Uber and Airbnb, the hugely popular marketplaces for taxi-like car rides and hotel-like short-term rentals, are usually considered to be successful case stories for the emerging “sharing economy.” Another buzz phrase, “people as a services,” describes the business models of these two companies, both of which attracted funding that values them in the tens of billions of dollars and are likely to become the instant darling of investors after their expected and much awaited Initial Public Offerings (IPOs).
A new paper, however, titled “Blockchain as an Institutional Technology Spearheading an Equitable Exchange Economy,” written by economists at the Centre for Blockchain Technologies at University College London (UCL) and The Impact Institute, challenges Uber and Airbnb as sharing economy role models. In fact, according to the authors of the paper, the “platform revolution" represented by these two companies, as well as similar companies such as Etsy and Lending Club, works to enrich the platform owners while preying on the value creators.
At the same time, the authors, Paolo Tasca, a Director at the UCL Centre for Blockchain Technologies, and Mihaela Ulieru, President of The Impact Institute, propose that distributed ledger technology could enable real sharing economy marketplaces without intermediaries and central hubs, where all transactions between consumers and service providers are routed through decentralized, peer-to-peer (P2P) networks.
Uber and Airbnb present very appealing frontends to consumers, offering services that are often faster, cheaper and better than traditional alternatives, delivered via sophisticated yet easy to use apps. To the consumer, the possibility to buy services directly from individual providers gives the impression that Uber and Airbnb are decentralized, P2P networks.
In fact, these are both centralized systems because the transactions between individual consumers and providers are routed through infrastructure, hubs and software that belong to the companies that own the platform. Besides taking a fee, the platform owners are in complete control of the network. In particular, they can dictate their conditions to the value creators — drivers and rental owners — and perhaps eventually alienate them, which would result in alienating also the consumers in the long run.
“To the novice, Uber-like networks seem to be decentralized,” note Tasca and Ulieru. “Yet, while Uber runs on a ‘smart’ phone, it does so via a quite ‘dumb’ application (app) which links into a centralized platform, which is completely controlled by and supports the goals of the company. Centralized innovation means slow innovation. It also means innovation directed by the goals of a single company. Finally, it means single point of failure.”
Another shortcoming of the centralized sharing economy is its vulnerability to regulatory action The economists note that, as centralized sharing economy operators reach "too big to fail" proportions, there will continue to be regulatory and policy skirmishes on every possible front.
Envisioning an Authentic Sharing Economy
“[What] would a platform enabling an authentic sharing economy, with the value created being equitably returned back to reward the value creators, look like?” wonder Tasca and Ulieru. “Are there principles which can guide the design of such platforms?”
Among the options presented in the paper, the possibility to route user-to-user services through blockchain-based platforms on the top of open and decentralized networks seems especially relevant. Open decentralized networks, of which the early phases of the internet itself provide good examples, enable the creation of all sort of services at the edges.
The blockchain “offers one service: securely time-stamped scripted transactions,” note the economists. “Everything else is built on the edge-devices as an app. It allows any app to be developed independently, without permission, on the edge of the network. A developer can create a new app using the transactional service as a platform and deploy it on any device.”
Eventually, centralized sharing economy platforms controlled by single owners could be replaced by decentralized cooperatives that issue blockchain-based shares or crypto-equity tokens to give ownership or membership rights to workers and stakeholders. In other words, Uber without Uber, controlled by the commons, where all revenue after overhead costs goes to the members of the co-op, who also control the platform and make decisions.
Tasca and Ulieru are persuaded that, in a not-so-distant future, we will organize our economic life around P2P decentralized sharing economy platforms, with the potential to dramatically narrow the income divide, democratize the global economy and create a more ecologically sustainable society. “These possibilities will be multiplied by the combination of blockchain-based platforms with other emerging technology breakthroughs,” they conclude.