Economist at University College London: Blockchain creates a truly sustainable sharing economy, challenging the Uber and Airbnb models

The hugely popular Uber and Airbnb are often considered the most successful examples of the emerging ‘sharing economy.’ The buzzword ‘people as a service’ describes their business models very well, and both companies have attracted billions of dollars in funding and have become instant darlings of investors.

However, a recent paper jointly published by economists from the University College London Blockchain Technology Center and the IMPACT Institute, "区块链正在引领一种公平的交换经济", suggests that blockchain is challenging the sharing economy model of Uber and Airbnb. In fact, according to the authors of the paper, the 'platform revolution' represented by these two companies and other similar companies such as Etsy and Lending Club aims to enrich the number of platform owners while robbing value creators.

However, the paper’s authors, Paolo Tasca, director of the University College London Centre for Blockchain Technologies, and Mihaela Ulieru, president of the IMPACT Institute, argue that distributed ledger technology can create true sharing economy markets without the need for intermediaries and central hubs, with all transactions between consumers and service providers being routed through a decentralized peer-to-peer (P2P) network.

Mihaela Ulieru (left) and Paolo Tasca (right)

Uber and Airbnb present a very attractive front end to consumers, offering faster, cheaper and better services than the traditional model, and providing services through complex but easy-to-use apps. For consumers, the possibility of purchasing services directly from individual providers gives consumers the illusion that Uber and Airbnb are decentralized p2p networks.

In fact, both Uber and Airbnb are centralized systems because transactions between individual consumers and service providers are routed through infrastructure, control centers, and software that belong to the platform owner. In addition to collecting fees, the platform owner has complete control over this network of services. In particular, they are able to impose their own conditions on value creators—drivers and hosts—and may ultimately alienate value creators, who will eventually be left without consumers.

Tasca and Ulieru noted:

“To the uninitiated, networks like Uber appear to be decentralized. However, while Uber runs on ‘smart’ phones, it does so through a rather ‘dumb’ app that connects to a centralized platform that is completely controlled by Uber and driven by its goals. Centralized innovation means slow innovation and it means innovation is guided by the goals of a single company. Ultimately, this means a single point of failure.”

The two economists pointed out that another disadvantage of the centralized sharing economy is its vulnerability to regulatory actions, because when centralized sharing economy operators reach the level of development that is "too big to fail", they will continue to conflict with regulations and policies from all sides.

Envisioning a true sharing economy

Tasca and Ulieru are curious:

“What would a platform that could create a true sharing economy and fairly reward value creators look like? Are there any principles to guide the design of such a platform?”

Among the options proposed in the paper, the possibility of designing a blockchain-based platform to route users to services over an open decentralized network seems particularly relevant. The early stages of the Internet itself provide a good example of how open decentralized networks can create a variety of services.

The two economists pointed out:

Blockchain provides a service: secure and time-stamped transactions. Everything is created on the edge device as an app. Blockchain allows any app to be developed independently at the edge of the network without permission. Developers can use this transaction service as a platform to develop new apps and deploy them on any device.

Finally, centralized sharing economy platforms controlled by a single owner may be replaced by decentralized cooperatives that issue blockchain-based shares or crypto-equity tokens to give workers and stakeholders ownership or membership rights. In other words, Uber is not controlled by Uber, but by the public, and the revenue after expenses is distributed to the members of the cooperative, who also control the platform and its decisions.

Tasca and Ulieru believe that in the not too distant future, we will organize our economic lives around P2P decentralized sharing economy platforms, which may significantly reduce the income distribution gap, democratize the global economy, and create a more ecologically sustainable society. They concluded:

“The combination of blockchain-based platforms and other emerging technological breakthroughs will continue to expand these possibilities.”