October 02, 2019 - Dr. Harry Behrens is Head of Blockchain Factory at Daimler Mobility. Behrens has been working intensively with Blockchain since 2012 and started the first Blockchain swarm of Daimler Mobility in 2016. In the interview, Behrens explains the opportunities and applications of Blockchain and what his Blockchain Factory is currently working on.
What is the concept behind the Blockchain Factory?
Since 2012 I’ve been increasingly focusing my work on blockchain technologies, and with the support of our CIO Udo Neumann I’ve been able to introduce this topic inside our company. By the time we established the blockchain swarm in the unit then known as Daimler Financial Services AG in 2016, it was becoming increasingly clear that there are many areas in our company where the use of blockchain technologies would be very appropriate. This use would be based on our connected-car technologies and our complex overall economic ecosystem, which we serve by means of our solutions and products. We want the Blockchain Factory to push completely new processes in these areas or, ideally, to open entirely new areas of business. We’re talking about payment systems, verification, data security, and, in the future, tokenization — in other words, financing on the basis of blockchain technologies.
How does your team do its work?
The first step is to identify cases within the Group where blockchain technology could create significant added value. Here you have to keep in mind that blockchain is not an advanced form of an existing technology. Instead, blockchain is a radical reversal of existing concepts. It’s an approach that has never existed before. That’s why you can’t use blockchain to optimize a simple process. Blockchain is almost always something you have to approach with a clean slate. It’s suitable primarily for new business models or for existing business models for which there is currently no appropriate software and which therefore still have to be controlled by means of a gigantic bureaucratic apparatus.
In other words, you’re looking for completely new ways to do business rather than using an existing process that could simply be improved.
That's right! The first question you have to ask in such situations is: Does it basically make sense to use blockchain for a certain process? That’s because in many cases blockchain is simply not productive. For example, it’s not worthwhile to take a technology that is based on decentralization and distribution and use it in a centralized format in a company where everyone uses the same cash register system and thus automatically works in an atmosphere of trust.
Dr. Harry Behrens, Head of Blockchain Factory
- Studied computer science with a focus on artificial intelligence at the Technical University of Munich
- Received a doctorate from the University of Tokyo with a dissertation focusing on “distributed A.I.”
- Has done intensive research on blockchain technology since 2012
- Has worked at Daimler Financial Services and Daimler Mobility since 2015, most recently as the Head of IT for Mobility & Digital Finance in China
- Became a co-founder of the blockchain swarm of Daimler Financial Services in 2016
- Is a co-founder of the Blockchain Factory and has been its Head since September 2018
“Blockchain” has already been a buzzword in the tech sector for several years. But what exactly is blockchain technology?
The best way to explain that is by running a small thought experiment. Imagine that you lend five euros to a colleague in the cafeteria and he tells you that you’ll get your money back tomorrow. On the following day your colleague comes to you and gives you back two euros. Of course you don’t let the matter drop. You explain that three euros are missing, but your colleague disagrees because he’s absolutely sure that you only lent him two euros the day before. This is where blockchain enters the picture. Blockchain ensures that this lending transaction doesn’t take place only between you and your colleague. Instead, several third parties are present as witnesses, and thus they act as referees who can confirm, in a kind of voting process, that you lent five euros to your colleague yesterday. This means that a consensus must be established regarding the fact that the business transaction between you and your colleague proceeded lawfully.
How does this work in practice?
Blockchain performs this process electronically by means of a peer-to-peer system. In a network of this kind, various participants who have equal rights interact with one another with the help of identical software. They can use one another’s services or offer their own services to others. To return to my example, the technical challenge is now to arrive at a consensus of all the participants and to safeguard this consensus in such a way that in the end all the participants unanimously agree that five euros were in circulation, were charged to the receiver, and can be registered.
Do you have a concrete application scenario for that as well?
Imagine that you’re a fleet operator and that you also have dealings with four other competitors in your field. Each of you has his own customers and his own data pool, but none of you is working to full capacity. Now a customer who has already registered his data with you and thus verified his identity would like to rent a vehicle that you are unable to provide. But a competitor who cooperates with you does have such a vehicle.
Is this where the Mobility Blockchain Platform that your team is working on comes into play?
Exactly! Thanks to blockchain, you can now clearly prove to your competitor — and thus to all the companies that are connected on the shared blockchain platform — that this customer has fulfilled all the necessary preconditions for renting and driving this vehicle. Meanwhile, the shared platform clearly records which service and which booking must be carried out by the participating companies. That’s how you process this transaction in the first step, but there is also a benefit for the competitor who provides the service — in this case, the car — and who is subsequently paid by you. The entire process is fully automatic. Ultimately, all the participating companies can access new sources of income without having to bear the costs of acquisition or onboarding. The customer, in turn, is glad to get the vehicle he wants. But in the future the benefits for the customer could extend even further.
Let’s take a look at major German cities. Many providers of electric scooters are currently competing to establish themselves on the market. Customers quickly lose their overview, and they need to register separately with each provider in order to use that provider’s services. Wouldn’t it be much easier for the customer if he only had to register with a single provider? That way he would have to show his identification documents and prove that he has a valid driver’s license only once. As soon as the corresponding “smart contract” validates these data and the customer’s digital identity has been assigned, he is given a legally valid identification card and can immediately use all the electric scooters offered by any participating provider. Blockchain could be used to create this kind of process and even to extend the process to diverse vehicle-sharing models. The ecosystem of a provider of shared mobility services would automatically expand, and so would the customer’s mobility options.
Blockchain at Daimler Mobility
Blockchain is much more than just a buzzword at Daimler Mobility. The upcoming technology, which has the potential to disrupt the financial and mobility services industry as we know it, is at the center of several of our in-house developed use cases over the past few years.
These possible applications would mainly benefit our mobility services. Are there also any ideas about how blockchain could support other business areas of Daimler Mobility?
The key terms are “pay-per-use” and “dynamic leasing.” In these models, the customer pays a certain basic amount plus a leasing fee for his vehicle that corresponds to the exact number of kilometers he drives each month. Previously this kind of leasing option had to be laboriously invoiced by hand, and as a result it was hardly worthwhile to offer it. Today the necessary data can be called up in real time by a device inside the car called the “hardware wallet.” Thanks to the cryptographic security created by digital identities in connection with blockchain technology, these data can be used in real time for billing purposes, and they cannot be counterfeited or contested. However, an appropriate billing mechanism is also needed in order to create that trust-based consensus between all the parties involved. Here too, blockchain technology is well suited to provide the necessary data. These usage models can also be expanded to cover additional applications such as insurance policies.
Does this mean that Daimler Mobility could basically start using an additional business model?
Yes. This is what we call a platform business. These business models are based on network effects that make it possible to serve an entire market. Two additional factors are involved. The transaction costs are reduced, and as a company that holds shares in a platform, you automatically benefit from a possible increase in value that the platform would gain simply by growing.
But you don’t necessarily need other big players in order to set up a platform. Aren’t you also cooperating with several startups?
That’s right, we’re working together with the startups to develop solutions and using their diverse capabilities in order to implement our ideas. Our long-term model calls for us to cooperate with startups as well as other major companies and to operate a shared platform. We can only achieve the economies of scale that we need in order to make such a model profitable by participating in such a platform on an equal footing. Besides, it’s important to operate this platform in a collaborative process — in other words, the control of this platform must be shared by all the companies that offer their services via the platform. This model was deliberately created as an alternative to the previous platforms that in effect are monopolies in which a single company benefits from almost all of the added value created by the platform.
Which startups are you working with today?
Four start-ups were initially involved in setting up the Mobility Blockchain Platform. The first one was 51nodes, a provider of services for blockchain programming and architecture. The second one was BlockchainHELIX, which deals with “know your customer” technology based on blockchain technology. The third, evan.network, makes the entire system available and specifically deals with data security and fulfillment of the regulatory requirements. The fourth one is RIDDLE&CODE, which gives us the opportunity to use a hardware wallet in order to call up vehicle data securely and automatically. In the meantime, Spherity, experts in the field of Digital Identity, have joined the project.