Middlemen: Watch out! How to democratize the sharing economy
By: Markus Eichinger
Tags: Blockchain, Distributed Ledgers, Payments, Finance, Sharing Economy

Middlemen: Watch out! How to democratize the sharing economy

“Sharing economy” sounds pretty social, but actually it’s not. Why distributed ledger technology and cryptocurrencies have the potential to change this once and for good. Markus Eichinger Nov 2, 2020·4 min read

Just grab a bike or scooter on the way to your Airbnb? Get a dinner delivered from a restaurant nearby and then watch some videos on YouTube? Pretty much everything can be sourced from the community - isn’t this great? Everybody is enabled to share everything with everybody. Just like this article on Medium.

Well, I think the term “social” or “sharing” is brutally wrong in this respect. While we tend to recognize content or assets sourced from a broad community as “shared” or “social”, our perception does neglect the fact that those assets or content is regularly controlled by strictly centralized organizations. Sure, those organizations provide reach and audience, but if Airbnb disappears tomorrow, the flats and rooms would not “exist” anymore. Same with this article — switch of Medium.com now and it’s gone — forever.

In the old-age days of the internet, this used to be a different story. Whenever you had something to publish, you would build and host your website, put the content on it and wait for Yahoo! (sic!) to refresh their search index. Nowadays, the most attractive and virtually only left option to reach audience or customers is through content aggregators.

I am concerned of this development.

Not only does this development take control from the content or asset providers, but it also opens doors for manipulation. The power that resides within the hands of just a few corporations nowadays is pretty disturbing — and you don’t need to watch “The Social Dilemma” on Netflix to understand this.

But years from today, this might change. I am convinced we will enter an age of distributed knowledge and distributed assets. And here’s how: Imagine instead of sharing information with one or several aggregators in the first place, you instantly share the piece of information with everybody. Whenever you post something, everybody has this information. Whenever you rate something, everybody has the information about your rating. Whenever you offer something, everybody has the information about your offer.

This sort of sharing also applies to physical goods: Imagine you own a self-driving car (we’re still a couple of years ahead of today in our timeline), and you would like to enable everybody to use this car — if you tell everybody about this offer, there’s no central party any more to control ranking, define pricing or take provisions.

But how to reach “everybody” and how to validate and guarantee the original content? The concept behind is the idea of the Distributed Ledger Technology (DLT). Many will know this technology from cryptocurrencies such as Bitcoin, but it’s actually more: In contrast of holding information (or a reference to it) in one single point of truth only, DLT holds the information with every participant in the network. This makes it impossible to forge information — as the network would immediately detect and repair the forgery.

Back to your self-driving car: With DLT, there’s no need any more for a central service to register your car with e.g. to manage bookings: Every booking could be processed by the car itself and saved irreversibly in the chain. The car’s availability is easily published and made searchable by the car itself as well, e.g. by registering on map services. There’s just one important missing thing, and that’s payments.

What destroys all fantasies of distributed assets and information is the need for a central way to process payments. And indeed, most of the services such as Airbnb or Uber are successful because of the convenient way they handle payments. But centrally processed payments also mean centralized management of information: Somebody needs to “tell” your self-driving car that a payment for a booking was successful.

And here’s where cryptocurrencies change the game: Cryptocurrencies behave like a bearer instrument — this means: “Who holds it, has it”. In DLT, your car would already have an ID (or wallet, however you’d like to call it) to process bookings. It’s just a tiny additional step to enrich this publicly available booking information with the publicly available information that the booking has been paid for — e.g. by referencing a transaction within a crypto currency blockchain. From this moment on, everybody can verify the validity of the payment — including you or your car.

Choo choo: Is this Thomas the Tank kiddy ride train the predecessor of self-managing devices that pay for themselves autonomously?

In the world of DLT, we will see a democratization of sharing. What sounds like a contradiction in terms is a huge paradigm shift in how we organize and trust information. We will see devices that manage themselves autonomously, communicate autonomously and receive their payments autonomously. Just like the coin-operated kiddie rides that I personally enjoyed a lot 35 years ago.

But the possibilities go way beyond: Imagine a production line where machines get paid by their subsequent machines in the line, thus mapping incremental value generation at the level of single steps of work? Or the above example of an “Everybody Uber” — where riders pay the cars directly and cars pay their drivers directly.

In the visionary world of DLT, centralized administration is doomed to disappear. Middlemen: Watch out!