Blockchain to Usher in Sharing Economy 2.0
The sharing economy is broken. In theory, the idea is sound enough — why does everything need to be personally owned when a society can function just as well by sharing? The average private vehicle, for example, goes unused for a reported 95% of its lifetime. Spare rooms in city centres sit also sit unused while hotels charge premium pricing that shuts out a lot of people from the experience. Why not, then, create a system in which cars or ‘rides’ are shared and those who have spare rooms can welcome guests for a relatively affordable fee. Voila, you have a sharing economy.
But this isn’t how things have worked out. Nothing is being truly ‘shared’ if monopolies have emerged to control that sharing. The likes of Uber and Airbnb have cornered markets (barring a few notable examples) the world over, with previous incumbents unable to compete with these all-powerful new middlemen. A sharing economy would suggest choice about how that asset is shared, not becoming beholden to profit-stripping central authorities that can deny access to the market with impunity.
Ultimately, it is very easy to argue that the business models adopted by the likes of Uber and Airbnb are exploitative in how they go about sourcing their product. The former offers flexible working for its drivers but is then able to step back from offering any sick pay or anything resembling a pension. The latter has an arsenal of properties for rent in just about every city on earth, without having to play by some of the key rules that hoteliers have adhered to for generations. Airbnb naturally does not employ room service, receptionists, or housekeepers in their properties, cutting off an important avenue into work for a lot of less economically-developed countries.
Those driving for Uber aren’t professional employees, therefore receiving none of the benefits that come with that status. Uber drivers have to provide their own cars, pay for their own gas, pay their own road tax, etc. All the while, these high costs for the drivers are pitted against low fares for customers, a system that has laid waste to the local minicab industry the world over. It’s for this reason that many people are conflicted in their opinion of this new form of tech company. People like the service provided by Uber, all while being aware that conditions for drivers can be poor and the money earned is often inadequate.
Enter Blockchain
This is an area in which blockchain technology can stake a legitimate claim to be the future. Decentralised tech is creating an infrastructure in which middlemen are redundant and technology itself — along with those using it — regulates the market. If assets can be logged and shared on the blockchain, the next iteration of the sharing economy can begin to take shape.
This Sharing Economy 2.0 could be used to address the problems of an economy built on second-rate forms of employment and profiteer middlemen. Sharing economy platforms, as they exist today, do little more than facilitate the sharing process, often taking a significant cut and making revenue significant enough for aggressive global expansion. Blockchain technology could feasibly replace them.
Let’s use Uber as an example. If the vision of Uber was that drivers would be able to make money from their asset as and when they wanted to, and that riders could pay cheaper fares thanks to the lack of admin costs associated, then the central authority of Uber itself isn’t fundamentally necessary. Uber exists to create and maintain the app and database of drivers and riders in order to ensure that the transaction is as smooth and safe as possible.
Siloed, centralised organisations which play a gatekeeping role don’t tend to survive the intense competition that arrives when their industry is democratised. Uber has plundered the regulated, monopolised minicab industry, but may find itself forced to quickly adapt if a decentralised alternative enters the market.
Centralised intermediated business models like Uber (and indeed Airbnb) are prime candidates for decentralisation. Perhaps the most vital function they perform is acting as mediators, background verifiers and complaint handlers. In the case of background checks, they could, in theory, be performed by a trusted third party — particularly given that Uber has a less than perfect track record so far.
In a decentralised system, the rider and the driver are connected with no central body needing to facilitate that process. The app would find nearby available drivers, who would then be able to bid on the fare. Once the rider has selected a driver, a smart contract would be automatically created between them, with the funds placed into escrow and held by the smart contract only to be released once the fare is complete. This process requires no central body other than for the creation of the app itself and for the management of complaints from either side.
In a true sharing economy, the notion of third-party platforms profiting from a ride-share would become unheard of, rather those doing the sharing could see the benefits directly. Once the public is accustomed to trusting a smart contract (rather than an organisation) to carry out and enforce a transaction, then the absence of governing bodies will begin to make sense — direct, peer-to-peer sharing in such a way that is sufficiently beneficial to both owner and user.
When blockchain technology first started getting serious attention, it was primarily talked about as a potential opposition to the established financial industry. Yes, cryptocurrencies have the potential to severely disrupt the major banks, but blockchain’s potential in other areas shouldn’t be overlooked. The sharing economy, as it exists today, has been lauded thanks to the success of the products created by Uber and Airbnb, but this is based heavily on price and access. If elements of exploitation and profiteering can be removed, the product will be matched by the infrastructure underpinning it.
