A few days ago, the California DMV announced that it is testing the use of NFTs as car titles on a private blockchain on the Tezos $XTZ network.
Information about the program is scarce as of now, and what we know creates more questions than answers.
What’s Going On?
California DMV chief digital officer Ajay Gupta said in an interview with Fortune that California is trialing the use of NFTs on a private Tezos blockchain. According to Gupta, the move will “increase efficiency and transparency while reducing costs.”
Importantly, Gupta noted that a proof-of-concept model has already been through testing and that the Department of Motor Vehicles hopes to have its title database fully replicated on the private Tezos blockchain within three months.
So What?
There are many ways to ask the obvious question this brings to mind, and we’ll start with “who cares?” with “does this matter in the slightest?” as a close second.
The answer here is, well, it depends.
Are you a crypto investor? If so, this isn’t going to be directly influencing your Tezos investment, so your answers are “(mostly) not me” and “no”.
Are you living in California, in the market for a new car, and a tech-forward individual? Then it's “I care” and “yes”.
Private Blockchains
The reason crypto investors should be rather neutral-to-not-caring about this is because, well, there really isn’t any direct influence on Tezos' price that is going to arise from this. In fact, it is completely likely that Tezos users are actually going to end up reinforcing the private layer 2 DMV blockchain, without seeing any increase in demand for Tezos tokens.
Private blockchains are nothing new. They have existed in companies for many years as a way to manage data. If I want to change something in the database, I need some people to approve it on their end and then my data (block) can get added to the database (chain).
While this is true, allowing outside people to lay claim, with or without access to the literal NFT and not a digital copy that the DMV shares with you, is new.
But?
While Tezos investors shouldn’t feel like they struck the motherlode with this deal, it could yet be meaningful for the blockchain.
With the first one being built on the Tezos blockchain, logically, when Oregon, Washington, and others follow suit, Tezos will make logical sense. When a Californian sells their car to an Oregonian, it just makes sense that they would want to avoid adding a step to wrap the NFT in some other crypto.
But again, that would be another private blockchain. The really important thing would be that Tezos, unlike other blockchains, actually have their foot in the door of reality.
If you are a Tezos investor, you are hoping that this partnership can lead to integration in other ways that directly increase demand for Tezos through real-world use.
Questions
I lost my crypto keys, did I just lose my car?
I’ll answer this one with a resounding no. Blockchains that have no recovery, also have little to no KYC (Know Your Client) information. No ID checks, social security numbers, nothing. Further, you likely won’t actually own the NFT, but rather, like on Coinbase, you will be told you “own” this thing that someone else keeps under custody. Unlike Coinbase, you won’t be allowed to send this to a DeFi address, I assume.
What happens if you sell your car to someone outside the state of California?
Think of three months as the start of a transition to digital claims of ownership and nothing more. It will likely be simpler to transfer Cali-to-Cali, but will likely be the exact same procedure for those opting for the Web 2.0 version of asset transfers.
Will the NFT car titles increase demand for Tezos, thus increasing the price?
Likely not. With the California DMV using a private blockchain, the likely relationship will be Tezos transactions adding a layer of security to the DMV-chain. Unless there needs to be a transfer of Tezos cryptocurrencies between the parties, which seems unlikely, then there should be no direct price influence.
Is there a need for Tezos? Or could the California DMV just create its own private blockchain by copying one of the many open-source cryptos, including Tezos?
Private blockchains have existed for a long time and it is likely that Tezos is more of an ease-of-use solution rather than the sole one. Further, token and blockchain migration is common and means that the DMV is by no means obligated to always be on Tezos. If let's say, a certain Treasury issued a stable coin of its own. Well, DMV-chain and other government-related blockchains will always be able to migrate there.
