Need a Ride? Get it on blockchain.

Let’s go back in Time, shall we?

Transportation is one of the basic needs of society. Due to the rapid commercialisation of technology and cheap credit, everyone can now easily own a vehicle. Due to the sheer volume of vehicles, we are forced to build our cities around these vehicles rather than around its people. And yet, modern private transportation is often wasteful, time consuming and unsustainable.

A Large portion of the energy used by personal vehicles is wasted transporting empty seats and cargo space. This inefficient use of private vehicles has had severe economic, social and environmental impact in many cities across the world including traffic congestion, air pollution, noise pollution, and the consequences of traffic accidents. In addition, these transportation systems are contributing to greenhouse gas emissions. At the city level, these impacts are resulting in problems including premature mortality, disability, aggravation of respiratory and cardiovascular disease, and sleep disturbance. Meanwhile, at a global scale, these impacts are argued to be contributing to climate change effects.

Traffic congestion cost in the US alone is estimated to exceed US $100 billion. Moreover in the Indian market, traffic congestion in India’s four major cities — Delhi, Mumbai, Bangalore and Kolkata — has already cost the economy a whooping INR 1.47 Lakh Crore annually, according to a study conducted by Global Consultancy Firm. The studies across the four cities show Kolkata to be the worst amongst them, followed by Bangalore. Delhi, despite having the maximum number of registered vehicles, which is over 10 million, seems to fare better because of its good road network system, which constitutes about 12% of the capital’s total area. Whereas Kolkata has barely 6% of its entire area under road network.

We could avoid this issue in the future by building cities around its people rather than around its transportation infrastructure. As for our existing cities, people prefer private vehicles over public ones because of a variety of reasons which include convenience, comfort, and availability. Delhi has the highest share of people commuting in private vehicles with 45%, followed by Banglore at 35%.

Companies such as Uber and Lyft bring solutions to this problem through Ride Sharing. The BCG report prepared for Uber claims that on average, 89% of commuters indicate their plans to buy a vehicle in the next five years. However, 80% of them also said that if ride-sharing meets their requirements of price, timeliness, and availability, they will put aside plans of buying a vehicle.

The Promise of Ride-sharing

Reliance on single occupancy vehicles is key to easing traffic congestions. The goal is for people to have practical, efficient and accessible alternatives that rival the convenience of hopping in their cars and driving on their own. Ridesharing is one dynamic solution that exploded into popularity with the rise of new technology. Ride-sharing platforms have made rapid progress in recent years. Worldwide revenue generated from these platforms is expected to be US $60 billion in 2018.

Currently, the ridesharing market is dominated by Uber and Lyft. Lyft claimed to have 35% of the US ride-sharing market in 2018. In India, revenue in the ride-sharing segment amounts to US$371m in 2018. Revenue is expected to show an annual growth rate of 19.6%, resulting in a market volume of US$761 by 2022. User penetration is 2.5% in 2018 and expected to hit 3.9% by 2022.

So there already exists a solution to the problem of traffic congestion. Services like Uber and Lyft can provide the convenience of comfort traveling and quality service. However, there exists an innate problem with companies such as Uber and Lyft because with the rise in their reach these platforms have become more centralized and less transparent. Drivers are unfairly treated by paying increased service commission for their trips to these platforms and face arbitrary changes in incentives. Commission rates for uber and lyft go up to 29%.

Exploring ride-sharing revenue growth in india.

Smart transportation is about creating a better usage of already existing infrastructure and resources rather than the addition of new ones. Can we do something to make this industry go in that direction at the same time ensuring that power is not centralized in the hands of a few?

Enter the Silent Revolution — ‘Blockchain’

Uber acts as an aggregator or a centralized clearinghouse to connect providers with individuals in need of their services. The user interface of these platforms give the appearance that you linked directly to the service provider, and in doing so make the platform feel decentralised, but in actuality, all the infrastructure including server and software are owned by Uber, and the mechanism for individuals to transact with one another is controlled by the platform.

The blockchain is a distributed ledger wherein the information is stored on computers all around the world. Built into the ledger is a consensus mechanism that allows anybody to transact and do business with each other and to trust each other without having to go through a central intermediary. In the words of Marc Andreessen, the famous billionaire, entrepreneur, investor, and software engineer,-”it is the distributed trust network that internet always needed but never had.”

The key advantages of blockchain models can be summarized as decentralisation, trust, security, chronological data, collective maintenance, and programmability. By using Blockchain technology, we can overcome the issues that come along with centralisation.

La ‘Zooz is a blockchain based platform that aims to solve these issues by building a worldwide, decentralised, collaborative transportation web. Their idea is to create a genuine decentralised transportation network which is managed and run by its community.

Blockchain-based platforms will be fair and transparent as the rules and regulations will be coded into smart contracts and will be available to be reviewed by all members of the platform. Currently, rules and incentives are controlled by centralised ridesharing platforms. In decentralised platforms, any changes would need to be executed by a governance mechanism put in place using smart contracts. The cost of running such an organisation will be minimal as most of the decisions will be made by smart contracts. There will be no fancy offices spaces with huge salaries paid to their employees.

The increased usage of the platform will lead to an increased value of the utility token which will, in turn, benefit the riders, drivers and other contributors by re-distributing the profits among the community. Instead of having a centralized organisation acting as a clearinghouse, everyone who wants to drive others around would attach that piece of metadata to their profile which in turn, will form part of a blockchain. There would be locations served and other information such as reviews of the driver that could be added to the profile. Then, when someone requests a vehicle, the blockchain could filter out possible matches and deliver them to the rider who can request a ride. Subsequently, transactions between the driver and rider can be processed on the peer-to-peer network.

Anything that can conceive of as a supply chain, blockchain can vastly improve its efficiency- it doesn’t matter if its people, numbers, data, money.

~ Ginni Rometty, IBM CEO

Key areas where blockchain could prove useful for ridesharing are:

  • Safety and Screening —The process of screening for applicants based on criteria such as criminal history and traffic incidents are similar to the industry giants. However, blockchains allow decisions regarding safety and security to be made collectively as a community rather than centrally.
  • Traffic Law Compliance — The ability to log a driver’s traffic record on the Blockchain could be used while hiring or selecting a driver.
  • Lack of Flexibility — Implementing the freedom for riders to choose their driver, as well as drivers having the ability to participate in a referral network or social circle of previously driven customers.

Analysing the Mystery — La’ Zooz

Based out of Israel, the business model of La’zooz aims to create an open — source, decentralised, community-owned transportation platform that turns a vehicle’s unused space into a variety of smart transportation solutions. By using cryptocurrency, La’zooz works with a ‘fair share’ reward mechanism for developers, users, and backers. The platform synchronises empty seats with transportation needs in real-time, matching like-minded people to create a great ride sharing experience at a ‘Fair price.’

They want to create a collaborative transportation web in which users can easily, instantly and at affordable rates, “surf” (Term they use for easy traveling) from place to place. La’zooz’s real-time ride sharing also provides a multi-hop solution, in which a rider switches between several vehicles on the way to his or her destination.

We will further analyse the business model of La’zooz to see how they incorporate blockchain technology to create an intelligent Transportation system.

La’zooz has one of the most successful application scenarios of a blockchain based intelligent transportation system. They have a leading business model in sharing economy and social transportation. La’zooz engages with the customers through their decentralised application (Dapps) which enables private car owners to share their empty seats with others traveling the same route. They use an intelligent transportation system by evolving ride sharing into a truly decentralised, community-owned-and-managed transportation network without poor centralised decision-making or risks which include surge pricing, privacy leaks, etc. To create this intelligent transportation system, networks will be Mapped out using, what La’zooz calls ‘Road Miners’, who essentially are members of the community that register as one of La’zooz’s computing nodes. The road miners are incentivised to share their transportation data by rewarding them with crypto tokens called ‘Zooz’ (housed on bitcoin blockchain) in proportion to the distance covered by them. Once the application is launched on achieving critical mass, these tokens can be used to pay for ride-sharing and other transportation services. Now, these tokens are mined by an innovative consensus algorithm designed by La’zooz called “Proof-of-movement.” This encourages the road miners to drive with the decentralised application of La’zooz running. As the road miners are interconnected into a P2P network without any central authority, their real-time transportation data is verified and stored in a community maintained crypto ledger through which all ride-sharing behavior, schedules, and payments are coordinated and executed. This is how they will create their local social transportation web.

Matan Field and Shay Zluf, founders of La’zooz, maintain that proof of movement does not incentivise fake driving and energy wastage. The value of tokens to be distributed will always be lower than the cost of the drive. So there won’t be any reason to drive to get Zooz tokens. Distribution of Zooz tokens is there only to incentivise those who ride anyway to share their location (and other ridings) information and by that help in building the “collaborative transportation network” (and in particular “real-time ridesharing”).

An ITS-Oriented Blockchain Model

A number of algorithms are designed and integrated into the La’zooz Dapp which can be used to make specific decisions without human intervention, for example, detecting the usage rate of a particular geographic region and activating the service in the area where the number of active users exceeds the “critical mass.” The community collectively makes its formal decisions according to each user’s weight, which represents the user’s contribution to the community and will be updated once a month via a public voting process.

Companies like La’zooz, arcade city, iride.io and other companies with similar business model represent the future trend of social transportation and will reshape the sharing economy. Ride-sharing can be part of the solution to traffic congestion because it gets more people into fewer cars. We can unlock our cities and their full potential, but we have to do it together.

The path ahead….

How do we know the potential for Ridesharing in Asia?

Over half of the world’s top ten most congested cities are located in Asia. According to Uber, Asian’s are stuck in traffic for almost two weeks a year. That’s just a few days behind the total number of vacation days allowed by employers in most of the Asian countries. Governments of these countries have serious concerns about traffic congestions emerging as a drag on economic growth because the number of vehicles is increasing faster than the roads being built. Economic losses in developing Asia are estimated to be over $35 billion in 2030.

Top ten of the most congested cities across Asia (by % level of congestion).

Bangkok tops the list in Asia followed by Jakarta and Chongqing. Bangkok remains number one concerning traffic congestion, with just over 12% of the population of Thailand, despite having a new and modern subway system along with other vehicles of transport. It would take twice the time it took to go to work in the morning, to return home in the evening. Because of the increasing number of vehicles and inadequate public transportation infrastructure, people are forced to use motorbikes to avoid traffic in Jakarta. It has even given rise to motorbike taxi-hailing service industry.

Chinese cities, namely Chongqing, Chengdu, Shenzhen, Beijing, Changsha, and Guangzhou are among the worst traffic congested cities in Asia along with Taiwanese city of Tainan. A study conducted by Uber on heavily congested Asian cities claims that 40% to 70% of private vehicles can be removed if ridesharing becomes a viable alternative to owning private vehicles.

What are some of the hurdles to implementing blockchain in Asia?

As per IBM, elimination of an intermediary to conduct business could disrupt the business model of the most massive technology backed sharing economy companies like Airbnb, Uber, eBay, Amazon, etc. However, creating an independent blockchain solution in some of the Asian countries may still not be viable as the mode of profit/commission is not defined. The process of implementation of blockchain can get very expensive for example blockchain developers are in huge demand now so hiring blockchain experts and data scientist is much costlier than software developers. There is a considerable dearth of people skilled in blockchain around the globe, and leading institutes are yet to adopt blockchain courses. In case of funding, ICO’s help generating funding for blockchain startups, however, the Indian tax and banking authorities are not in a happy place with cryptocurrencies and ICOs, making it difficult for startups to acquire funding. Similarly, in China, ICO’s are officially banned. It is required by law for Chinese citizens do not participate in ICO’s however, citizens in Hong Kong and Taiwan are still investing with some liberty.

Blockchain as an enabler can help to bring all the relevant stakeholders together, create accountability and transparency across the value chain and can set a strong foundation for the successful implementation of the integrated intelligent transport system in India. There is a need for a comprehensive blockchain framework policy that would regulate and encourage shared mobility system addressing the above challenges.

Helping you understand the fundamentals of blockchain and develop elegant blockchain solutions to empower your successful businesses into new technology spaces, BirthVenue.

Curious to explore blockchain for your company? Get in Touch with us at BirthVenue.in

Envisioning a world without intermediaries.

Sabarish Nair

Blockchain Analyst

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Sabarish Nair

Sabarish Nair

Blockchain analyst with key focus on protocols & scalable industry solutions.