Cooperatives On The Blockchain
The sharing and collaborative economy have become buzzwords with Companies like Uber, Fiver, Airbnb being celebrated as the wave of the future. The sharing economy is a socio-economic system built around the sharing of human and physical resources. It consists of various marketplaces that match demand with supply using peer to peer services. Its aim is to unlock the value of unused and underused assets, saving us time, hassle and money.
SOME PROBLEMS
Unfair Reward
Early sharing economy enthusiasts envisioned a future where the peer-to-peer exchange of goods and services will provide job security and empower individuals. But what we see today is that companies handling intermediation between demand and supply usually grow very rich while the folks providing value from both ends of the spectrum are compensated with miserly rewards if any. There is a huge disparity between contribution and reward in our digital economy. There is a huge network of people creating economic value but these people are not being rewarded enough. Heck, it shouldn’t be called ‘sharing economy’. Just like Robert Reich, I believe a more accurate term would be ’share-the-scraps’ economy. Our economic and organizational structures are really messed up. Businesses today priorities shareholders satisfaction over customers.
Greed
Humans are inherently selfish. We are not hardwired to care about collective goods. What we care about is maximizing our own resources at the expense of people if given the chance. We want a cheap holiday. We want a cheap ride to pick us up and take us where we want to go. This selfish nature has also led corporations handling intermediation to put themselves first.
Centralized Governance
Limiting development of peer to peer marketplaces and solutions to few cooperations robbed us of viewpoints and ideas that we would have had if opened to a global ecosystem of collaborators who put the customer first and not shareholders. Instead of being limited to a few people, the wisdom of the crowd can be harnessed to make sure that decisions are carefully deliberated for the benefits of users
SOLUTION
Cooperatives
In a bid to optimize our digital economy, people have begun to start or join platform cooperatives. A few examples include Alpha Taxis, ATX Coop Taxi, Auckland Co-op Taxis, Partago, Green Taxi Cooperative, cooperative forms of Uber connecting drivers with users; AnyShare, Main St. Market, Fairmarket, the cooperative form of marketplaces; and others too numerous to mention.
While these cooperatives provide services like their strictly centralized counterparts, they differ in ideology. For cooperatives, it is user first, whereas, for their counterparts like Uber, it is stakeholders first.
But the cooperative structure comes with its own challenges. There’s usually the problem of political infighting which causes them to struggle with effective decision making. Also, there are some lazy members that are just freeloaders. They are there to benefit from the hard work of others. These problems make the cooperative framework inefficient.
A New View of Share Holders
What if contributors and the community around a project become shareholders and become actively involved in running an organization? Imagine a world where contributors are co-owners of businesses and values are distributed both fairly and transparently. A world where employed and unemployed people can start, join and offer their skill to a decentralized organization and the value created is fairly distributed to them.
Any individual or group of individuals can start or contribute to a project they care about and acquire some kind of equity in that Decentralised Organisation. This will enable organizations to rapidly scale up, moving from a few founders to hundreds and thousands of dedicated individuals. Imagine a transport network or a social network independent of Uber and Facebook but owned by users.
Blockchain-Based Cooperatives
The blockchain is an amazing invention that is able to make true sharing and ownership possible. It has provided the infrastructure for the creation of decentralized entities. Although the Blockchain technology has its flaws, it is the best technology for truly co-owning assets and businesses. The technology allows us to create valuable assets with rules to govern their ownership and access. We can build on this to create collectives. People around the world will be able to start or join collectives and participate. These collectives will be governed more transparently and democratically ensuring value created are distributed fairly and according to the set rules enforceable by the blockchain protocol. This kind of organization can be built on the following platforms:
Existing Platforms to build Cooperatives on
Ethereum
Ethereum is a platform that enables the creation of smart contracts needed to automate agreement between two parties. Ethereum is currently playing a disruptive role in the creation and sales of digital assets. Through the ICO, billions of funds have been raised by projects and businesses attempting to equally disrupt other sectors instead of relying on traditional funding models. In particular, the use of smart contracts on the platform allows for pseudonymous users to safely collaborate with one another on their projects.
Colony
Colony is a protocol for building a Decentralized Autonomous Organization using open source smart contracts on the Ethereum network. It enables developers to integrate decentralized division of labor, decision making, and management in their application. It combines task management with “payments” and tracking.
This platform can help solve most of the problems listed above. The protocol ensures that contributors to a project get what they deserve. No need to rely on humans to determine the reward for contributions.
Aragon
Like colony, Aragon is a decentralized application built on the ethereum blockchain that allows anyone creates and manage decentralized organizations. Not only does it provide tools for efficient management of organizations, it also minimizes cost related to running an organization. It uses its ANT token for governance or other functionalities.
These are some of the most notable solutions for building blockchain-based cooperatives. However, it is important to note that none of these platforms provides a way to completely decentralize ownership. Ethereum doesn’t solve the problem completely. It doesn’t provide a way to own resources decentrally. With it, automation happens only at the smart contract level which handles finance. So if an individual or a group of individuals want to build a decentralized Uber alternative on Ethereum, they will have to build a centralized application but link to a smart contract. This gives room for manipulation. While Colony and Aragon attempt to solve this problem, they are limited because they are built on Ethereum which was not built to support decentralized Object storage and ownership. These platforms at best, provide decentralized governance. In an upcoming article, I will write about this problem and a possible solution.
The blockchain is a budding technology making its way into various industry, disrupting traditional systems. By providing peer to peer interaction, greater transparency, and security, it will ultimately change the way we relate and collaborate.
