The sharing economy is worth over $250 billion, and there are no signs of it slowing down.
Share economy unicorns like Uber, Airbnb, and Upwork, are all centralized platforms whose owners control the network. With the growing number of disgruntled drivers, hosts, and freelancers, blockchain technology is a potential peer-to-peer alternative where everyone can own a part of the network.
Decentralized cooperatives can replace the existing central framework and issue tokens for stakeholders who control and make decisions on the platform. Blockchain technology can, therefore, create a true peer to peer decentralized share economy.
Not a true sharing economy
A true sharing economy removes intermediaries and facilitates exchange between different individuals. While Uber, for instance, allows individuals to participate in a larger economy, it remains a profit-driven centralized institution.
The transactions that occur between consumers and providers go through software and infrastructure that belong to Uber. Uber, therefore, takes a 25 percent commission for every transaction. Unfortunately, the 7 million drivers who depend on Uber as income, have little or no say. Users and suppliers can even be removed from the marketplace at the sole discretion of the company who owns the platform, despite their performance.
How Blockchain can create a true sharing economy
A true peer to peer sharing economy should not have an intermediary who dictates pricing, terms and conditions and takes hefty transaction fees.
A Blockchain network can enable a decentralized peer to peer ride sharing economy where the free market set prices and determines this based on demand and supply. Ride-sharing services like Uber do this through surge pricing, but the system has potential for easy abuse when centralized.
In the sharing economy, providers and suppliers can be paid through the blockchain using a special token or cryptocurrency belonging to the decentralized network.
The driver and passenger enter into a smart contract on the ethereum network. The systems holds the payment in escrow until the consumer arrives at their destination. Those who keep the system running receive a small fee. Unlike centralized networks, however, demand and supply for contributors, not any one party, controls the fee.
The leadership and decision-making process would work under a blockchain voting system where all stakeholders have a say in major decisions. The democratic approach contrasts with Uber’s group of executives who are under pressure by their shareholders to make profit-driven decisions.
Decentralized decision making
Unlike private institutions, a blockchain driven marketplace has fewer monetary incentives. For economic motivations, founders of blockchain driven marketplaces can launch ICOs. Blockchain shared economies require tokens, and at the launch, the founding member can profit from the sale of tokens in an ICO.
Since blockchain-based businesses are less profit maximizing, perhaps existing share economy businesses could leverage blockchain technology to build customer trust.
Share economies exist on the premise of trust. Blockchain can help companies like Uber create digital online identities. A rating system available across a broad community is significantly safer than the current star rating approach.
Blockchain in other sharing economy businesses
Airbnb, among other companies, could also use blockchain technology to improve their services. With over 100 million guests, blockchain may be used to strengthen the trust and transparency between owners and guests.
In 2016, Airbnb acqui-hired the team behind Change Coin. While Change Coin’s premise was to tip someone in bitcoin, Airbnb looked at the Change Coin team as a way to add blockchain technology to their existing infrastructure.
Airbnb also works on the premise of trust. Owners trust guests with their property. Conversely, guests trust that the space appears as advertised, and is vacant upon their arrival.
At the moment, if someone trashed an apartment, only Airbnb and the owner receive updates. The owner could choose to share this publicly via a review. However, with blockchain technology, this information could be instantly shared with others on the network. The end result is more transparency and trust on the network.
Currently, there are many opportunities for Blockchain-based applications in the sharing economy. With the implementation of smart contracts and tokenization, a decentralized peer to peer system can exist.
The biggest challenge for future startups is the issue of scalability. Although the blockchain technology exists, any development concerning its application will require further experimentation and maturation of the technology.