Companies Like Uber Need to Be Decentralized
The demand for greater transparency, accountability and equality between users and service providers has been met through the “sharing economy”. Decentralized cryptocurrencies, decentralized applications, and technological innovations such as Bitcoin and Ethereum, are also part of this movement. Can such innovations improve Uber and the ride-sharing industry?
To expand on this notion it would be wise to sample an industry. For our purpose we will examine the ride-sharing industry, which is currently monopolized by well known brands such Uber and the smaller Lyft.
What are the downfalls of centralized technologies and how can we improve on them using decentralized protocols, without intermediaries?
Issues of centralized systems
Centralized systems — political, financial or otherwise — are prone to fail by design. The need to trust an individual, company, or authority, introduces risks that simply do not exist in a decentralized system. In short, centralization concentrates power:
“Power tends to corrupt and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority.” — John Emerich Edward Dalberg, Letter to Archbishop Mandell Creighton, 1887
Centralized platform are also vulnerable to hacking. A chart included in an article published by Business Insider last November (2017) titled “How Uber reportedly tried to keep the lid on the data breach that affected 57 million people” compares recent hacks:
All of these centralized platforms hav been hacked, leading to millions of people’s private information being exposed. A massive violation of the personal privacy and security of those who trusted these service providers to keep their personal information safe.
Decentralized cryptocurrencies and applications have a different approach. They allow you — as a user — to carry your own data, as opposed to relying on gatekeepers to secure that data in exchange for using their platforms.
The downside, from the perspective of investors and regulators, is that decentralized platforms offer less options to monitor, control, or monetize the activities of the users. If you control your own data, then what power or insight are they left with?
What that in mind, let us return to our case, the ride-sharing industry.
Uber and Lyft, centralized or decentralized applications?
Traditional ride-sharing platforms, such as that of Uber or Lyft, seem decentralized, right? Well, no, not exactly. Uber and Lyft are both proprietary applications, meaning that they are closed, owned and operated by a corporation. They can be viewed as a stepping stone towards having a fully decentralized, autonomous and open-source platform.
For now, these platforms give people the ability to use their network, find work and get paid. Due to their centralized design, Uber and Lyft are vulnerable to regulatory attacks. A case in point is the recent — December 19 (2018) — decision by UK courts which ruled against Uber’s argument that drivers are contractors and not workers. As a result of this decision, Uber drivers are entitled to holiday pay, sick pay and a minimum wage:
“The ruling radically disrupts Uber’s business model, and the GMB union [British Trade Union] estimates drivers could each be owed as much as 18,000 British pounds ($31,700 [USD]) in backpay and entitlements.” — ABC, 2018
Australian barrister Sheryn Omeri — noted in the article for defending Uber drivers in Australia — adds perspective on the matter :
“No-one is saying that Uber technology is a bad thing, it’s a very good thing in that it enables these opportunities for people to obtain work and earn their livelihood… The issue is it can’t be permitted to expand at the expense of the rights of the people who give that technology life.” — ABC, 2018
Uber has appealed the decision, buying time until the judgement of the Supreme Court— the highest court in the UK. Until then, Uber doesn’t need to act on the existing decision and can freely continue its path towards a long awaited IPO — set to launch in 2019.
Scandals and Controversies
Both Uber and Lyft have been part of numerous cases which clearly demonstrate issues surrounding centralized systems. As mentioned in an article by Reuters:
“The controversies included allegations of sexual harassment, obtaining the medical records of a woman raped by an Uber driver in India, a massive data breach, and federal investigations into issues including possibly paying bribes to officials and illicit software to evade regulators.”
See also a Business Insider article titled “40 of the biggest scandals in Uber’s history”, and a TechCrunch article titled “Former employees say Lyft staffers spied on passengers”.
The most significant Uber scandals are the data breach of August 2017, and the exposure of the personal information of 57 million users in November (2017). As covered by Business Insider, “hackers contacted Uber and demanded a $100,000 extortion fee to erase the data from their servers”, a proposition which Uber agreed to and disguised as “bug bounty” fees. William McGeveran, a law professor at the University of Minnesota posted the following tweet:
Can we trust centralized systems?
The real question still remains, does the end justify the means? Can we excuse the wrongdoings of Uber and Lyft, which have provided jobs to individuals who would otherwise be unemployed, and opened a market that was previously monopolized by taxi drivers?.
That is something we must consider.
What would a decentralized Uber look like?
Decentralized applications and companies will in time do to Uber what Uber did to taxis, and empower consumers with options that didn't exist before.
Imagine an application where you, as a driver, set your fees. You decide what currencies to accept, whether it be PayPal, cash, credit cards or even cryptocurrencies.
You can keep all the money or, if you like, you can donate a small percentage to further develop the application and selected features. The ride and fare is secured via a smart-contract — for example on the Ethereum platform — removing the risks involved with payments, which take place automatically once the journey is complete.
As a passenger, you own your ride history data, which is encrypted and secured on a blockchain. If you choose to share some of that data, you are rewarded with a discount or an upgrade in car class. You can chose to ride with a driver with whom you have built a relationship, or specify details such as the driver’s language, the type of the vehicle, or that pets are allowed. There are exciting projects working on similar concepts (see DAV Protocol).
An advantage of decentralized systems is that they permit matching very specific needs, without having to give away a significant portion of the money to a gatekeeper.
Building blocks of new decentralized ride-sharing platforms, such as the identification system, screening process and insurance (see Civic), are in development. Once the new platforms are in place, drivers and users won’t be at the mercy of regulators or centralized companies.
Image from Pexels.
