How Tokenization Will Help Fainin Take a Cut of the €335B Sharing Economy

When was the last time you played the guitar? A year ago? And what about that extra bike taking up space in your garage? You may not realize it, but you probably have at least five items lying around that are just collecting dust. Someone in your vicinity could really use that guitar for a jam session with her friends, so why not lend it to her at a modest price for a day?

Cue in Fainin, the shared economy app and OST Partner Company.
The Berlin startup wants to make it rewarding for people to lend things they rarely use, and for others to find and borrow them easily. It also wants to make sure its users won’t have to second-guess anyone renting their items, and that there’s no haggling between lender and borrower whenever something gets broken. Lastly, Fainin wants their platform to be current, relevant and value-adding to everyone looking to rent unused items.

According to a study by McKinsey, the sharing economy market will grow to €335 billion by 2025. The dawn of AirBnB and Car2Go ushered in a new attitude towards giving short-term access to your personal belongings for a rental fee. Fainin is taking this one step further by narrowing the sharing economy down to everyday items.

Fainin CTO and Co-founder Ammar Al-Eryani first had the idea for his sharing platform when he was still studying and living in a dorm. Many of his peers had stuff sitting idle, while others were looking to use those same items. The lack of a marketplace for temporary items prompted him to launch Fainin together with Ashraf Al-Eryani and Hernan Santini.

“Sometimes you just need a drill for the afternoon, but going from door to door to find out if someone has a Bosch drill lying around was so off-putting, you ended up not hanging the painting!

I saw an opportunity here and started making plans for what would later become Fainin.”

— Ammar Al-Eryani, CTO and Co-founder of Fainin

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Trust is good, blockchain is better

Lending your bike to your brother or a good neighbour is a no-brainer for most people, but renting it out through a marketplace to people you don’t know may make you think twice What if it gets damaged? Or even worse, what if you need to replace it? Who’s going to pay for it and how do you prove that the borrower damaged it?

Fainin wants to avoid lenders and borrowers getting into a “he said, she said” type of situation by allowing both parties to keep track of everything that has happened before, during and after the rental. From first contact, to the transfer of an item, to confirming that it was returned in the same condition: every step gets recorded into a smart contract on the blockchain to guarantee 100% transparency for every transaction.

And should anything get damaged during the rental period, lenders and borrowers alike have nothing to worry about: Backed by one of the world’s leading commercial insurers, items transacted through Fainin are insured up to €15,000 ($17,500). The insurance covers first, second and third party claims; meaning that if you borrow a bike, crash it into a car and get hurt in the process, all the costs including medical care up to €15,000 will be covered by the insurer.

To make sure that reports actually get filed by the borrower, Fainin has put a user rating system in place: Be an honest borrower that takes care of your rental item and you’ll get a five-star review and a little badge of honour on your profile. Be an unreliable user and no one will want to lend you anything.

Once a report has been filed, a data point (flag) gets added to the smart contract to indicate that the rental resulted in an insurance claim.

Fainin’s smart contracts are deployed on the OST utility chain, ensuring a scalable solution for the hundreds of rental agreements that will be added and modified every day. The smart contracts are kept ‘lean’ by hashing all the data (including messages, images, geolocations and videos) before they get stored in the contracts.

“OST is the perfect blockchain solution for us, as we do not need to invest precious time and money into building everything from scratch, and their technology allows us to grow our ecosystem in an agile and highly scalable way.”

— Ashraf Al-Eryani, Managing Director & Co-founder of Fainin

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Using Branded Tokens for Growth

Fainin created a secure sharing platform that encourages people to rent their unused items to people in their vicinity. Finding a way to keep users engaged is vital to Fainin’s growth, so the startup is looking to achieve and exceed the following business goals

• Making the platform the go-to for short-term item rentals
• Incentivizing user engagement
• Build up lender, borrower and product reviews
• Replace fiat money as a payment method

Based on their need to reach these goals as well as providing transparency in this process for their users on their platform, they decided to use tokenization as a way to accomplish these goals.

Tokenization lets Fainin create a dynamic ecosystem where users drive engagement inside and outside the platform. Their own Branded Token, minted with OST KIT, is called Fainin Token (“FNT”). Introducing FNT as an alternative payment system allows them to work with incentive mechanisms that drive user actions, like a borrower writing product and lender reviews.

Tokenization also allows for microtransactions, the value of which would otherwise be outweighed by traditional transaction fees. A microtransaction can be a reward or a fee as small as €0,10ct, depending on the platform’s needs.

Here’s a real-life example of tokenization within the Fainin platform:

Jenny rents a camera after seeing a demonstration video and reading the glowing reviews from previous borrowers. She really likes the camera; it even made her consider buying one! Now Fainin wants to incentivize Jenny to leave a review of the camera and its lender, making the item rank even higher on the marketplace. This brings value to other users on the platform as they become better aware of the item and its usability, resulting in a continuously improving overall user experience.

Fainin believes that with Jenny’s review offering so much value to the rest of the platform, she should be rewarded with €0,20ct worth of FNT.

In a separate use case, Ali has a mountain bike he rarely uses and would like to rent it out. However, five other people in his neighborhood also have a bike that they want to rent. To draw attention to his bike, Ali is willing to pay a promotion fee. On Fainin, he has the option to spend about €0.50ct worth of FNT per day to show his product at the top of the Sports Gear listing.

Both examples are about making users engage with the platform by enabling them to either easily earn something if they add value or spend something if they want to derive value. Using tokens, this is done at a very low transaction cost, thus drastically lowering the barrier for people to earn or pay for a certain action. These transaction costs would normally be cost prohibitive with fees charged by credit card companies, banks and the likes of PayPal. But with a token the transaction fee for a 1 FNT token transfer can be as little as €0,01.

Aside from the two aforementioned examples, Fainin is currently exploring the following token transactions:

User-to-Company (Spending FNT)

1. Borrowers spend FNT for an item to be prioritised on the platform (like an audio mixer for tonight’s birthday party)
2. Individual lenders & small business (e.g. bike or kayak rental shops) can spend FNT to sponsor items in a specific location through push notifications

User-to-User (Spending FNT)

1. Borrower spends FNT to place a reservation for an item on the marketplace
2. Lender earns FNT for delivering the item securely and on time

Company-to-User (Earning FNT / Airdrops)

1. Lenders earn more for uploading items that are more sought after within the community
2. Lenders earn for responding to borrowers’ live requests within 60 min

Fainin will work closely together with the OST Blockchain Strategy Consulting team to flesh out the token economics and incentive mechanisms behind these and similar actions, relying on OST technology to get them implemented into their app.

As FNT represent monetary value, Fainin will need to verify people’s identities to be compliant with financial regulations. This process is called “Know Your Customer” and Fainin may choose to use OST KYC in the near future to automate the verification of its users.

A token wallet for every user: Fainin’s Tokenization Implementation Strategy

Fainin has already begun development on integrating tokenization into their platform by participating in the OST KIT Alpha challenges. The Alpha program, now in its third phase, invites and rewards developers from all over the world to develop real tokenization models by building a Proof of Concept integration between their platform and OST KIT.

Continuing work on their OST KIT Alpha II Proof of Concept (see video below), Fainin’s Alpha III project focuses on preparing the platform for tokenization by automatically creating a wallet account, powered by the OST Ledger and Balance APIs, for every new user.

“We want to have the early beginnings of a tokenized ecosystem in place by the time Fainin goes to mainnet later this year, so every new user gets automatically linked to a wallet account. Users can start interacting with FNT branded tokens right from the start, as they get rewarded for their sign up, for completing their profile, and other predefined actions.”

— Hernan Santini, COO & Co-founder Fainin

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Watch Fainin’s Alpha II POC video:

The Fainin iOS and Android app betas will go live in August 2018, available to a select group of beta-testers in Germany. The team expects to finalise work on their Alpha III Proof of Concept integration later that month. A public soft-launch is planned for the 27th of August 2018, followed by Fainin going to mainnet together with OST, later this year.

Fainin aims to go far — starting out as a lending/borrowing platform for everyday things,then expanding into other sharing economies like mobility (cars, scooters, and bikes) and the rental market (vacation homes, short-term stays) in the future. With a tokenized economy in their platform, these expansion plans may happen sooner than they expected.

About OST

OST blockchain infrastructure empowers new economies for mainstream businesses and emerging DApps. OST leads development of the OpenST Protocol, a framework for tokenizing businesses. In September 2018 OST introduced the OpenST Mosaic Protocol for running meta-blockchains to scale Ethereum applications to billions of users. OST KIT is a full-stack suite of developer tools, APIs and SDKs for managing blockchain economies. OST Partners reach more than 200 million end-users. OST has offices in Berlin, New York, Hong Kong, and Pune. OST is backed by leading institutional equity investors including Tencent, Greycroft, Vectr Ventures, 500 Startups.