Blockchain use case micropayments for mobility services (Uber, Lyft, Car2Go, Drive Now, Wundercar, etc.)

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Blockchain use case analysis micropayments for mobility solutions

Blockchain use case micropayments for mobility services

The automotive industry is undergoing a radical transformation. Most of the experts do agree that the future of the automobile is electric and autonomous. Another scenario that is likely to happen is that there will be a shift from the individual car ownership model to a scenario where more and more people are using cars on-demand and participate in some form of car sharing. In on of its recent reports, McKinsey and Company stated that we will see a move from “one vehicle for every trip” to a scenario where there will be “A mobility solution for each situation”. Is the blockchain use case micropayments for mobility services hype or a real opportunity? In this article, I will try to shed some light on the merits of using blockchain technology for mobility use cases.

The race is on: building mobility solutions is a software-first game

On the technology side a lot of effort goes into the development and application of technologies such as machine learning, high-definition mapping, and real-time analysis of car data. While software first startups such as Uber, Waymo, and the Chinese Didi ChuXing are pushing on AI and machine learning, incumbent companies such as Ford, GM, Daimler, BMW, and Hyundai leverage on their strong brand and powerful partnerships.

It will remain to be seen, if software-first companies will be able to learn building cars faster than hardware-first companies are learning to build highly scalable and reliable autonomous driving software. There are definitely very exciting times awaiting for us. Let us now focus on the blockchain use case micropayments and its applications in this field.

The future of the automobile is electric, autonomous, and based on mobility tokens.

With so much focus on AI, machine learning, and the electrification of the drive-train in the automotive sector nowadays, it is surprising that there are not more news about how the blockchain, as another fundamental technology innovation of the last decade, will shape the sector.

I think the first important question to answer is: what is the goal of the mobility of the future? Remember the multi-pass from the 5th element that Leeloo Dallas used in the movie to get around?


I think the future will be similar to this. In the end it is all about the seamless transition between different modes of transportation with a single point of payment for anything on the continuum. Who owns the customer wins. The future of mobility will be the platform that provides these service.  Micropayments will be a big part of this game. The blockchain use case micropayments – what do you need to know about it?

WHAT is this about?

Using a cryptocurrency token as a means of payment for mobility solutions (Uber, Lyft, Car2Go, DriveNow, Wundercar, etc.)

WHY this makes sense?

Processing payments can become complex and can become costly if multiple currencies and payment corridors are included. One such example are payments from a country within SEPA region to a country outside of the EU corridor. For mobility providers this is especially relevant as they often provide services on a truly global scale. As of May 2018, UBER operates in about 60 countries and 400 cities around the world. With the introduction of an own cryptocurrency token “MOV” the following problems can be solved:

  • Cryptocurrency payments are extremely cost-effective. With new technological breakthroughts right around the corner (e.g. lightning and raiden as 2nd layer off-chain transaction technologies), transferring value around the world will become as inexpensive as sending an internet package. It will be possible to send euro-cent equivalents in cryptocurrency with negligible transaction costs.  In blockchain literature this is often refereed as to “the internet of money”. With more and more people travelling internationally and mobility as a business on a global scale cryptocurrencies will enable to real-time billing of mobility services, no matter in which jurisdiction the service is consumed.
  • A second benefit a cryptocurrency can bring along is to foster an own economy around its services and products. For example, the fictitious Car2GoCoin could not only be used to pay for borrowing a car from Car2Go to go to the supermarket, it could also be used to award customers for good-behavior within the Car2Go community. One such example would be to go and refill the car, or for making useful suggestions to improve the services. This could even go so far as to let Car2GoCoin holders participate from the business success of Car2Go, by distributing a small amount of profits back to the Car2GoCoin holders. This would naturally rally a strong community around Car2Go. Which mobility provider would you recommend if you know that you will participate from each ride?
HOW is it done – Blockchain use case micropayments?

We are looking at a scenario, where a large mobility player issues its own cryptocurrency and lets users pay for services in their own ecosystem with this token. For simplicity let us call this token MOV. In reality this could be the UberCoin, the LyftToken, or the Car2GoDiamond, etc.

In order to bring the MOV token to life, roughly the following steps (including a thorough legal check and getting official approval from authorities for MOV) need to be followed

  • Step 0: Decide if an own MOV token should be issued or an already established cryptocurrency (Bitcoin, Litecoin, Ethereum, NEO, etc.) should be accepted as a form of payment. The former allows to create your own economy around the MOV token the later has the advantage that both liquidity and availability (i.e., is traded on all major exchanges around the world already) problems are solved already for you.
  • Step 1: Decide on the base blockchain the token should be created on. The most common ones are: Ethereum, Bitcoin, and China-based NEO. This will also define the “Token-standard” the MOV token will need to follow. For example, on Ethereum ERC20 is the most common one, while the NEP-5 is the de-facto standard token format of NEO.
  • Step 2: Write a smart contract that specifies the economy that you are building for the MOV token. Important parameters will be set in the smart contract: Will there be a finite supply of MOV tokens, what is the denomination of MOV like, will the economy be inflationary or deflationary in nature? How many of the tokens will be sold to the public and how many are you keeping in reserve? These are all critical questions where including an economist into the team will pay off.
  • Step 3: Start selling/issuing the token and get it listed on the major cryptocurrency exchanges. Following market dynamics the MOV token now will have an external evaluation  (e.g. 1 MOV = x USD) defined by how many people are willing to buy your MOV token idea.
  • Step 4: Start to integrate the MOV token into your systems and services. This way, users can use MOV tokens instead of fiat money (EUR, USD, RMB, etc.) to pay for your mobility services.
REALITY CHECK – Blockchain use case micropayments

The blockchain use case micropayments focuses on issuing an own cryptocurrency has to deal with two problems:

  • ACCESS: How can the user get hold of the MOV token?
  • ECONOMIC FEASIBILITY: Given the technical limitations within today’s major blockchains that yield to significant transaction costs often prohibit sending true micropayments, since transaction cots > value of micropayment

Let us turn to the graphic below to shed some light on this two limitations:

Blockchain use case micropayments for mobility providers - analysis by Dr. Reinbacher

Regarding the ACCESS problem, there are two scenarios that we need to consider.

First, if the MOV token gains a big followership it is likely that it is listed on the major fiat/crypto exchanges. In this case, users of the MOV token can conveniently buy the MOV token from these exchanges. This also means that MOV token holders need to bear the fluctuation risk. Tokens that you buy today and use to consume mobility services next month with can have a totally different valuation at the day of consumption.

Second, the issuer of the MOV token can decide to hold back a certain share of tokens (for example 20% of all MOV tokens generated) that act as a “stabilizing reserve”.  These tokens are then managed by a trusted 3rd party and sold for a fixed price at the mobility platform directly to the customer. These tokens then cannot be transferred or sold to third parties, but remain within the wallets of the mobility provider. This solved two problems: everyone gets easy access to MOV tokens and can buy them with FIAT money directly at the mobility platform without the need to register at a fiat/crypto exchange first and it does not expose the user to fluctuations in price of the MOV tokens.

Regarding the ECONOMIC FEASIBILITY problem, we need to distinguish between two cases. Refer to CASE A and CASE B in the picture above.

  • Case A: This depicts the scenario as of today. The limiting factor in most micropayment use cases is the prevailing transaction fees for cryptocurrency tokens. For example, at the year end 2017, a single bitcoin transaction cost 55 USD ( While this was an extreme scenario at Bitcoin’s peak hype times, transaction fees are still significant as of today: about 3 USD for every bitcoin transaction. The immediate conclusion here is that micropayments do not make sense since the following equations does not hold VALUE OF TOKENS >> TRANSACTION FEES. Given the current transaction fees, use cases that require payments for tiny amounts of value are thus building what I call a “Thick Mobility Platform” (cf. Top-right part of figure). The basic idea here is in order to make payments with cryptocurrency feasible, MOV tokens remain in a wallet within the mobility token platform for most of the time. The thick mobility platform, keeps track of all users and the value of MOV tokens that they possess. An user can only “cash-out” by transferring MOV tokens from the platform to his own wallet when the value of the MOV tokens in his account is significantly bigger than the transaction fees required to transfer the tokens. While this is a fix that will work for a lot of use cases and in fact this is the architecture that most blockchain projects that use cryptocurrency as a payment are implementing it comes with a series of drawbacks. The thick mobility platform bears the same operational risk as an exchange. Thus, security and availability standards of the mobility platform need to match those of the leading exchanges. Remember the now famous Mt. Gox hack? Imagine what kind of reputation damage a hack of the cryptocurrency wallets at the mobility platforms of Uber, BMW, Daimler, etc. would have. However, this is still the prevailing architecture that we find today.
  • Case B: This depicts a (near) future scenario. While the general public has been busy with speculating about the bitcoin price in the last years, a lot of brain-power went into the design of what is called 2nd layer scaling technologies. The two most promising approaches are the Lightning Network for Bitcoin and Raiden for Ethereum. Without going into much details, the main innovation here is that not every transaction needs to be done on the blockchain. Instead, payment channels can be opened between two participants. The two participants can then perform thousands of transactions among each other and either participant can close the payment channel by writing the final balance on the blockchain. It is easy to see that the equation from before VALUE OF TOKENS >> TRANSACTION FEES is much easier to satisfy in this case as transaction fees will go near to zero in this case. This will also greatly reduce the operational risk of the mobility platform. Instead of replicating the functionality of a fiat/crypto exchange it is enough to manage a wallet that holds the fees that he mobility platform charges to its users. This is a less risky undertaking as holding a large amount of all tokens in your economy as in the first scenario.

What does all this mean for mobility providers? It is important that executives are aware of one of the biggest innovations Bitcoin and the blockchain brought along: a new global payment layer with near to zero transaction costs. This will make real-time, cross-border billing a reality.

While 2nd level scaling technologies are at the verge to gain mainstream adoption it is important to enter the game now. Are you a mobility provider and are you still only at Powerpoint level with your mobility token use case? You might be missing out on one of the greatest opportunities of the last decade. Let me know what you think about the blockchain use case micropayments in the comments below.

About the author

Dr. Thomas Reinbacher is former computer scientist and McKinsey management consultant and works as independent adviser in Munich and Beijing. If you want to work with me or have more information on that particular use case,  please find me on

Disclaimer: This analysis on the blockchain use case micropayments is an outside-in analysis, provided without warranty or any claim for completeness. All opinions expressed about blockchain use case micropayments are my own. All information on blockchain use case micropayments is given strictly on a non-reliance basis and under the exclusion of any responsibility or liability, in particular with regard to loss or damages and/or administrative and regulatory sanctions.