When Airbnb and Uber burst onto the scene, there was much talk about how these companies hailed a new era of peer-to-peer sharing. We were led to believe that over the coming years, we would no longer buy things like lawnmowers or power tools. We would be able to share such items across communities, using the internet to connect those who have with those who need. It would be more efficient and create less waste. But the sharing economy has not really evolved in this way, and sharing economy companies are partly to blame.
The Problems of the Current Sharing Economy
A few big players dominate the sharing economy. Ten years on from their creation, these are mainly Airbnb and Uber, although there are a few others. Both companies have suffered with problems over the years and created a few more at the same time.
No Direct Connections and Heavy Fees
The term sharing economy, and the benefits touted by companies in the sharing economy, belies the fact that there is little true sharing involved. It’s true that these companies provide platforms with a decent user interface to connect people. However, individuals may not communicate with one another outside of the platform without violating terms of service.
Sharing economy companies also take a healthy portion of earnings from the individuals lending out their assets. These fees have enabled the rapid expansion of both Uber and Airbnb.
Blockchain enables a peer-to-peer connection, which eliminates the need for an intermediary like Uber or Airbnb. Blockchain services reduce or even eliminate middleman fees. This allows those with something to share to connect directly with those wishing to borrow. The parties agree on the price and transfer it securely in cryptocurrency.
Safety and Crime
Even if you have never personally experienced any issues using Airbnb or Uber, the chances are that you may know someone with a story. Although sharing companies have put in place security measures and checks, horrifying incidents still occur. CNN reported earlier this year that 103 US Uber drivers so far stand accused of sexual assault or abuse and nearly a third of these had prior criminal convictions. There are reports of similar incidents by other ride-sharing companies such as Ola in India and Grab in Malaysia. Meanwhile, there are entire websites dedicated to Airbnb horror stories from both guests and hosts.
To be fair to the sharing economy companies, the Airbnb website does quite rightly point out that background checks are dependent on data from public organizations that are often fragmented and poorly maintained.
Verification of identity and background checking is more effective on a blockchain platform. Particularly if government organizations move towards recording things like criminal offenses and driver’s licensing and registration on immutable blockchains, background checks for the sharing economy companies would be more reliable and robust.
Blockchain-based sharing economy companies can also benefit from recording the background checks on the blockchain. This would make the checks trusted and tamper-proof.
Data Security and Privacy
In late 2017, Bloomberg broke the story that Uber had concealed a massive data breach from its customers for more than a year. Hackers had cracked security measures around the company servers and stolen the data of around 57 million users. The company subsequently fired its Chief Security Officer for having played a part in making a $100,000 silencing payment to the hackers.
While Uber is far from alone in being the subject of such a hack, the example serves to create yet another case for sharing economy companies to be decentralized with blockchain. The decentralization of databases across multiple nodes keeps data more secure, avoiding many of the vulnerabilities of centralized servers.
Moreover, if such an attack on a decentralized system did happen, it would be far more difficult to cover it up. Even if 51 percent of blockchain nodes were to prove malicious, a cover-up would require 100 percent not to squeal.
Future Outlook for Blockchain Sharing Economy Companies
Despite all these problems, the outlook for the growth of the sharing economy looks bright. One study stated that the market is expected to grow from around $14 billion in 2014 to more than $335 billion by 2025. Blockchain startups have been quick to see the opportunity to end industry domination by big sharing economy companies. Two such blockchain startups are Origin and ShareRing. Both see the potential for a network that will offer sharing transactions across a wide range of goods and services.
Origin is an open-source, Ethereum-based protocol for creating sharing economy marketplaces. It allows developers to create customized dApps for different types of sharing goods and services (e.g., tasks, home sharing, ride sharing) or for different localities. Origin will be launching its own dApp on the platform. This app acts as a consumer marketplace and connects those wishing to do business. The system uses smart contracts to govern transactions and payments for goods and services.
The website highlights how the lack of a middleman allows its users to transact without incurring substantial fees. Origin is already partnering with companies who will use the platform to build their own sharing marketplaces. The company is running its token sale in partnership with SEC-registered Coinlist Capital. Running a compliant ICO allows it to distance itself from the proliferation of scam ICOs that have plagued the market.
ShareRing has similar goals to Origin but is developing its own blockchain to launch a dual token system. The dual token mechanism aims to reduce friction in onboarding new (non-crypto) users to the system.
ShareToken is the utility token of the system. It is the incentive driving the blockchain, as well as the coin used to buy into the system by those with goods to rent out. SharePay is the other token and is linked to the value of fiat. Users can exchange fiat for SharePay using the ShareRing platform. Those wishing to rent via ShareRing can then “top up” their SharePay balance using their credit card.
ShareRing has roots in the Australian ride-sharing firm Keaz. As such, it recently gained entry into the automotive blockchain consortium MOBI.
Monopolies are Precarious
Monopolies dominate the current sharing economy, and markets like this are ripe for disruption. The emergence of blockchain cuts out middlemen so savvy startups can create headaches for the likes of Uber and Airbnb. The big sharing economy companies, as well as other online marketplaces, need to make sure that they are keeping up with these developments if they are going to stay at the top of their game.
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