The Department of Motor Vehicles has never been an agency that screams innovation. The agency is better know for bureaucracy and endless lines than technological transformation. But this may be changing after a collaboration between California's DMV and open-source blockchain Tezos and Oxhead Alpha, a crypto-focused software development firm.
Together, the three partners are building a DMV-run blockchain that will not only digitize car titles for California drivers, but also seek to streamline title transfers between owners.
Ajay Gupta, the chief digital officer at the California DMV, said that the agency hopes to finalize its “shadow ledger,” or a full replication of the state’s title database on the blockchain, within the next three months before building consumer-facing applications, including digital wallets that hold car title NFTs.
“The DMV’s perception of lagging behind should definitely change,” Gupta told Fortune in an exclusive interview.
The road to blockchain
At a time when crypto is still searching for mainstream use cases, car titles have come up frequently as a potential killer application. A startup out of Cleveland raised $5 million in 2020 to digitize titles, and the state of California published a report the same year identifying possible pilots for blockchain, with the DMV included as one of the options.
Gupta said that work began on the project in early 2020, although his team had to pause because of the pandemic. Still, the agency saw an opportunity to leverage digital ledgers to modernize its processes, with generating and transferring car titles emerging as a clear area for innovation.
Andrew Smith, the president of Oxhead Alpha, said that he was pleasantly surprised by how quickly the Gupta-led DMV wanted to move with the initiative. He described the current system as using 18th-century paper-based technology to solve 21st-century transaction fraud, pointing to the common sense solutions presented by digitizing car titles and tracing their movement.
For example, if someone buys a “lemon,” or faulty car, in California, it will have a special designation on their title. If they then move out of state and back into California with the car, they can shirk the "lemon” branding and sell the car without the new buyer knowing.
“As far as the benefit for having a persistent digital title, this is a very obvious use case,” Smith said.
The DMV worked with Oxhead Alpha and Tezos to create a private instance of the Tezos blockchain, which would increase security compared to relying on a public blockchain. Smith said that the DMV chain is currently operational and running DMV validator nodes.
For now, the blockchain will operate in the background, but Gupta hopes to create consumer-facing applications soon. An obvious application would be allowing people to transfer car ownership between digital wallets through an NFT version of their title, with the DMV acting as a middleman to ensure that all the sale obligations are completed. Gupta said that type of functionality is on the horizon.
Another possible use case is transferring titles between states. Smith said that he’s seen a lot of appetite from municipal-level governments, with mayors such as Miami’s Francis Suarez advocating for crypto, and that generating interest from states would come next.
Smith added that blockchain serves as an ideal tool for collaboration between states because projects can incrementally add participants.
“This certainly demonstrates there is real benefit to real people,” he said.
