary depending upon the features, customization, and quality. This example encapsulates the automotive industry’s dilemma. As is often the case, information concerning a vehicle may be of poor quality, not shared, or simply not available, making it possible to end up with a bad car despite your best efforts.

The two utility methods discussed [3] are based on asymmetry and symmetric information models. In the case of a vehicle, the information needed to assess fair market value is deeply fragmented, prone to variance and sampling bias, and again may simply not be available. The asymmetry model uses arbitrary numbers and requires us to re-evaluate the stochastic dominance shift using actual spends and mile intervals. The issue of information asymmetry is a huge challenge for both local and global consumers. The symmetric information model, on the other hand, assumes the quality of all cars is uniformly distributed, but we know this to be not always the case.

Since information on blockchains is more accurate and instantly available across local geographies, we can analyze transactions to identify significant economic shifts of the demand curve. For example, by reviewing the quantity of vehicles bought, sold, or serviced and then tracing the prices along the curve, it is possible to witness the lack of equilibrium within the current pricing and inventory models used to stock automotive parts near the last mile or the route most traversed. This is impossible with current technologies that rely on passive demand data. With blockchain technology, it would not be surprising for manufactures and distributors to discover new demand curves and the next $b opportunity to tap into. However, this is only possible when consumers are actively engaged and participate in the economic activities.

SHIFTMobility is releasing two relevant applications this month: Vehicle Passport [6] and AUTONSCAN [7], an enterprise blockchain platform. Vehicle Passport adequately addresses the issues faced by consumers related to information asymmetry while building transparency and trust with data captured directly at the point of service. The OEM version automates this process by providing consumers with easy access to all sales and service data as blocks get delivered directly to their smart devices..

For vehicle trades and exchanges, the goal is to have all pertinent data and information related to the manufacturers warranty, service history, pending maintenance, and parts replaced (whether OEM or aftermarket) so that the highest utility can be determined for the lowest cost. Our Vehicle Passport solution is flexible and allows price ceilings to be placed by buyers and sellers alike. The app also allows users to quickly swap the blockchain to a new owner, ensuring data continuity and correct vehicle value assessment for each mile driven; these are some of the requirements that were factored into the design of blockchain and DApp. SHIFTMobility now looks forward to supporting millions of vehicles and blockchain transactions on its network.

Learn more at http://shiftmobility.com/automotiveblockchainplatform/

References:

[1] The World’s Most Powerful Supercomputer Is an Absolute Beast

[2] Choice under Uncertainty, Jonathan Levin, October 2006

[3] The Market for “Lemons”: Quality Uncertainty and the Market Mechanism, George A. Akerlof

[4] Decentralization – The New Frontier for The Automotive Industry?

[5] Automotive Blockchain: Costless Verification and Next Generation Consumer Rewards

[6] Vehicle Passport – Industry’s First Blockchain Application for Car

[7] Introducing the Worlds’ First Open Marketplace – AUTONSCAN

SHIFTMobility 2018

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