Will Blockchain Spell the End of Brokers?
According to Nitin Gaur, the Director of IBM Blockchain Labs, “we are living in the age of disintermediation,” or the removal of middlemen. He gives a few examples: Uber, a ride-sharing service that has no actual taxis of its own; Airbnb, which possesses no inventory of guest properties but sees a great deal of business by allowing people to offer individual rooms in their homes; Alibaba, which connects customers and suppliers directly. From South Asia to North America, on a global scale people seem tired of middlemen and want to interact directly with each other.
That’s one of the benefits of blockchain technology. It’s secure, fast, and creates a transparent ledger that records all transactions and alterations made on it (and it’s accessible to all necessary parties of said transactions). More and more industries are jumping aboard the blockchain train, from banking to real estate to charity giving — and its transparency often removes the need for intermediaries, like brokers.
Using blockchain isn’t quite mainstream yet, but it’s on its way to be. This poses the question: are brokers about to become unnecessary?
First, real estate. Because there are so many steps associated with the process of selling and buying property, it’s prime ground for fraud. That’s why third-party verifiers are often necessary. According to Techcrunch, “At current, most buyers and sellers make use of escrow and title companies for third-party verification — a safety net to make sure both parties keep their end of the deal, as well as reduce the risk of fraud.”
But if smart contracts are exchanged and transactions enacted via blockchain, is that extra authentication necessary thanks to blockchain’s transparent nature? Escrow agents typically take 1–2 percent of a property’s value in commission. That’s not a fee most people like to pay.
As of now they are important, but blockchain databases are so thorough that “new platforms can eventually assume functions such as listings, payments, and legal documentation. Cutting out the intermediaries will result in buyers and sellers getting more out of their money as they save on commissions and fees charged by these intermediaries. This also makes the process much quicker, as the back-and-forth between these middlemen gets cut.” This is appealing to property owners but doesn’t bode well for real estate brokers.
Some websites charge a fee for freelancers and people looking to hire freelancers to use their services. They can connect potential clients and contractors, but what if it was easier for them to find each other? Boon Tech is “a blockchain-based, free freelance marketplace in which employers and freelancers meet to carry out transactions involving freelance series with cryptocurrency rewards.”
You read that right: Boon Tech is not only free, but it also offers users rewards. Using blockchain’s ledger allows employers and freelancers to find each other and rest assured the other party is legitimate. No third-party middleman or “intermediary” is necessary here.
The supply industry is also rife with errors and inefficiencies. Years ago, it was easier to keep track of trains because railroads are fixed and can carry greater loads. Trucking allows for more maneuverability, but limited technology makes it difficult to manage the numerous vehicles.
When trucking entered the scene, “freight brokers became the lynchpin connecting what is now 15 million trucks to 250,000 manufacturers and 300,000 distributors across the country. Brokers became the purveyors of communication, discovery, and trust — and effectively indispensable,” according to Fr8’s whitepaper.
Fr8 created a new system that has the potential to revolutionize the supply industry. They created a tokenized network that works like Uber: customers can search for nearby reputable drivers to transport their goods, and drivers can likewise search for customers who need something transported (ideally towards their home destinations after a drop off).
As they describe it, Fr8 Network is blockchain-based “platform for shippers, carriers, and brokers to place and track orders, compare prices, assess performance, buy insurance, and set payment and credit.” That sounds like they’re trying to make brokers obsolete, right?
If users can access an interface that allows them to see actively driving trucks, search for driving jobs, track shipments, and view other relevant information, it doesn’t seem like a mediator is necessary to oversee the system. The system takes care of itself; however, Fr8 has no intention of eliminating brokers entirely.
They “believe individual brokers will exist in the marketplace as representatives of shippers and carriers, much as they do today. But [they] want to give every broker access to the tools and information they need to operate effectively and capture the full rewards for their hard work. Today’s brokers exist primarily as liaisons of relationships. Now independent brokers can enter the Fr8 ecosystem as enablers — a critical asset for optimizing [their] network of shippers and carriers.”
Brokers won’t disappear; their duties will just shift. Fr8 is meant to make the trucking industry more efficient, but that doesn’t mean some sort of oversight isn’t necessary.
Blockchain is a transparent ledger, which means it’s secure enough to handle a variety of transactions without a third party acting as an intermediary. Brokers may not have a lot to do in certain industries in the future, but in others, they’ll only have a different set of jobs to do — they won’t vanish altogether.
What do you think blockchain means for brokers?
Disclosure:
The author has had a working or personal relationship with one or more companies mentioned in this article in the past. Access to mentioned company’s management and information was made through the author’s personal network. All information was vetted prior to posting.
Disclaimer:
This essay is not intended to be a source of investment, financial, technical, tax, or legal advice. All of this content is for informational purposes only.
