4 Ways The Sharing Economy Can Benefit From A Blockchain-Based Credit Solution

Your FICO credit score determines whether banks and other lenders will loan you money.

Too low, and it may be impossible to get a loan.

But a high credit score means lenders will be willing to extend you more credit, and usually at a lower interest rate.

This score is calculated using several different metrics — like payment history, combined credit lines, and number of open accounts — that determine the likelihood you’ll pay back your loan in full.

It’s our belief that the sharing economy can benefit from a similar credit scoring system.

Much like the credit industry, the sharing economy operates by trusting a person with something that isn’t theirs.

For loans, it’s money. In the sharing economy, it’s a bike, a car, or even a house.

At Spin, we’re envisioning an open source, decentralized credit system that can be accessed by any sharing economy provider.

We see the future of credit as a blockchain-based scoring solution that works throughout the entire sharing economy.

We call it Layer Protocol.

And when this credit scoring is put into place, it will accelerate the growth of the sharing economy — and benefit all sharing platforms and their users.

Here’s why:

1. Establishes Decentralized Reputations

Some people are extremely trustworthy. Others less so.

The problem is that it’s often difficult to tell who is who when it comes to the sharing economy. That’s why you see Airbnb hosts who don’t accept “first-timers.” They’ve been burned before and don’t want to take a second chance.

Our goal with Layer Protocol is to help establish a decentralized reputation that can move freely from sharing platform to sharing platform.

That way, as an Airbnb host, you can know if a first-time user sending you a request has trashed five bikeshare bicycles in the past month — or if they have an impeccable track record within the sharing community.

2. Prevents Monopolies

It’s difficult for new sharing economy providers to emerge because of the centralization of reputation scores.

Each site effectively creates a natural monopoly as it grows and adds more user reviews.

For example, it’s hard for a new Airbnb to emerge because consumers have built up scores and reputations on that platform. There may be a better platform out there somewhere, but users are less likely to migrate to it. They won’t have the same privilege their reputation affords them on Airbnb.

But if reputations are decentralized from the platform, that means users can take their reputation from one sharing platform to the next.

Companies then have an incentive to continually improve their offerings and innovate faster than emerging competition.

3. Improve Borrower Behavior

Each sharing economy provider relies on the trustworthiness of the borrower to keep the the asset in good working order.

Whether it’s a car, a scooter, or an apartment, they’re trusting that the borrower will return it on time and in good shape.

Right now, punishment is the only incentive that fuels borrower behavior. A damaged back seat or a dinged up scooter means a bad rating for the user.

But on blockchain credit system, a sharing economy provider can actually reward positive user behavior.

For instance, Layer Protocol lets borrowers receive tokens for good behavior. Tokens which could then be used to redeem services on other platforms.

So, if you clean the sheets before leaving an rented Airbnb, the host could send you tokens for your service. You could use those tokens for your next bike or home rental.

And remember how people with good FICO scores get lower interest rates? We empower that within the sharing economy as well.

Develop a good track record and you’ll see the cost of some services drop.

While the punishment mechanism is still there, the goal is to continue introducing positive incentives for good behavior.

4. Establish An Alliance of Providers

A decentralized credit solution will allow us to create an alliance of sharing economy providers — without one platform running it and gaining power over everyone else.

No provider wants to rely on someone else. They don’t want to rely on Airbnb, Uber, or Spin to solely own a system. But most providers would be fine with using one system as long as they were all equally-incentivized participants in the network.

Decentralization through the blockchain promotes integration.

It’s simple to integrate two different platforms, or to make two platforms compatible with each other, when everything is open and digital. We even foresee an alliance of providers as different protocols grow and combine. Blockchain protocols are the building blocks of the decentralized “web 3.0”.

And this will be possible because of the natural synergy within the sharing economy. A distributed ledger credit system running on blockchain will be the glue that holds the system together.

In the future, the sharing economy will grow to encompass every part of our daily lives.

Our first focus for Layer Protocol is asset-sharing platforms: carshare, homeshare, and bikeshare.

But our ultimate goal is to build the foundation that betters existing sharing economy platforms and accelerates user-facing innovation in the space — a decentralized system that gives people access and incentive to participate in the sharing economy.

Join the Layer Telegram community for future updates: https://t.me/layerprotocol