The sharing economy has redefined how consumers acquire services today. Uber and Airbnb may not own the fleets of vehicles and or the leasable real estate that are made available through their platforms but they are able to serve millions of customers. Sharing economy provider revenues are expected to reach $40.2 billion by 2020.
All of this has been made possible through the willing participation of peers. The shift towards a peer-to-peer (P2P) model has challenged the long-standing dominance of established big-name service providers.
However, the leading sharing economy platforms also have their share of criticisms. Given the rising sentiment against corporate greed, many pan their centralized approach to business. They exercise full control over who participates and the policies and pricing mechanisms that govern their respective platforms.
In ridesharing services like Uber and Lyft, for example, prices are determined by algorithms and not by the drivers. A recent MIT study revealed that Uber and Lyft drivers only make a median hourly profit of just $3.37 – a figure that is below US minimum wage. The study, however, was challenged by Uber stating that drivers could make as much as $10 hourly profit. But regardless of the actual number, many drivers have reported being unhappy with their income. This wage concern is just one among the many issues that are plaguing sharing economy platforms.
So can the sharing economy become more equitable for all stakeholders?
Blockchain has been gaining use across a variety of industries. Its key features of decentralization, transparency, and security are being applied to create new experiences through various applications and services. The sharing economy stands to be no different.
Blockchain can provide better means for peers and providers to transact with each other in a number of ways:
Crypto Payments
Sharing economy platforms have to support a variety of payment options including credit cards, digital wallets, and even cash. This creates certain problems for providers. Handling cash isn’t exactly the safest option. Card payment, while convenient, mean money has to be paid to the platform first before it gets credited to the provider’s account. Cards also expose providers to fraud and chargebacks.
The use of crypto tokens for payments makes transactions faster and more secure. ShareRing is an upcoming crypto token that’s built with the sharing economy in mind. It is being built with the express purpose of being unhindered by currency exchange or cross-border transaction fees. Payments via ShareRing will be instantaneous which means tokens will be credited immediately to a person’s account. Payments also won't be subject to bank or fund transfer clearing processes. Transactions will be irreversible which will curb the risk of chargeback fraud. By opting for such a payment mechanism, providers will make better margins and will get ready access to their earnings.
ShareRing also plans on integrating identity verification that can be used across various platforms. The token has just recently concluded its seed round presale and is set to hold its main sale in April.
Smart Contracts
Renting or sharing items and services should always be covered by a legal agreement. A contract is often the only protection that providers have in the case of disputes. Fortunately, this is another area where blockchain can offer improvements.
Smart contracts, while not necessarily the same as paper contracts, help automate the fulfillment process. Actions are only triggered when certain terms and conditions of the agreement are met and they can be customized and may be digitally signed by transacting parties. With the blockchain as a record, the terms in a smart contract are transparent and immutable. Smart contracts also help guarantee that work is done to specifications. They can effectively serve as an escrow service, withholding payments until all the conditions in an agreement are met.
Beenest, a home sharing platform, allows homeowners to offer short-term housing rentals. Core to the platform is its use of smart contracts to automate transactions. Through smart contracts, the platform takes away the need for middlemen such as brokers, banks, and lawyers to settle a deal between renters and owners. In addition, the platform offers know-your-customer (KYC) and arbitration mechanisms to offer added security for users.
Decentralization
Blockchains operate through a network of peers instead of being managed or controlled by a single entity. The applications built on top of blockchains often follow a decentralized approach as well. Decentralized applications or dapps are built to be free of control or influence of a centralized authority.
Decentralized marketplaces can help create an equitable space for providers to compete. Participants in the sharing economy stand to gain from such an environment as they will be free to create their own offerings, terms, and prices. Consumers can then collectively determine fair market prices. Consumers would also naturally gravitate towards providers with favorable terms and reputations which then encourage providers to provide competitive pricing and superior value.
Decentralization also creates a global reach for providers making them unhindered to do business by local restrictions common to many sharing economy platforms.
Security, Trust, and Fairness
One can consider the current landscape of the sharing economy as not really a sharing one. The mechanisms provided by these centralized platforms aren’t exactly P2P since they still serve as the middlemen in transactions.
This, however, can be changed through blockchain. The technology creates true P2P means for customers to connect directly to providers without the influence and control of centralized authorities leaving the market free to determine the value that providers bring.
By minimizing fees, automating agreements, and guaranteeing payment, blockchain-based platforms could help create a space that benefits sharing economy stakeholders. So, it appears that the answer to the question is yes, the sharing economy can be improved. Blockchain can instill security, fairness, and trust in the space.
Jim Hoffer is founder and managing director at Hoffer Financial Consulting. Follow him on Twitter.
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