Route to the Sharing Economy

I believe that currently the fundamental reasoning behind any intervention linked to the future scenarios of blockchain technology stem from the observation, albeit a given, that we mustn’t consider present realities as immutable certainties. As history has taught us, the economic and social paradigms are constantly subject to startling changes and they remain susceptible to changes of direction due to the presence of effective technological inventions. The inextricable links between innovation and the economy, as well as society and politics, create a jumble of various actors and disorganized interests. From time to time, these actors reach compromises and redesign the social setting in which we live. I believe that now, at this very moment, we find ourselves at the crossroads of epochal change. If you turn your head around and look back, industrial development created unprecedented security for many, only yesterday, or in other words capitalism took on its role as the global archetype.

The evolution of capitalism

Capitalism is commonly understood as “the economic system based on the use of capital ? composed of money and material assets ? with the purpose of developing activity aimed at producing assets and providing profit for those who employed that capital” (Dizionario Treccani). A snapshot of the year 1919: let’s go back to the moment when Conrad Nicholson Hilton, forefather of the Hilton family, acquired the Hotels Statler Company for the extraordinary cost of 111 million dollars. At the time, this represented the most expensive real estate transaction of all time. That spark of capital investment, or rather more than just a spark, it was more like a bonfire, gave impetus to an empire whose interests diversified and which, over time, became a colossus. Like in all stories, the company experienced moments of calm and moments of storm and, at a certain point, a considerable amount of shares were placed at the disposition of one of the largest private equity funds in the world, Blackstone.

On 12 December 2013 Hilton Hotels debuted on Wall Street and the IPO of Hilton Worldwide Holdings raked in the figure of 2.35 billion dollars, a record in the hotel sector. A sequence of events, which, born out of skill and courage, plus the dynamics of capital or material assets, brought life to a solid company. This company granted access to private investors, who later increased their shares.

Airbnb

In the past, though in reality it was just yesterday, globalization widened the borders of the potential market of capitalism, but then something changed deep down. The technological inventions connected to the world of the internet and all that followed started shifting the paradigms: the interconnection of more people, without any kind of intermediary, created the fine strands of a web to which the world progressively connected.

Another snapshot. The year 2008: Airbnb was founded. This is another fascinating story, a tale of extraordinary success, which all sprang from when Brian and Joe, the two founders of the company, moved to San Francisco. They were having some problems paying the rent on the loft where they had gone to live and so they decided to rent part of it out during an important conference. In 2009 they firmed up the idea and the project, and at the end of 2010 the company crossed the line and reserved 700 thousand nights. That number, in February 2011, reached one million and represented a 65% increase in earnings as compared to the previous month. A tale which no longer represents a creature from the world of pure capitalism, not a tale of only capital and material assets, but rather a tale of courage and an ambitious vision of the digital economy of our times.

I point out the success of Airbnb while purposefully referring to the digital economy, because often a fundamental misunderstanding arises. This misunderstanding springs from the thought that whatever is the digital economy, is also the sharing economy, without making distinctions between the two. It would seem that, in the collective imagination, the digital and the sharing economies are two sides of the same coin. A coin from which, in general, people expected more fairness and greater individual freedom, and especially, a coin which people expected to go beyond the prevailing capitalistic model.

In reality the capitalistic system is not destined to suddenly vanish, but it will see its own weight gradually reduced. This is because such things do not occur in only a moment, but rather emerge from a process of transformation. Therefore, one of the most plausible scenarios is to see the digital economy proceed in its development and simultaneously the real sharing economy will achieve its most brilliant growth as the use of blockchain technology increases. As for the current situation, it is more opportune to speak of a phase of transition during which the predominating form of pure capitalism has moved, and will continue to move, toward “digital capitalism” by means of sharing, which itself is further strengthened by the growing importance of technology and interconnections.

The three principles underlying the sharing economy

Common opinion is that the sharing economy pivots around three fundamental ideas:

– sharing, or rather the possibility to collectively use a resource. In the community people have the chance to meet and create a reciprocal advantage through a relationship of trust; the exchange occurs peer-to-peer, whether that concerns goods, time or money;

– digital platform, the new marketplace where contact and connection occur, and where the exchange of goods, services and experiences become possible while breaking down geographic limits and favoring encounters for specific requests or resources, thereby optimizing market exchanges;

– circular economy, in a setting where the hierarchical relationship is not pyramidal, but rather the spheres of the financer, producer and consumer are codependent and not separate (See also this report (in Italian) on the circular economy: Digitale e sostenibilità: come le tecnologie 4.0 abilitano l’Economia Circolare).

It is this last feature that, I believe, blockchain technology will make possible.

Nowadays, if a platform achieves the status of being the unique reference point for a massive number of members, who in fact operate and work thanks to said platform, and if that platform connects the users, manages them as a monopoly, and imposes itself as a third party and gains profit, that means that it rests firmly on the ground where the concept of the sharing economy lives and breathes. The power of reach that the platform can achieve in a short time, given the meagre costs, puts at risk the concept of fairness, and also creates a form of “digital capitalism” (See my report From Capitalism to Digitalism). Through time, Airbnb has defined some intelligent algorithms which, with the progressive increase in the supply of rental houses put at the disposition of new users, determines a constant reduction in the average costs of rental in the broader housing market. It goes without saying that these algorithms are also able to shape prices based on higher and lower demand throughout the year (holidays, trade fairs, events, etc.). A dynamic from which it is difficult to escape.

The new economy of sharing

When we cannot easily imagine alternatives, then we must often submit ourselves to a situation. This is not only true in the world of rentals, which in some ways is already privileged from the start, but let’s think, for example, about the birth of on-demand delivery service companies such as Glovo or Deliveroo and the resultant blurring of the line between independent and dependent employment. This is leaving many individuals in a limbo of eternal precariousness without any form of employment rights.

Therefore, if we wanted to paint a picture of a world which can be perfected with the tools at our disposal, we might imagine a capillary system based on blockchain, a system which relies on independent connections. The problem of trust could be solved by feedback and intelligent contracts, and moreover it could be guaranteed by the traceability of information, made secure and unalterable by the blockchain. Thanks to the new economy of sharing and with a little bit of foresight, therefore, it isn’t difficult to envision the creation of a service which is in some ways similar to what is already being offered by the platforms present in the digital economy, but completely devoid of the concept of a “boss or master”, thus completely open-source.

BlaBlaCar

Let’s turn our sights to transport. BlaBlaCar was born in France in 2006 and was originally designed with the mission to give life to a platform of users who, duly registered, could enter into direct contact with each other to share a trip in a single car. It essentially put into practice a new spin on the concept of carpooling. It was an incredible success with extraordinary results and it has so far included 25 million users in 22 countries around the world. Following a change of ownership, however, the platform’s open policy drifted away from its founding spirit, with no little disappointment from a large number of its members. In some countries, in fact, a system of payment granting a commission to the platformwas rolled out. Prior to this, the service had been free and the new system also eliminated direct contact between the driver and passenger.

Blockchain and the Age of Access

To better understand this example, we have to ascertain how efficient and efficacious the provided service was before the organizational structure was concentrated into a pyramidal form and if, despite not having direct effects on the use of the system in itself, the change nevertheless betrayed the principle of the “Age of Access,” as so well described by the American economist Jeremy Rifkin.

Again we have to suppose that the use of blockchain is able to downgrade the power of the monopolies, even those of a digital nature, by permitting the arrival of a new, freer and more flexible, economic model. And that the time is now ripe for another transformation of the technological and economic contexts. This transformation will go along with an unprecedented cultural shift thanks to blockchain.

The alternatives may be — no, let’s believe that they will be — created rapidly.

Let’s go back to the example taken from the world of rental properties. It must be underlined that, at the moment, some start-ups are already working on an alternative and are raising funds, directly through blockchain technology, with an Initial Coin Offering (ICO). The goal is a digital platform with a flat structure which is completely democratic and accessible at no cost. While maintaining the idea of reciprocal trust, smart contracts will be stipulated to protect the guests and the owners. A feature of deep transformation, which proved itself to be solidly backed granted the support and trust expressed by the investors who participated in the call for investment.

There’s nothing left to do, but wait, in the hope that the sharing economy will become a tangible structure in our society and that it will generate a world a little better than the current one. This remains, if anything, the most noble goal of our community.

?Giovanni Perani

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Italian version: https://www.blockchain4innovation.it/esperti/blockchain-rotta-verso-la-sharing-economy/