When it comes to digital currencies, the number of coins has increased tremendously over the years. From roughly 500 cryptoprojects in 2014, the industry is now populated by nearly 9,000 different coins, and the figure will likely increase in the years to come. However, in terms of importance and impact, there are just a few coins that truly matter and dominate the market, and Ethereum is one of them.
Ranking second in the digital currency hierarchy by market cap, Ethereum has captured traders' and investors' attention from the very beginning. Much of the traffic on the existing crypto exchange platforms such as Binanceis generated by users who buy or sell Ethereum, alongside other popular coins like Bitcoin, Tether or Binance Coin.
But Ethereum’s appeal doesn’t stem solely from being second to Bitcoin. Unlike other crypto projects in the market, Ethereum is not just a coin that can be used as a means of exchange or an investment venue. Ethereum is an innovative open-source blockchain platform with smart contract functionality that has given rise to an ever-expanding ecosystem of decentralized finance products and services (DeFi) and non-fungible tokens (NFT). Due to its multiple applications, Ethereum has the potential to drive change across all major industries, and the automotive sector makes no exception.
The automotive industry has always relied on innovation and tech advances to push forward. That’s how car manufacturers have managed to reinvent themselves over and over again and deliver superior products and services that meet their customers’ ever-increasing demands. Therefore, embracing blockchain technology falls in line with the sector’s forward-thinking nature. Although the penetration of blockchain platforms in the industry is still in its early stages, there’s certainly a lot of potential stemming from this association.
There are numerous ways in which automakers and other stakeholders in the industry can leverage blockchain technology to address many of the challenges they’re facing today, but if we were to analyze the blockchain applications that have the biggest impact in this area at the moment, Ethereum definitely stands out as the biggest driver of change.
First, we have the use of NFTs which have emerged as powerful tools in the automotive industry for various reasons. NFTs, short for non-fungible tokens, are unique digital representations of different types of assets that reside on a blockchain, being mostly used to establish and trace the ownership and authenticity of these items. Even though there are various blockchains that can be used for NFT development, Ethereum remains the most popular platform in this respect, having a market share of over 78% in this space.
But how exactly can NFTs support the evolution of the automotive sector? The main application of NFTs in this field is related to car provenance and ownership. At the moment, sellers and buyers rely on a variety of documents to determine a vehicle’s origin and ownership history. Sometimes, investigating a car’s past can turn into a very lengthy and difficult research process, especially for collector cars. Fortunately, NFTs can streamline the vehicle registration process and title transfers between owners by providing a digital record of each car’s ownership history. The data that makes up the NFTs is publicly accessible and tamper-proof, meaning that anyone can view it but no one can alter it. This ensures buyers can gain direct access to important car information such as its origin, alterations, or maintenance record.
In 2022, Italian automaker Alfa Romeo launched its first blockchain-certified vehicle using NFTs, being among the first brands to integrate this innovative technology for data tracking and supply chainmanagement. The Alfa Romeo Tonale SUV comes with an NFT digital certificate that tracks the car’s service history. That way, manufacturers can enhance transparency which is often an issue when working with third parties.
However, data tracking is not the only use case for NFT in the automotive sector. Since NFTs are mostly associated with digital art, car brands are also looking into using this technology for promotional and marketing purposes. Hyundai provides a good example in this respect with the launch of its NFT 'Shooting Star' collection in 2022, comprising 10,000 Ethereum-based tokens that can be purchased on its official NFT website.
Buying a car often implies exploring different financing options, whether it’s searching for a direct lender or getting financing through a dealership. Anyone who has ever taken this route knows that the process requires a series of verifications, financial documents and plenty of paperwork for the loan to be approved.
German dealerships have found a better method to deal with these procedures by using Ethereum smart contracts. These are blockchain-based programs that run automatically once a predetermined set of conditions for an agreement are met. Both dealers and buyers can benefit from the use of Ethereum’s smart contract functionality, as this can speed up the financing approval process considerably. By eliminating the paperwork that is prevalent in traditional loan applications, buyers gain faster access to the funds they require and dealers get to sell more cars in a shorter amount of time.
Apart from saving time, using blockchain technology as a tool for facilitating transactions also comes with the added benefits of enhanced security and cost-efficiency. With middlemen like banks or loan agencies playing a less important role in the transaction process, the fees are also being reduced. What’s more, blockchain might one day enable dealers to completely eliminate intermediaries from the equation and provide customers with financing options directly.
At the moment, Germany is one of the few counties that has stepped into this space, but as blockchain technology becomes more prevalent across all industries, other parts of the world might be encouraged to venture down this path. And while the future of digital currencies has always been uncertain, Ethereum’s dive into the automotive industry stands as proof that there’s much potential for growth in the field.