Sharing economy and blockchain
By now I am sure everyone has heard about the sharing economy, or at least the success of companies as Uber, Airbnb, Udemy. These companies are conquering the world of business, without even owning anything- Uber does not have any cars, nor does Airbnb any property. Let's have a look at what the sharing economy is, its benefits and downsides, and how blockchain can improve these services.
What is a sharing economy?
The sharing economy, alias collaborative consumption, are businesses which provide platforms to sell or rent products or services by a private owner.
The origins of these services can be dated back to 1995 to the founding of E-bay and Craigslist, where people started to re-circulate their own goods. Since then, we are not just sharing and selling our old things, but we can sell our free room for certain days, rent a seat in our car, or our ability to fix a TV.
There are 3 major factors which made this type of business possible:
- Technology- with the spread of internet, faster communication, and intelligent systems technology made it possible for even distant individuals to connect and share what they have.
- Desire to create fair, sustainable businesses and more social connections- we are not just looking for product or a service anymore. We want experiences, values, and to spend our earnings in supporting our community, the environment, and our social life. By Uber, Lyft we support the environment by using less cars more efficiently. Airbnb does not just give you a room, but an opportunity to connect with locals in any part of the world. These values and desires, above financials, drive us to participate in the sharing economy.
- Trust- renting out your room to a stranger, having someone else drive your car- all these and more require a high level of trust. After all, we do not know these people, how can we make sure that they are going to do the right thing? With its community building activities, feedback and rating systems platforms allow us to share our opinions, and choose reliable service providers. This trust has been built step-by-step from the start, and it constitutes a trust not just in the specific provider, but in trusting the platform system as an effective source of services.
- Extra income for prosumer- all these services give the possibility for anyone to earn some extra bucks with the things they already have or do
- Lower fees than traditional providers for consumer- as the services are not necessarily are provided by professionals, but our peers, these services tend to have a more friendly pricing range
- Better use of resources, creating more sustainable solutions- by sharing our products we can ensure more effective consumption, and more sustainable use- for example, sharing car rides helps to reduce car pollution, and reduced DUIs in several US states
- Community building- with connecting to our peers, we can have more meaningful relationships with service providers, and build our own community based on the values of the platform. One of the reasons for Airbnb's success, is that it connects you to locals, and let's you peak into how they live their lives in a different place. Airbnb is also known to help regions with slower tourism to attract more travelers.
- Richer experiences- from person to person we are able to adapt more the experiences, and provide better services. By rating drivers on Uber, they have elevated the service, tend to chat, or provide you with a complimentary bottle of water. This provides a better experience than a nameless taxi drive.
- Lack of regulation- Strict regulation is a burden for companies, and a barrier to entry to plenty of small entrepreneurs. However, regulation also gives a standard for emergency processes, liabilities, safety and security. Hotels have sprinkler systems in case of fire, taxi drivers have licenses that prove their capabilities. Taxes provide a base of income for our cities the services they provide- from firefighters to city cleaning. Regulation in its current form might be excessive, however a complete lack of regulation risks our personal and community safety and wellbeing.
- Negative impact in traditional services- Let's consider for example to effect of Airbnb on the availability of rentals. Plenty of cities have experienced the drop in apartments and rooms available for rent since the spread of Airbnb. Let's look at Venice- on 7,25 km2 you can find about 5000 available Airbnb rentals. The regular rental prices per month, can be earned in a matter a few days or weeks. This means, finding a place to rent for a student, or young professional for a longer period becomes nearly impossible. Plenty of cities have introduced strict rules against Airbnb to limit short-term rentals, and give possibility to the citizens to find affordable housing (look at Barcelona, Amsterdam, Berlin, Japan, etc.).
- Transparency in transaction fees- It all sounds well and great, giving possibility to people to use their underutilized assets for more income, but let's not forget, the platforms are operating for a profit as well. Platform providers charge a certain amount of transaction fee- Airbnb between 0-20%, Uber 25% for using the platform. With the initial low price of the service, paying the service fee, and covering the cost of the service made, it is crucial to evaluate how much profit does it actually make for the provider. I am concerned- instead of providing better opportunities, aren't we just exploiting the workers who are in dire need of any extra income?
Sharing economy with Blockchain
Pairing the rise of the sharing economy, with improvements in the blockchain technology is a perfect match to improve peer-to-peer transactions. Blockchain technology (explained in depth here), provides 4 much needed innovations to the sharing economy:
- Transparency and decentralization- as much as we think, that on a platform such as Uber or Airbnb the power is in the hands of the users, the central entity is still the platform provider. They do decide the service and transaction fees, which we often do not see clearly. With blockchain technology we can establish full transparency, and reduce transaction fees by relying on the technology itself to do the transactions, instead of a middle-man.
- Services on a single-platform: for each new service I would like to have- a room in Rome, an Uber in Singapore, and someone to clean my house in London- I need to sign up again and again to new platforms. With decentralization on a blockchain, we would be able to have one single place to perform all transactions instead of logging in again and again to different have services.
- Elevate trust- We can see all necessary information about our partner, and all actions they have done before, making a perfect base for informed, trusting relationships. With smart contracts we are able to control exactly our services, establish our terms and conditions, and execute the payment when needed, without the possibility for violation.
- Security- Computer hackers can find service platforms a very appealing target. Plenty of personal information, payment details, addresses and so on. On the blockchain you store data in an encrypted format, and each block is encrypted on the next, and connected via a chain (hence "block-chain"). This means to hack to blockchain, someone would need to alter to whole chain, which would require huge, untracked, nearly impossible computing power. This is why storing data on blockchain is a lot safer than any platform.
There are already a few companies exploring the idea of sharing on the blockchain- Sharering, with its own token would make it possible to share any service on one platform, or Origin, which helps you to build your own platform on a blockchain. To see my example, check out the use case for Blockchain to share electricity here!
The sharing economy is not new. It is here, we are living it, and it has even more possibilities. It is perfect, that we can share the things we have, and consume just as much as we need, making us a more effective, sustainable society. However, we need to assess how can we make the sharing economy more profitable and sustainable for all parties. We need to build it in our society, regulations and economy. Blockchain, with its transparent structure, base for trust and safety can be the ideal tool to improve and enhance what we can do in the sharing economy.
What do you think? Have you used any of the services mentioned above? What was your experience? Where do you think these platforms are going?
Let me know in the comments, or message me!
/https://futurelab.assaabloy.com/en/security-in-the-sharing-economy/?/http://terzarivoluzione.com/internet-of-people-e-la-sfida-di-ferma /https://bitcoinist.com/sharing-economy-booming-blockchain-wants/ https://www.originprotocol.com/en