According with experts, one of the best ways to combat various types of fraud, such as subsidized housing sales or mileage manipulation in second-hand vehicles, would be setting up a unique and up-to-date registry. Different actors could use such an instrument to secure all of the key data bound to different transactions, so that they could later retrieve reliable information.
LUIS MEIJUEIRO (CTIC) 17 APRIL 2017
In our previous article, “What is this ‘blockchain’ thing everyone is talking about?”, we described how blockchain can be used to store key information associated with transactions relevant to certain business processes. We also wrote that a distributed, decentralized and synchronized registry is shared among all the parties or users in the system, something very different from traditional databases. Another feature we discussed was that blockchain offers an adequate balance between security and transparency. Moreover, blockchain provides a fundamental characteristic to fight fraud: it makes it impossible to undo or rewrite any data already registered.
Thus, blockchain technology seems a perfect solution to develop anti-fraud registries capable of putting an end to fraud schemes such as the ones mentioned above. Blockchain has the additional advantage of reducing or avoiding the intermediaries needed to build trust between parties involved in transactions, thus improving interoperability, scalability and, ultimately, saving costs due to the technical systems usually required.
CarTrustChain, our first blockchain-based distributed application (Dapp) and one of the two pilots developed by the BCCB project, can be used to prevent vehicle odometer fraud. By means of this Dapp, the owner of the vehicle, an authorized third party (such as an inspection agency, repair shop or insurance company) or even the vehicle itself (a "connected car" with Internet access and appropriate hardware), can record the vehicle’s accumulated mileage at any time during the milestones in a car’s useful life (maintenance, technical inspection, insurance appraisal, transfer/sale, etc.) into the unbreakable registry provided by the blockchain infrastructure, accessible via the Internet.
Screenshot of the CarTrustChain Dapp developed by CTIC
From a technical point of view, the strength of this Dapp lies in its "smart contracts", a set of code instructions executed by the blockchain. These contracts link the digital representation of the vehicle with all of its relevant operations and its corresponding mileage. The smart contract controls who can interact with the vehicle’s key information and how.
The immutability and inviolability of the stored information represent the very nature of blockchain technology. This is something impossible to be achieved with the vehicle’s odometer by itself, which as we know, can be tampered with. Smart contracts control the logic of all operations: they authorize users to record data, determine the times when a record can be entered, allow queries of vehicles’ event histories, register the transfer of a vehicle’s ownership, and several other possible interactions between the vehicle data in the blockchain and the end users of the Dapp.
This combination of blockchain and smart contracts is highly advantageous. The distributed nature of the blockchain network -and therefore, of each smart contract- makes the Dapp ubiquitous and accessible at any time, since it does not depend on specific servers as traditional applications do.
Regardless of all its benefits, CarTrustChain could be erroneously criticized for still allowing the owner of the vehicle to falsify the mileage, given that any amount can be entered into the Dapp. However, to support such fraud, the owner would also have to convince the rest of the authorized users (control agency, repair shops, etc.) to be complicit in the lie, which should also be consistent with previous records, since CarTrustChain alerts about any inconsistency.
A possible upgrade to CarTrustChain is to design, jointly with vehicle manufacturers, a secure built-in loT device to enable recoding the distance traveled by the vehicle directly into the blockchain. At present, we have made CarTrustChain able to read the mileage of a "connected car" and write the information sent by the device in the field that the user would otherwise provide manually.
Screenshot of mileage log in the CarTrustChain Dapp
CarTrustChain eases the analysis of historic data by showing any "anomaly" or "suspicious" record in a graph comparing the previous vehicle event history and the general average for the same period and country (according to data available in this EC study on the functioning of the market for second-hand cars).
Screenshot of vehicle information in the CarTrustChain Dapp
In a car trade operation where the buyer uses CarTrustChain for checking the vehicle's history, any displayed anomaly should put the buyer on guard, who would probably demand from the seller further proof of the real mileage, for example by requesting invoices or other support documents. Refusal or any discrepancy between the documents provided and the information recorded in the blockchain could confirm the risk of being a victim of fraud.
A QR code is generated for each vehicle registered with the Dapp. This code can be used to immediately obtain the last registered mileage of the vehicle. For example, a used car ad portal or listing could display a CarTrustChain QR code within the information of each vehicle, so potential buyers would only need to scan the QR code with their mobile phone in order to check the history of the vehicle. Sellers adopting this system would stand out from their competitors by offering a higher level of trust.
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Example of an advertisement that uses CarTrustChain QR codes
In the near future, we aim to achieve collaboration with dealers and companies that trade with vehicles, repair shops, and control authorities, among other key actors, in order to test CarTrustChain in a controlled environment, and to better adapt the Dapp to actual usage. For instance, the Asturian company New Cars Asturias has already expressed its interest in testing the advantages that blockchain can bring to their business.
As explained in this article, the combination of blockchain technologies and data analysis techniques enable the development of simple yet powerful applications allowing a majority of honest and cautious users to collaborate in a network and build a very solid anti-fraud solution.
Since the beginning of 2016, CTIC has been working on the BCCB project, a space for experimentation with blockchain technologies. If you are interested in more details about the different applications of this important innovation and how to approach them, please contact us.
