Business prospects: Will the “sharing economy” be disrupted by blockchain technology?

Rage Comment : Companies like Uber and Airbnb are representative companies of the sharing economy. Due to their departure from the traditional transaction model, they have developed rapidly, growing from $15 billion in 2015 to $33.5 billion in 2025. The decentralization and immutability of blockchain can break the monopoly of sovereign states and commercial institutions. It is believed that blockchain technology can promote the development of the sharing economy, remove intermediaries, thereby reducing costs and benefiting consumers.

Translation: Nicole

Trust and authority are two fundamental elements that a society needs to function and allow its members to interact with each other within their own sphere. Sovereign states and commercial organizations have traditionally held a monopoly on these two elements, either through coercion or through consensus, depending on the members of the society themselves.

If law enforcement and the judicial system do not have an absolute monopoly on enforcing judgments within society, chaos will ensue. Another less obvious monopoly is the power of social media networks over their user base.

The best example is Facebook, which has a monopoly over the data of its 1.71 billion active users (as of the second quarter of 2016), according to Statista.com.

As of November 1, 2016, to achieve "free access" to its social platform, users should pay fees in the form of important data, and the network's intrinsic value has been successfully monetized. As of November 1, 2016, the market value is US$372.1.

This monopolistic arrangement between society and its institutions is definitely not an ideal approach.

However, this is a world where information is everywhere, so it is not surprising that many traditional ways of doing business are being rapidly disrupted.

The sharing economy is a good example, expected to grow from $15 billion in 2015 to $33.5 billion by 2025, according to a report by PwC.

Founded in 2008, Airbnb is a major player in the sharing economy. The company provides a platform for property owners and travelers to reach consensus on short-term rental contracts. Although Airbnb does not own rental properties, the company currently has more than 2 million storefronts in 34,000 cities in 191 countries, with annual revenue exceeding $1 billion and a market value of $24 billion.

The rapid growth of companies like Uber and Airbnb, and the valuation disparity between them and traditional companies in the same industries, show that consumers and independent service providers around the world are ready to move away from the old business model of monopolizing the transaction process.

The new way of sharing economy Mavericks seems to be taking over the business world, thanks to the recent arrival of blockchain technology, which futurists call "the ultimate disruptor."

What is blockchain?

Blockchain is an innovative technology that enables true peer-to-peer transactions. Its execution is determined, verified, and recorded through a decentralized ledger, which is itself protected by a cryptographic hash code. Each set of operations is digitally recorded in a block of data that is created every ten minutes and then irreversibly sealed with a random and unique set of codes called a "hash", which serves a dual purpose. First, this ensures that the data block is securely sealed and the transaction data is permanently stored. Second, the block hash constitutes the first transaction in the subsequent block of transactions, becoming the link or "chain" between blocks, hence the name blockchain.

The technology is revolutionary because it allows data creators to track how their data is used, which allows them to claim a share of the billions of dollars in revenue that now belongs entirely to the data aggregators, i.e. the corporations.

The same idea applies to songs, where artists can now sell their music directly to consumers without going through traditional record labels and digital distribution channels like iTunes and Spotify, who receive the majority of the revenue simply because they have a monopoly on the transaction process.

Banks will also risk being ‘out of business’ as their roles as custodians of centralized ledgers and facilitators of transactions will be reduced, as both functions can be performed more cheaply and securely using blockchain technology.

Blockchain and Cryptocurrency

Bitcoin (BTC) is the classic use case of blockchain technology and the most famous currency among the more than 100 currencies on the market, having achieved amazing success since its launch in 2008. In February 2010, each Bitcoin was worth $0.01, and at today’s price of $714 (as of November 2, 2016), Bitcoin’s market capitalization is larger than Mongolia’s annual GDP at $11.54 billion.

The first Bitcoin transaction in the “real world” took place in May 2010 when Laszlo Hanyecz, one of the first adopters of the cryptocurrency, wanted to test Bitcoin’s acceptance in the real world. Laszlo offered 10,000 Bitcoins, which at the time was worth $30, or the price of two Papa John’s pizzas. But to his surprise, a man in London accepted the deal. Today, the price of 10,000 Bitcoins for two pizzas would be $7.15 million.

The huge appreciation of Bitcoin prices proves that the masses are ready to break away from the monopoly of traditional transactions. More importantly, it represents full trust and confidence in blockchain technology.

According to a report by Gulf News, governments are also adopting blockchain technology, with the Emirate of Dubai announcing a strategy to move all transactions to blockchain by 2020, saving 25 million man-hours per year in the process.

The Abu Dhabi Securities Exchange (ADX) has launched a blockchain for electronic voting, and it can even be used in the commercial and financial sectors. In addition, in September, Janet Yellen, the chair of the US Federal Reserve, said before attending the Congress:

“Blockchain will have a very important impact on payment systems and business operations.”

There are a number of factors that have led to the rapid adoption of blockchain. However, the main factor that has contributed to this turning point is giving individuals the right to own the data they create and the ability to choose what to do with it.