What Research Says About Blockchain in Public Transport

This post is also available in: Deutsch (German)

Can blockchain make a difference in public transport? We find out from research literature.

An article titled Can travel be revolutionized with blockchain technology? starts with a point that my colleague raised when he pitched this article idea to me about using blockchain in public transport.

“25 or 30 years ago, traveling from one end of Germany to the other meant paper tickets and separate fares [for different transport modes]… Today, we live in a digital world where most people complete their travel plans online. So why is it that travellers still don’t have a seamless, single digital ticket-buying experience across multiple modes of transportation?

intro in the article about using blockchain to improve public transport.

The outdated transport business model involves a passenger using multiple companies to move from point A to point B in a multimodal transport route. Even in this digital era, this means experiencing the trouble of visiting separate websites to buy tickets.

This is probably one of the reasons passengers want a seamless ticket-booking solution for multimodal transport, whereby passengers can book once on one website or app for more than one mode of transport. It’s said that blockchain records the single customer purchase on a distributed ledger used by multiple entities across a value chain, and accurately splits the payment among the providers.

This is also one of the reasons blockchain-based transport is being brought into question. Hence, we shall look at some research about using blockchain in public transport in this article.

If you don’t know what blockchain is…

“The world’s most popular way to buy, sell, and trade crypto. Trusted by millions since 2011 with over $800 Billion in crypto transactions.”

Blockchain’s homepage screams.

This substantiates the common perception among anyone unfamiliar with blockchain that blockchain is all about Bitcoin. But, if you go through the background information provided by Blockchain’s document titled The Future is Decentralised, you’ll realise that it’s much bigger than cryptocurrency.

However, I find that no one can explain blockchain better than 101 Blockchains (this is NOT an ad, this is just my view of which source is easy to understand):

“Blockchain is a peer-to-peer ledger system that allows peers to transact between them without any centralized authority. The peer-to-peer network is completely decentralized. To make it decentralized, each peer carries a copy of the ledger. The ledger can be a complete copy or a minimal copy required for it to stay connected and functional to the network.”

Blockchain for Beginners on 101 Blockchains.

If you’re interested in a more comprehensive guide on what blockchain is and how it works, you can check out 101 Blockchains’ guide to blockchain here. Or, if you’re a visual learner, you can watch a simple video by Simply Explained, Simplilearn, or the Centre of International Governance Innovation.

Testing the hypothesis that blockchain improves public transport

“Blockchain has been described as a trustless system. Trustless means that you don’t have to trust specific participants in a transaction for the transaction to occur. A transaction will occur because of specific set rules and algorithms – protocol – of a blockchain platform. The trustless paradigm scatters the role of transaction approval across multiple actors in a network.”

Blockchain in transport and logistics – paradigms and transitions by Koh, Dolgui and Sarkis (April 2020) on blockchain removing the need for trusting participants.

In recent years, studies and reports about applying blockchain or distributed ledger tech (DLT) in public transport have been written and published. One such study is Blockchain-Based Intelligent Transportation: A Sustainable GCU Application System by Xiaomin Du et al (June 2020), which researched the sustainable application of blockchain to an intelligent transport system.

Intelligent transport refers to the use of physics, computer science, the Internet of Things (IoT), and transport data in optimising transport conditions.

“The technological novelty of blockchain lies in the fact that it is possible to build a consensus on the true state of the ledger without trusting any centralized entity or an intermediary. Therefore, the blockchain has the excellent characteristics of supporting data sharing and being tamper-proof, trustworthy, and traceable, making it suitable for building an information system to deal with multiparty collaborative business.”

Blockchain-Based Intelligent Transportation: A Sustainable GCU Application System also on why blockchain is good.

With an extensive literature review and an evaluation from an expert committee, the authors used a decision-making trial and evaluation laboratory (DEMATEL) method to determine the importance and correlation of 15 influencing factors of the intelligent transport system to prove why blockchain is needed for this use case.

Based on the results, the factors are rearranged from highest importance level to lowest importance level as shown below:

The authors also suggested that the system should be built with 3 layers in mind: government, company, and user (GCU).

  • Government: Traffic management departments can issue traffic licenses, monitor traffic, collect data, and release road condition updates through blockchain. Such traffic information can be used by the construction department to plan streets better.
  • Company: Transport companies can monitor operating vehicles in real-time, record or audit transactions, file taxes, and store insurance contracts as smart contracts using blockchain.
  • User: Users like passengers and drivers can give or search for traffic data, buy or sell tickets, and trade travel permits through blockchain.

However, the authors noted that blockchain is not perfect due to the large volumes of data generated from the replication of transaction copies, resulting in slower processing, the need for more storage, and higher costs (which contradicts the above transaction cost reduction point).

Other disadvantages of using blockchain here include complicating calculations and additions of new blocks, the need for public and private keys for security purposes, higher costs of adding new blocks, and possible widespread distrust in DLTs.

It should be no surprise that implementing blockchain in public transport has its challenges since a bibliometric analysis by Astarita et al in A Review of Blockchain-Based Systems in Transportation (December 2019) concluded that blockchain tech is still in its infancy despite its potential in improving trust in transport.

The Italian authors noted that most of the relevant papers they reviewed are focused on hypothetical potential applications while very few can be found about actual real-life applications. Hence, there’s much progress to be made in implementing blockchain in these fields to see the actual results.

Similar conclusions can be found in OECD International Transport Forum’s 2018 report Blockchain and Beyond: Encoding 21st Century Transport, which sought to investigate the potential for DLTs to make transport services coordinated and seamless thanks to its decentralised approach.

The report found the possibility of DLTs like blockchain enabling the engagement, integration, and alignment of transport industry players through protocols, which would be especially important in adapting their strategies to the needs of passengers who are gaining control of their travelling.

Since blockchain is still in its infancy as mentioned earlier, the impact blockchain would have on public transport remains to be known unless someone takes the first step in its implementation, which could depend on whether blockchain can bring more value to the track than existing systems do.

So, does blockchain make a difference in public transport?

There is no definite answer to this question, especially due to the lack of real-life evidence for this use case since the widespread adoption of blockchain is still a work in progress. On the one hand, blockchain provides the following benefits:

  • Convenient transport experience for passengers.
  • Decentralised peer-to-peer network, whereby peers can transact without a centralised authority or middleman.
  • No need for the peers to trust each other since the transaction goes through the protocol.
  • Transport data cannot be changed or messed with.
  • Transport data is also traceable.
  • Traffic management departments can use blockchain to issue traffic licenses, analyse traffic and release traffic data.
  • Construction departments can use blockchain to access traffic data for urban planning.
  • Passengers can use blockchain to search traffic data and buy tickets.
  • Drivers can use blockchain to give traffic data, sell tickets and trade travel permits.

But, on the other hand, some adjustments may be needed to reap these benefits. The adjustments recommended by the OECD report mentioned earlier include:

  • Public authorities must prepare for a much more networked and meshed world.
  • Take into account changes in data science and technology when developing Mobility as a Service.
  • Look beyond initial cryptocurrency applications of distributed ledger technologies. [In other words, banish the misperception that DLTs are all about cryptocurrencies.]
  • Governments should help deploy the building blocks that enable wider uptake of distributed ledgers.
  • Apply blockchain technology now for slow and (relatively) small transport use cases; anticipate next generation distributed ledger technologies for “big and fast” applications to be deployed later.
  • Governments should develop algorithmic code-based regulation to accompany the uptake of distributed ledger technologies.

Maybe, when these adjustments are made, we can reap the benefits as a result. And this means being able to buy a ticket on a single platform for a multimodal transport route.

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