How blockchain can solve the problems of delivery and shared ride applications — 1 of 2

By Matheus Darós Pagani
CEO of 4CADIA Foundation

Article originally published on LinkedIn

In recent months, Brazil has seen protests from application deliverers like Rappi and iFood against the amount paid by companies, the absence of labor rights and the working conditions faced by workers.

The workers’ complaints, which have come to be added to many drivers of application companies such as Uber, Cabfy and 99, dissatisfied with the percentage of races charged by the company and the lack of transparency in the relationship with drivers.

As always, sectors of the political world have tried to respond to the demand by urging increased regulation and even nationalization of services. A candidate for mayor of Rio de Janeiro even defended the creation of applications by the city, so that the cost of intermediation was not passed on with so much onus to drivers, deliverers or customers.

Unfortunately, society does not seem to see that the solution may be not in a setback, but in a step forward. In this sense, the blockchain could solve many of the impasses involved in this imbroglio.

The problem

Since its arrival in the Brazilian market, delivery and shared ride applications have represented a true revolution in the market.

Urban passenger transportation was dominated by cab companies whose licenses were issued by the public authorities, which also defined the amount of fares to be charged to passengers. In the case of delivery companies, delivery services became much more expensive due to the imposition of plastered labor legislation, one of the biggest problems for the free market in Brazil.

With the arrival of delivery and transportation service applications, the scenario changed for the better. The number of people employed grew, the cartels that dominated the market were weakened and many businesses were able to become more dynamic. The problem is that, in fact, this has bothered people who have difficulty adapting to the model.

Contracts with Uber, Cabfy, iFood, Rappi, among others usually result in excessively long working hours (in some cases, 12 hours a day or more), with precarious working conditions, low pay and very little bargaining power between service providers and large companies. For this reason, the topic should remain on the agenda of the day, in spite of the irrationality of the solutions presented so far.

A problem that cannot be solved with another problem

Of course, the kind of response offered by the state to such a situation always tends to make the problem worse. Forcing companies to hire delivery guys or drivers by a plastered labor legislation like the Brazilian one would only make the services leave the country. This hypothesis is catastrophic, all the more so because it would exponentially increase the number of people without income in a country already affected by the crisis caused by COVID-19.

On the other hand, the state administration of applications managing millions of reais every year is another source of corruption and inefficiency, going against the proposal of innovation and speed that the companies mentioned represent. After all, the creation of a monopoly was never a viable solution for oligopolized environments, in any situation.

Between the economic retrocession and the precarious work, it seems that the Brazilians find themselves facing a choice of Sofia. But what if it didn’t have to be so? What if blockchain could offer a solution to the problem?

Beyond inefficiency

The problem represented by the applications in question goes far beyond asymmetric contractual relations. It involves security as well. In the USA, for example, Uber has already revealed 3,000 cases of sexual assault involving its drivers in 2019.

As much as the company claims to have a control policy to avoid this kind of situation, it is easily conned by offenders. Generally, the problem occurs when a person who has been approved rents his car to another driver, who was denied in a previous evaluation or simply did not submit to registration. This type of failure allows repeat offenders to continue using the service even after they have been removed a first time.

Real free market

Intermediation, therefore, is at the heart of all these issues. That’s why blockchain can offer a solution that pleases all parties involved — except, of course, the large application companies. With decentralized network applications and protected by encryption, it is possible to create a self-regulated service, which establishes a practically direct relationship between the provider and the user, with more security, trust and transparency.

This means savings in transaction costs, which today are concentrated on application providers, allowing a free market environment between provider and customer, with less asymmetry of information and capable of reducing inequalities.

In this model, it is possible to think of applications in this network that work as a “book of offers”, in which people can request services or offer them freely. When there is a match, both parties connect, without the need for an intermediary.

Safer applications

Also the security of all involved parties can be operated with blockchain applications. This is made possible by the immutable character of the ledger, which allows tracking all transaction records, which makes the reputation of both parties widely accessible to other participants in the network.

Travel sharing platforms can thus distribute information between drivers (or deliverers) and customers equally within the network. To ensure the security of all involved, the network can be informed instantly if a passenger sends a distress call, for example. This would allow other drivers or police officers to respond quickly to the call. The same goes for fraud or misconduct by deliverers in delivery applications.

A distant dream? Quite the contrary. In the next article, I will talk about use cases already in operation and others in development.