The auto industry has struggled with a lack of transparency together with widespread information inaccuracies, from titling to financing. The not-for-profit Fusion Foundation aims to tackle these issues through its blockchain technology.
Fusion will be working with another cryptocurrency startup – the AUtomotive eXchange Platform (AXP) – to put 10 million used cards on a blockchain. Chief Product Officer John Liu explains more.
Digital Journal: What are the general advantages of blockchain?
John Liu: Blockchains bring cost-efficiencies to value exchange and information sharing by removing middlemen or counterparties who profit from information asymmetry. They can also support the digitization of assets, opening access to market opportunities by eliminating physical boundaries and enabling fractional participation in financial transactions.
Furthermore, blockchains make it possible to share data transparently across ecosystems in which counterparties implicitly or loosely trust each other. All participants have permissioned views to the same transaction audit trail (changes to data or financial transactions) so mistakes or fraud can be prevented. Additionally, blockchains remove siloed information so that participants benefit from single-record keeping—that is, they do not re-enter the same information multiple times, resulting in wasted efforts and data inconsistencies.
DJ: Does blockchain always require cryptocurrency?
Liu: No, blockchain does not always require cryptocurrency. Depending on how technology is used, no transactional payments may be involved. When payments are involved, the fiat-to-crypto exchange can be handled behind the scenes by the organizations involved.
For example organizations may choose to create a private chain with Fusion to share information through the distributed ledger. A licensing fee paid in fiat can be submitted to Fusion. As this would be a private chain, the organizations may choose not to charge (that is, not to levy a so-called “gas” or a fee, as Ethereum charges) on the transactions they run through their private chain.
If organizations do want to run on Fusion’s public chain, or charge per transaction—the organizations can still provide a “fiat payment experience” and take care of the fiat-to-crypto exchange through services such as Shapeshift or by going through major fiat-crypto exchanges such as Coinbase or Gemini.
DJ: How was the Fusion protocol developed?
Liu: Unlike feature- or application-driven development of other chains that employ a top-down approach, the Fusion protocol was designed from the start to support the Internet of Value, which refers to the ability to exchange value as quickly as the Internet exchanges information.
The Fusion team deconstructs and analyzes financial transactions and exchanges at their most fundamental steps, then reconstructs these steps into easily accessible components paired with elements from the Ethereum code base.
Today, financial systems typically rely on centralized custody in order to achieve market connection, trust, and value exchange. The blockchain solutions that have emerged, while achieving trust in decentralized fashion, are limited to their own chain. To fully realize a connected Internet of Value with distributed hosting, Fusion built technology to connect assets and transactions across different chains, in a decentralized fashion.
DJ: Why did you select an open source solution?
Liu: We believe the world is only in the early stages of seeing blockchain’s transformative value. And a new era of blockchain innovation will be accelerated through open source collaboration, by removing duplicative work – Many of the high-quality blockchains are open source so developers can explore their potential applications without having to reinvent the wheel.
Also, by leveraging global intellectual talent – Being open source means anyone can access and improve our technology to benefit the world. The limit of our talent pool is the limit of the world’s best developers.
Further, integrating with many solutions – The more a technology is used, the more quickly stability and adoption will be achieved. Being open source means Fusion is not constrained to monetize and sell the technology, as is the case with for-profit developers. Any use case can be considered, regardless of the revenue opportunity.
DJ: How is the Fusion system unique?
Liu: Fusion’s technology was designed from the start as an inclusive, financial transaction protocol that offers the following unique characteristics. First, interoperability – A future where information and values are exchanged digitally can only take place if siloed systems are connected. Many blockchain companies are focused on creating feature-rich or performant solutions that only work within their chain. Fusion’s protocol can connect to and control assets of all chains and traditional databases through both centralized (asset gateways) and decentralized (made possible with our innovative Distributed Control Rights Management technology) approaches.
Secondly, support for time-based transactions – Financial transactions, from everyday house rentals to sophisticated derivative trades, all rely on the ability manipulate specific slices of time for an asset. Through Fusion’s Time-Lock protocol, the “rights” and “ownership” of assets and information can easily be separated across different date ranges, powering time-based transactions such as insurance, smart-lock controls, and credit.
Third, value enriched exchange tools— Fusion’s protocol offers simple ways to digitize assets, create asset derivatives and exchange values without the need for smart contracts or programming multi-step transactions, using its Asset Gateways and Quantum Swap technologies. Furthermore, with our Universal Short Account Number (USAN) technology, users have a single Universal Wallet address that can be used to store any crypto currency or digital token, even if the underlying chain technologies are not compatible with each other.
DJ: How did the AXP project come about?
Liu: Automotive eXchange Platform (AXP) CEO Max Kane has operated AXP’s online used car portal for the last three years. Over this period, he became frustrated by the low quality of data and high instances of fraud throughout the industry, and the resulting negative impact on participants, from the public to the private sector. He became interested in collaborating with Fusion after several successful business and product fit engagements.
DJ: How does the solution help reduce fraud in the automotive sector?
Liu: Similar to the pre-2008 mortgage industry, the auto financing industry is dealing with precariously high levels of financial fraud, such as income inflation and inaccuracies in vehicle history reports.
Through misrepresentation or inaccuracies of data, the value of financial transactions (such as the rates for a loan, the price to buy/sell a used car, or the insurance quote) can be negatively impacted.
The Fusion/AXP solution helps remove fraud by increasing the transparency of data and leveraging multiple industry participants to cross-validate that data.
The solution generates trusted vehicle and consumer information. This includes the creation of digital assets that represent a vehicle and consumer, with full audit and record immutability as well as data points cross-verified from government agencies such as DMV, auto-financing organization, auto-insurance organizations, and others. The Fusion/AXP solution also supports increased collateral transparency. For instance, the trusted and cross-organization validation of data increases confidence of investors buying auto-backed loans as well as insurance companies writing policies.
DJ: What financing solutions does the system enable?
Liu: Every financial transaction that takes place today can be enabled by the Fusion protocol. That’s because he protocol was built from the ground up to facilitate financial transactions.
DJ: How have you addressed cybersecurity concerns?
Liu: Fusion handles cybersecurity in two ways. The first is to employ cybersecurity best practices, such as designing our software to store information in encrypted fashion or sharded across different databases. Our technology was designed to meet the highest cybersecurity standards. The second way we address cybersecurity relies on blockchain’s consensus mechanism. We are currently testing this mechanism to make sure that consensus is robust and secure against hackers.
