Why are Airbnb and other travel companies interested in blockchain technology?

Blockchain technology has the potential to impact every aspect of every industry we can imagine. But can it overcome the failure of its predecessor (Bitcoin), and if so, can it serve space tourism? — Deanna Ting, Skift

Have you ever wished you could earn your American Airlines AAdvantage miles as soon as you get into your cramped seat? Or wish you didn’t have to worry about your passport when you travel to another country? Or wish your reservation and credit score were confirmed instantly when you place an airbnb reservation?

An emerging technology disruptor born out of Bitcoin is emerging as a solution to these travel situations. Blockchain is the underlying technology for cryptocurrencies like Bitcoin. Bitcoin is just another name for digital currency that runs on a blockchain.

Melanie Swan, a blockchain theorist at the Institute for Social Research in New York, said:

“Bitcoin is like a Skype for money. It digitizes it, it puts the money on the internet, and the blockchain is the software protocol that Bitcoin operates on.”

Swan used the analogy of email to better describe how blockchain works. "Just like you send emails based on the SMTP protocol, you can use the blockchain protocol to send currency (bitcoin)."

After understanding the basic form of currency, we can see that blockchain is similar to PayPal or Venmo payment, it is a peer-to-peer platform, but you don’t need to wait for the bank to verify whether the transaction is successful, and you don’t need to pay fees when transferring money. You don’t have to use Bitcoin to make blockchain work. You can use any currency, cryptocurrency or any type of information to make blockchain work.

Blockchain is a shared, public ledger developed based on security theory. Because relevant information can only be added but not removed, no matter who owns the currency or related information, transactions cannot be repeated or changed. Each transaction is linked together. Blockchain uses encryption algorithms to verify the authenticity of each transaction, and each transaction must be authenticated by the network in order for the transaction to be successful. Any transaction, whether successful or failed, will generate a record, which will be the system's credential for establishing user credibility.

Banks are interested in blockchain technology

In December, at an investor conference held by Goldman Sachs investment bank, participants commented on blockchain:

“This decentralized, cryptographically based solution cuts out the middleman. It has the potential to redefine transactions and the backend of many different industries. From banking, payment justice systems, and voting systems to vehicle registration, wire bills, gun inspections, academic records, trade settlements, and title registries for catalogued works of art, a distributed shared ledger has the potential to make transactions faster, cheaper, and more secure.”

Blockchain has gained the attention of a number of financial institutions in recent months. According to the Wall Street Journal, banking giants JPMorgan Chase and Citigroup have successfully completed credit default swaps using blockchain technology in recent years.

The emerging startup, Digital Asset Holdings, is now led by former JPMorgan executive Blythe Masters, who is trying to develop mainstream applications of blockchain and has raised more than $50 million from investors including JPMorgan, Citi, BNP Paribas, etc.

IBM is another company that has taken a fancy to the technology. As a member of the Linux Foundation's "Hyperledger" project, IBM and other like-minded companies are trying to find solutions for applying blockchain technology in various industries.

In fact, on April 29, IBM released new permission-based blockchain code, a new type of blockchain network that can ensure better operational security. In addition, the new IBM cloud service enables blockchain networks to comply with existing regulations and security requirements.

Jerry Cuomo, IBM vice president for blockchain, told Skift that the new code released by IBM will help other developers further their work, and the new cloud services based on blockchain technology make it easier for organizations and enterprises to adopt blockchain technology to eliminate security concerns.

Qiu Wumo said that customers told us that security issues are an important factor limiting their adoption of blockchain. Enterprise development plans require data and identity protection and data consistency, which is very important. Blockchain has integrity and some customers have begun to consult, which gives other companies more assurance and commitment.

Bitcoin: Where it fell, it stood up

Bitcoin has faced a number of challenges over the past few years, and it is well known for that. Its largest exchange, Mt. Gox, went bankrupt in 2014, and like other cryptocurrencies, it has a bad reputation. Earlier this year, Bitcoin's leading developer Mike Hearn decided to abandon the project altogether, writing in a blog post:

“The web is on the brink of technological collapse.”

Jeff Klee, CEO of Amtrak (and parent company of CheapAir), knows a lot about Bitcoin and its applications in travel. In November 2013, CheapAir became the first online travel agency in the United States to accept Bitcoin. Seven months later, the company had more than $1.5 million in sales from Bitcoin flights and hotels. Since then, Klee says his Bitcoin business has more or less reached a peak.

“Bitcoin volume isn’t falling, it’s just not really growing yet. We have our core Bitcoin customers, but it’s not a growing customer base.”

Klee said Bitcoin will face challenges, but stopped short of calling it a failure.

“I don’t think Bitcoin is completely dead, it just doesn’t look as promising as it did two or three years ago. Bitcoin has not yet reached the potential that many people think it has. I have always felt that blockchain technology is more valuable than Bitcoin. To gain mass payments, Bitcoin needs to attract mass market consumers.”

However, Klee believes that the existing challenge is that many travel companies want to use blockchain technology to build a whole financial system, which is not yet realistic. He believes that this technology still needs more acceptance by the general public in order to gain more support. He said that at present, most travel companies can accept payments using Bitcoin or other cryptocurrencies.

Klee said:

“I think blockchain is a very promising technology that could have a significant impact on the financial system one day. It definitely makes sense for companies to keep an eye on blockchain technology and look for opportunities to use it.”

IBM said it is important to note the difference between Bitcoin, a cryptocurrency, and blockchain, the underlying framework on which cryptocurrencies operate.

“The reason we became interested in blockchain had nothing to do with Bitcoin.”

Jerry Chuwomo of IBM said that blockchain is more like a model that has been designed to complete a certain task. Blockchain has a development blueprint, but there is no single way to achieve it.

One huge difference between Bitcoin and blockchain is that the blockchain used by Bitcoin is "anonymous," while the blockchain itself is not necessarily anonymous. Chuwomo said:

“Bitcoin uses blockchain to make certain assumptions, anonymity being a big one.”

They imagine that anonymous participants in Bitcoin can use blockchain for anonymity, but we think the blockchain we built is very constructive. We need to make profits for enterprises, so we will give up some of the anonymity of blockchain.

Although blockchain applications are still immature, this has not stopped some companies from trying to use it and making relevant planning and thinking, blockchain can be applied to the tourism industry. Here are a few examples:

Loyalty Program

IBM's Qiu Wumo said he could imagine using blockchain technology to create reward points and shopping malls. One such platform that uses blockchain to enable loyalty programs is Loyyal's Loyalty Network.

In theory, on this common platform, you could use your airline points to pay for a hotel room, or use some extra points from your car rental service's loyalty program to buy a cup of coffee. The profit point is immediate - when you step on the plane, you can immediately earn credit points and store them in your electronic wallet, and airlines can even encourage travelers to purchase items during the flight.

Sean Dennis, COO and co-founder of Ribbit.me, said the company’s current platform can be applied to existing network transformations, and the brands that are undergoing the transformation can also choose other related brands. They hope that in their own blockchain-based reward APP, whether they are members of the same airline alliance, or hotel and car rental partners, they can achieve a win-win situation. Through smart contracts, the platform can use customer data to send targeted rewards or promotions directly to certain travelers.

Swan pointed out that La'Zooz is a carpooling application that uses blockchain's distributed ledger technology. Like Uber or Lyft, it is not a centralized platform. Zooz drivers and passengers can basically use their smartphones to earn Zooz coins, which can be used for future trips throughout the Zooz community. This is a reputation system built between the system and the user, which is secure and decentralized, and it conducts transactions on the system by establishing public data.

Purpose of identification

In addition to government-issued ID cards, driver's licenses, or passports, blockchain can also be used to store immunization records, or electronic medical records.

"Anyone can verify that blockchain technology, which is queried in real time, can verify the validity of a passport," Swan said. "All of these forms could be part of your digital wallet, where you have access to all of your records, securely and privately."

Nathan Blecharczyk, co-founder of Airbnb, recently said in an interview with City AM that Airbnb uses blockchain technology to better establish a reputation platform for merchants and travelers, and also to effectively store identity information.

He said:

"I think in the Airbnb space, reputation is everything, and I can see a future where anyone needs to gain reputation so that people can be eligible for certain properties. But the question is whether there's a way to leverage that to help other sharing economy models really thrive."

In April, Airbnb acquired key members of the ChangeCoin team.

Airbnb was quick to take notice of Bitcoin’s micropayment services, but has not yet acquired ChangeCoin’s assets, nor has it made any plans to incorporate Bitcoin into Airbnb’s corporate systems.

Electronic ID card

Estonia, the Eastern European country that gave us access, paved the way for the development of blockchain, which allowed us to develop an e-identity project using blockchain. It allows non-Estonian residents to apply for e-citizenship, which is a bit like a permanent residence permit or ID card. It also enables these residents to enjoy a range of services provided by the country, but it should be clear that this is different from legal residence.

In just 18 minutes, various businesses based on Estonian electronic identity can be launched within the legal framework of the European Union. Currently, the project is used to encourage people from all over the world to start businesses here, but Swan believes that this project can also promote the development of tourism in tourist destinations and has great potential.

“If you’re thinking about how to attract tourists, you can look at how Estonia is using digital IDs to attract residents of other countries to start businesses here,” she said. “Countries like Estonia that have pioneered cryptocurrency have seen residents of other countries expand many businesses and services, even more than local citizens.”

Although there are only a few thousand electronic ID cards currently, the number of projects using blockchain technology and its applications continues to grow. In February, Nasdaq and Estonia announced that they would join forces to provide a blockchain-based electronic voting system applied to the electronic ID platform. This way, shareholders of companies listed on Nasdaq’s Tallinn Stock Exchange can easily vote at shareholder meetings.

Powering travel businesses and operations

Cuomo believes that it is conceivable that blockchain can provide backend technology support for hotel reservation systems or flight reservations. Flight departures, hotel operations, all of this can be managed online through blockchain. Everything involving the relevant parties can be accelerated because people are using a unified account managed by blockchain.

At present, many corporate organizations and companies are still on the sidelines. Blockchain technology is still in its infancy and it may take several years for this technology to become mainstream.

“Do you remember the rise of cell phones and the internet?”

Swan said.

“We know they were invented in the 1980s, but it took about 20 years for everyone to adopt them. We think the same thing is going to happen with blockchain. It may take five, 10, 20 years for it to become mainstream.”