All Financial Wisdom
Can Mileage Fraud be Eliminated with Blockchain?
As a distributed accounting protocol underlying Bitcoin, the one released by Satoshi Nakamoto, Blockchain, is not only drawing the future of its most immediate objective, which is the financial sector: Blockchain is also being a catalyst for the transformation of many other sectors. It is not only transforming sectors from top to bottom, it is also serving as a versatile tool for many other initiatives and projects.
These initiatives and projects, although they do not represent a radical transformation of entire sectors, nevertheless will also contribute to changing our day to day lives. One of these initiatives aims to put an end to the eternal mileage fraud with which second-hand vehicles are sold, and intends to do it with the (allegedly) omnipotent Blockchain.
From the veracity of transactions with Bitcoin to the accuracy of the miles traveled
As the usual readers already know, we have told them other times about the characteristics of distributed accounting that Blockchain has brought.
Faced with the impossibility of shielding a specific computer 100% of the time from cybercriminals, the visionary Satoshi Nakamoto decided to confer security and veracity on transactions with Bitcoin was to put the information distributed among innumerable nodes of an extensive network. It is the most intelligent approach to computer security seen since the dawn of the Internet: you can not hack hundreds of computers at once (something technically unfeasible today).
The application of how you can ensure, with Blockchain, that information about Bitcoin transactions is true, is directly exportable to also make the information about the mileage of a car equally true for its subsequent sale as a second-hand vehicle. At least in theory, as we will see below.
And the European Parliament has talked about mileage falsification
It was the European Parliament itself that has spoken out about this eternal fraud that affects the second-hand vehicle market. As you know, it is unfortunately quite usual that some sellers with few scruples “retouch” the miles that the odometer shows of the used vehicles that they then try to sell you as “bargains.”
There is no need to live outside the law to know that there are many improvised “technicians” out there who offer their services to subtract miles from that car that someone intends to sell second-hand. The mechanics are fraudulently very simple: one of the ads that suggests this type of service is contacted in the press or on an online bulletin board, and an agreement is reached. The service includes that the “supposed” technician moves to his own garage to do the “intervention.”
For less than $100, they’ll offer to change the miles that the central computer of your car shows in the odometer of the dashboard. For a bit more, they also offer to change the internal odometer record that your vehicle carries, and also records the miles traveled with (supposedly) higher reliability.
This marketing of bits and miles is more than reprehensible, and also harms the entire credibility of the whole business of buying and selling used vehicles. In the end, the buyer ends up distrusting even the most honest sellers, unfairly harming everyone equally.
How could this fraud be ended with the help of Blockchain?
As is logical, that information about mileage that is going to be registered in a truthful and distributed way in all the nodes of a Blockchain network, must have a method by which it’s collected and stored in said network. This is the most critical aspect of the possible solutions to this fraud.
A good (and easy) moment that is already used today to record the number of miles that a vehicle is traveling along its life (and the road) is the mandatory ITV inspection. Since this vehicle revision procedure was launched, this moment of the inspection is a necessary control point for the mileage. In each ITV that you pass, your miles are registered. Nowadays, in addition, they are made available to the general sector precisely to pursue this fraud of second-hand vehicles.
But of course, the ITV inspection does not control the newest vehicles, and an annual checkpoint will not be able to dissuade even the most stubborn fraudsters. After all, the fraud of the miles is a market, dark, but market after all. This means that, if the market expands, and fraudsters choose to “retouch” the miles of their vehicle annually before each control ITV, it increases the business considerably for those improvised “technicians”, which will lower their price by intervention. Thus, it will reach a “market” price that will end up only increasing.
The next step to give accuracy to the mileage has been to include more control points. The natural control points are each time your vehicle goes through a workshop to perform a maintenance or repair a fault. Obviously, having more control points increases the difficulty of keeping the fraud updated, but does not eliminate it completely. If a fraudster has the bad luck of having a breakdown, then he only has to assume that he has “lost” those miles of more than what was recorded in his last ITV. That’s because there are mechanics that can go to the dark side being an active part of a “parallel” mileage economy. As our grandparents said, “there is everything everywhere,” and there are going to be some workshops that are not honest.
Blockchain can contribute with its distributed accounting feature so that the mileage information collected in the control points is completely true and unalterable. But we have already noted that this will reduce fraud, but it will not eliminate it by far.
What should be added to Blockchain to achieve the goal of ending Mileage Fraud?
If you realize, at the moment that the miles are accounted for in your own car by the central computing unit of your vehicle, and are stored in some hidden place under the chassis, they are obviously alterable by some improvised “technician”. But this has an easy solution that would do the “trick”. A solution that is obvious once…drum roll please…all vehicles are connected to the Internet.
With every hyper-connected vehicle thanks to the Internet of Things (IoT), your vehicle can be reported, up to a granularity of each hour, the miles traveled. And obviously, what your vehicle reports after all is software that can also be altered, but you can increase the difficulty in an additional way. The key is the vehicle’s navigator. Every vehicle that leaves the factory has its own GPS today. The information of this GPS is much more difficult to be tricked, since it comes from hardware (a GPS sensor), and also the vehicle needs to be accurate precisely so that the user of the car can use the navigator to follow their route.
And that GPS information can be transmitted at any time by the vehicle to a central computer of the manufacturer and / or the Blockchain network, but not as miles traveled (which is a data stored to transmit more easily manipulated), but as its location exactly at each moment – and with this, the actual miles traveled can be computed externally. A technical point to be solved would be where to get and how to finance the computing capacity necessary for this, which, depending on the implementation, can be huge, very expensive, and proportional to the reliability of the approach.
This seems the best possible solution with current technology, and the European institutions are on the right track. But, in addition to the announced Blockchain, they should also take into account those other conditioning factors and technical solutions that we have proposed in this analysis. Although they are not deluded, the dark side will always be there “working”, and with part of the technology on their side, it is quite likely that, in one way or another, they will still remain in business to a certain extent.
Reliability at 100% and in all cases is quite difficult to achieve. All legislation assumes that a small proportion of criminals will always be able to get away with crime: the issue is that this proportion is residual, and that, when one of those fraudsters is detected, the weight of the law takes away almost all of them.