What do you get when you cross the sharing economy with blockchain?
The sharing economy has yet to unlock its greatest benefits.
The peer-to-peer sharing economy is big. It's your Uber, Car Next Door, Airbnb, Airtasker and more that let people profitably leverage their own underutilised resources, such as vehicles, homes and time.
The business-to-consumer sharing economy is also big. It includes rental car companies like Avis, which offers vehicles by the day or week, and on-demand variations such as Zipcar, also owned by Avis, which offers vehicle rental by the hour or day, with the aim of improving overall asset utilisation and giving consumers what they really want – a convenient and cost effective way of getting from A to B.
And then you have the B2B sharing economy. On one level, this includes developments like shared office space. And on another level, it includes the sharing of any kind of business asset in any way, such as equipment rentals, the selling of useful data or manufacturing by-products, the use of any kind of third-party service provider and a whole lot more.
There are a lot of benefits to be unlocked by improving business-asset utilisation, reducing search frictions and otherwise applying some advantages of the "sharing economy" mindset to B2B products and services, and businesses are overall quite hungry to start getting these benefits. However, only a small fraction of those who want to get involved are actually doing so.
According to Commonwealth Bank's Equip: Issue 8 (PDF), about half of surveyed businesses said they planned to start sharing assets to cut costs or generate extra revenue. But less than 10% were actually doing it.
"Many firms would like to further assess the risks and reliability of sharing models before making their own assets available to others," the report says. "Despite the potential, the sharing economy is still in its infancy... this may be because businesses are yet to find the right balance between sharing equipment and information, and maintaining their competitive edge.
"One potential answer is for complementary businesses to create a framework for mutually profitable collaboration rather than relying on trust. With a proven model for collaboration in place, our research suggests we are likely to see growing use of shared assets in the very near future."
The impending B2B sharing economy has blockchain written all over it.
Sharing and/or caring
The sharing economy isn't just for the consumer market, emphasises ShareRing and Keaz CEO and founder Tim Bos. "I would say moving forward, probably about 60 to 70 percent of the users on our platform will be business-based users."
ShareRing is an Australian blockchain startup that aims to unpack the sharing economy for everyone, reduce the waste inherent to consumption in this day and age, and streamline the fragmented global-sharing economy.
And it might be among the first startups to satisfactorily, consistently and flexibly scratch the underutilised asset itch being felt by most businesses, which means offering tools that can suit an exceptionally wide range of assets and use cases.
The good news is that when you get right down to it, the needs of any kind of sharing system are very similar. You have to track assets, make and receive payments, and make sure there's a clear trail of possession for each asset that's being shared around. This framework can be applied to an extraordinary range of industries and asset types.
"In agriculture, what we're seeing now is some more opportunities for communities of farmers to start sharing things like their combine harvesters rather than renting from a central location. We're actually seeing a lot of growth in China in that area in particular," Bos notes. "Other areas are in construction, tracking machinery with downtime, sharing that among different construction companies."
It doesn't have to be focused on tangible assets either. The potential of blockchain technology to manage and track purely digital assets opens the door to easier integration of intangible assets in the sharing economy.
"Another one is Power Ledger. They do sharing of power. It's not something you can touch but it is very much part of the sharing economy," Bos says. "There's another company based in the UK, looking at the sharing of water-based assets as well. You might have farms of people that have very low utilisation of the water they have access to, now we have technology in place that allows them to share that water.
"I don't see [intangible assets] outgrowing some of the more tangible, but I do see them taking a larger slice of the pie than they do now," Bos says.
The middlemen of the sharing economy
Also true to blockchain form, the technology offers a way of cutting out the usual middlemen and more directly connecting asset owners and asset borrowers. Consider Airbnb and Uber, Bos says. They're essentially just brokers, taking a sizable cut of the profits for doing what might be done with a smart contact instead.
They serve as the trusted go-between for asset providers and users, an arbitrator for the inevitable disputes, a financial intermediary and a matchmaker who brings parties and counterparties together.
But when you apply blockchain's ability to create trusted interactions out of thin air, their role will likely have to change to remain relevant.
"I like to see Uber or Airbnb as an intermediary in the sharing economy. It's essentially just a broker arrangement. I see their involvement as either changing or being less as you get some more autonomous organisations that can maintain and hold that trust required between two parties."
So what prevents ShareRing from being just another intermediary? It might be the fees of just a few cents per transaction rather than a heftier cut a la Uber or Airbnb. The ability to use blockchain technology, with smart contract-driven autonomous organisations to facilitate peer-to-peer sharing, rather than inserting oneself as a permanent intermediary, changes everything by permanently eliminating a huge cost.
Reassuringly, Bos notes that ShareRing has no plans to start managing and renting its own assets on the platform. It's an entire sharing ecosystem, not just another front end for another middleman in the sharing economy.
Where mobility crosses profitability
A brief history of the taxi might be in order to understand how the developments in the sharing economy stand to disrupt mobility services beyond Uber.
In a nutshell, cost-effectiveness is everything. Uber has yet to find a way of sustainably delivering its current service, so reducing the cost of mobility services beyond what they are now will involve a fundamental shift of some kind.
When supply < demand
Taxis were the first type of business to offer mobility as a service, fulfilling the human need to get from one place to another within a reasonable time frame and at a reasonable cost. For a long time, this ability was reserved for the relatively affluent, but ongoing technological advances gradually lowered the barriers for entry. Eventually, the car arrived and proliferated, giving anyone with adequate funds the ability to go where they wanted on demand.
It was still a profitable time for the industry. The startup costs of acquiring and operating one of those newfangled motorised vehicles was high enough to keep competition low. Taxi prices remained relatively high.
So demand was greatly outpacing supply, and the taxi industry was quite profitable.
When supply > demand
Then a major shift came in 1907, when the Ford Model T arrived as a significantly more affordable vehicle. The taxi industry was now buffeted by a loss of customers resulting from vehicle ownership on one side and a lot of newfound competition from the reduced barriers to entry on the other. Mobility would never be the same again. The largely unregulated taxi industry quickly commenced a race to the bottom, exacerbated by the Great Depression a couple of decades later, which put a lot of otherwise-unemployed drivers behind the wheel, carrying passengers for less.
Supply was now outpacing demand, the taxi industry was much less profitable and cutting costs became the new objective to remain competitive.
When supply ~ demand
When taxi regulations came to the USA, they had the functional effect of capping supply even as demand grew, which once again shored up profits for the taxi industry, at the cost of leaving it stagnant, unnecessarily expensive and ripe for disruption at a later date.
That's where Uber entered the market in 2010 as a peer-to-peer taxi alternative largely beyond the scope of existing regulations. Given the historical background, it's little wonder that it voraciously snapped up millions of riders across the market and found no shortage of willing drivers. It was then joined by competitors like Lyft and dozens of other smaller regional alternatives. It was a return to the same pattern the world saw a century before – a sudden growing supply and a race to the bottom.
The difference might be that regulators are more nimble now, vehicle safety standards are higher and a certain level of quality needs to be assured. But still, supply is growing dramatically, profits are down and the goal is still to cut costs everywhere.
It's a bleak picture for Uber, but perhaps not entirely unexpected. As Forbes contributor Len Sherman observes, taxi driving in an entirely free market, where any individual can become their own taxi driver just by having access to a vehicle, hasn't been especially profitable for about a century – especially not when a behemoth like Uber is vacuuming up a large cut of the profits.
This problem wasn't solvable until the rise of blockchain systems that can directly connect riders and drivers, cut out the middlemen and maintain the legally required standards. This is a fundamental change in the mobility industry.
Plus, one of the key takeaways from the last century of taxi kerfuffles might be that almost everyone has somewhere to be almost every day, and people will turn on a dime whenever there's a more cost-effective way of driving or riding a taxi.
Around the ShareRing
But the sharing economy isn't just for cars.
"When I first developed Keaz in 2012, one of the things was to create a platform for the sharing economy," Bos said. "But what we realised is each asset is different. It was impossible to develop a one-size-fits-all platform."
So the focus tightened to focus on mobility alone, particularly on cars, bikes and other vehicles. But when the potential of blockchain technology reared its head, the opportunity of making that one-size-fits-all sharing economy platform was back on the table.
"I think one of the things blockchain enables us to do... is around creating a platform that's essentially a one-size-fits-all for the sharing economy, with autonomous organisations and smart contracts," Bos said.
One of the linchpins is the idea that anyone can write their own rules about how they share their own items, and then have those rules effectively and automatically enforced with minimal use of third parties. This element comes back to asset tokenisation, whereby things are essentially put into a digital and programmable blockchain form.
You can't yet program a car that won't start if the person behind the wheel doesn't have a licence, but you can program a system that won't let anyone borrow a car without having a driver's licence, and with the right IoT devices, you can prevent anyone who isn't the borrower from starting that car.
ShareRing is already working with niche car manufacturers to this end.
"They're providing us with a couple of cars we're looking at integrating the IoT side of software with," Bos says. "Once that’s done that will be like a sharing-enabled, or sharing-approved vehicle.
"Anyone in the sharing economy can write their own rules about how they share their own items. If you've got an asset that's tokenised, you can write your own rules about how that asset behaves," Bos explains. "You look at ownership vs custodianship of an asset. Where we are now, we talk about one asset that's tokenised, that basically has an owner and a temporary custodian. That custodian is responsible for a certain period of time."
The asset life cycle
As with the platform itself, these rules can be expanded to an exceptionally wide range of assets, the assets produced by those assets and so on. You're not restricted to tracking individual static assets but can also follow and share assets across an entire life cycle.
"What if it's an asset that is something like a farm that grows, and has a yield, and creates other assets?" Bos asks.
In the B2B sharing economy, a farming-equipment rental company might lease gear for a combination of cash upfront and a pre-programmed set of the eventual profits from that harvest, further dropping costs associated with equipment finance and letting the rental company more confidently offer a more competitive deal.
Once you expand your idea of what assets can be shared, and unify them around a single platform such as ShareRing, you're looking at a game changer. This improved access to more assets, and the near-elimination of many old frictions, might let a business recoup costs or even turn a profit from assets that used to be just a cost.
The incentives that can be provided by ShareRing through its native token can also help drive community participation in these kinds of events by sharing the profits associated with valuable assets – even if that asset is just garbage to the person holding it at the time.
"We're talking to a group at the moment... [a] biomass recycling system," Bos explains. "A company like McDonald's might throw away rubbish, this group might buy that rubbish and turn it into road surfaces. Rubbish is a shareable asset. We're talking to councils about having kitchen bench-top biodegradable composters. Councils provide those to some houses, then other houses give their bio waste to those."
Owning, rather than sharing, a blockchain
The use of a cryptocurrency also reduces the costs associated with handling payments and allows for easier sharing of assets internationally across different currencies. But to keep it accessible, ShareRing is exploring fiat on-ramps for the system as well as going for a dual-token system which includes the ShareRing governance and access token as well as the pegged SharePay stablecoin.
This is one of the reasons ShareRing is opting for its own blockchain (based on Tendermint) rather than building on a separate platform like Ethereum, Bos says.
"It was a tough decision. We looked at Ethereum, and a number of others. The issue was initially around, I guess, a lack of control – lack of direction – with using another blockchain."
When the goal is to cut costs and frictionlessly onboard users, scaling problems and other existing platform hassles might be a real headache.
"We can develop the economies within ShareRing and ShareLedger to always make sure its low cost to use, and low cost to launch a sharing economy. We can make sure apps are tailored around the sharing economy."
Plus, for a system like ShareRing that's not necessarily as dependent on the appearance of decentralisation as bitcoin or others, it might be easier to achieve the scalability required to handle potentially billions of tokenised assets.
"We're going through a lot of tests around scalability and how we scale to potentially billions of assets," Bos said. "We're talking billions."
Things you don't want to share
And while it aims to be a largely decentralised sharing ecosystem, there's still a need for a governance model and some measure of authoritarianism to determine what can and cannot be listed on the platform.
Slave labour, for example, is also a shareable resource, but most people would probably agree that it doesn't belong on ShareRing. There needs to be some way of drawing these lines in order to ensure the platform is actually useful.
It's worth noting that paid labour is still very much a shareable resource though, and ShareRing is in talks with CanYa, another Australian blockchain startup, in that area.
But other lines are blurrier, such as the sharing of assets that are illegal in some jurisdictions or sharing items that are defective or potentially dangerous.
It's not yet clear what the best way of balancing freedom, functionality and ethical and legal responsibility on the platform is. ShareRing is going for a kind of constitutionally guided masternode system, but Bos concedes that trying to enforce a constitution is probably going to be an educational and ongoing process.
"I think one thing we're trying is to put together a list of principles that we're adhering to, and that list of ethical principles will guide what can and can't go on the platform," he said. "Once we release the next version after November (the date of the first test launch), the next thing after that will allow for voting on the masternodes. They'll have that list of principles they adhere to as part of the voting system.
"I think it's very difficult. I think we're going to learn a lot as we try to enforce that. The last thing we want to do is fall into the same traps as EOS, for example. The last thing we want to do is end up in that sort of downward spiral... it's become a bit of a dictatorship.
"We want to keep it open and see how we try to enforce it as we go forward. That will evolve over the next 12 to 24 months."
Along the way, ShareRing's built-in reputation system might help, while also posing some problems. The idea is to ensure platform users can access reputation information on the entities they're borrowing from – similar to Uber's driver reviews and 5-star rating system – but this comes with some problems of its own.
As soon as reviews became commercially important, they start being manipulated. The thought has occurred to ShareRing too, and it's aiming to settle it with sheer diversity and by allowing an open ecosystem of third-party reviews to bring in more data. Essentially, hoping to settle smear campaigns by overwhelming the noise they produce with accurate data instead.
"Potential for misuse is always a problem," Bos notes. "A hotel group in Sydney used their own system to put down competition and knock down negative reviews. We're partnering with as many other reputation-type systems as possible. More is better."
First steps
"When we launch in November, we are launching as a pilot. We do have a number of providers we work closely with to bring on board and navigate it."
The heart of the platform is largely in place, so the first step for ShareRing now might be to seed the ecosystem with reliable test partners. In other words, sales and marketing.
"From our side, it's very much a big sales process for us," Bos said. "We can't expect it to grow by itself. With our sales people, we're targeting specifically agriculture and construction as the first markets. In the consumer space, we're targeting events, event hire, wedding, travel, hospitality... In the longer term [we're targeting] house rental and apartments. We're also doing smaller things, like lawnmowers, but it's not a big focus."
The sharing economy is a natural match for the B2B market, but so far there hasn't been a viable system for managing it.
ShareRing probably won't be the last platform that plans to corner the paradigm with a holistic blockchain tokenisation and sharing platform. Just look at how quickly Uber was tailed by competitors. But with a pilot launch coming up in November, it might well be the first.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and ADA.
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