If you look up the definition of a sharing economy, you will find it often includes the sharing of a good or service through an online platform. The truth is, sharing economies have existed for centuries—well before there was an online. Communities have historically shared resources, instead of owning one of everything themselves.
However, the advent of the Internet changed the possibilities of a sharing economy by expanding the reach of potential buyers to lenders. It gave rise to tech giants like Airbnb and Uber, allowing individuals to monetize their unused rooms, houses and cars. These companies provided people with a more affordable and accessible way to get from A to B, and stay in C, than their traditional counterparts.
The sharing economy has experienced waves of hyper enthusiasm, but it has yet to reach its full potential. The sharing of smaller items has failed to gain the want and necessity from would-be users, as transaction costs and convenience still favor purchasing the item outright. However, the development of technologies including blockchain and IoT are beginning to change these limitations. We’re seeing the next evolution of what a future sharing economy could really mean for individuals, the economy, and the environment.
Shifting Our Mindset
The boom of the digital revolution has allowed us to connect to the world in a way we couldn’t before. This has given us access to greater options for finding accommodation, transport and resources we may otherwise have found unaffordable or inaccessible. In the developed world, we still live like we need to own everything ourselves. From our cars, to our internet, to our dust-collecting DIY tools, we need it for ourselves. It might be convenient, but it’s costly and takes up space, and we often don’t utilize the assets full value. Private vehicles go unused for an estimated 95 percent of their lifetime, so why does everyone need their own car? What if cars were rented by the day or hour, and you only paid insurance for the period rented?
Learning a New Way to Trust
Online platforms listing available rooms or other assets exist because users need someone to trust in the transaction process. When you pay for a good or service, you want to know you will receive that item, and these platforms help instill that trust.
The arrival of blockchain technology, although initially intended to disrupt the finance sector, has resolved that need for trust. Blockchain’s key features—decentralization, transparency, immutability, and security—have prompted almost every industry to consider operational optimization. Blockchain provides a “trust-less” environment because it’s not controlled by a central authority. Instead, consensus on any given transaction is handled by a network of peers, or nodes.
To maintain honesty and integrity among the network, various incentive or disincentive methods are applied across blockchain models. This ensures that valid transactions are verified and confirmed, while discouraging motives to act unfavorably.
Blockchain’s ability to decentralize ownership means we can create an Uber-esque service without needing the company. This would lower operational costs incurred by the central platform, enabling a true peer-to-peer exchange where prices are agreed directly between seller and buyer. This would prevent your personal data from being collected, stored, and monetized by entities that have traditionally provided these trusted platforms.
Beenest is one example of a company using blockchain technology to improve the house-sharing economy, by eliminating the terms of service and costs incurred by the centralized giants that typically hold the market share. Improving on existing companies classified under the “sharing economy,” like Airbnb, Beenest allows the users, and not a company, to truly reap the benefits of what it means to share resources peer-to-peer. In this new model of house sharing, those with rooms or houses to spare are able to directly connect with those looking for accommodation, with no intermediary charging a commission or exploiting its user’s data.
Automation Drives Opportunity
Smart contracts are another element of blockchain. They remove the need for trust between parties providing or using goods and services. Smart contracts are a set of self-executing rules that run on an if-then premise between two or more parties. For example, if you wanted to rent a car for the day, you would send through the required payment to an account that is monitored by the smart contract. Once payment is received, the smart contract would execute, allowing you to unlock the car and switch it on. Once the rental period is up, the car would lock and no longer turn on.
Slock.it is a German-based company that is building real-world applications for the sharing economy, by enabling human-machine and machine-machine sharing through blockchain and IoT. Among their many endeavors, they’re developing smart switches.
Using smart contracts, these smartwatches can unlock the door to a rental home, office space, vehicle, or give access to services such as metered Wi-Fi, for the period paid. Through a simple app, users can search for connected devices to hire, pay and gain access to the device. History and use of these devices are stored on the blockchain in the back end, recording data including time used, amount paid, and so on.
For devices such as machinery, this record could also notify the device when it needs its next service. The use of smart contracts within a sharing economy model means there is a reduced need, or even no need, for third-party intermediaries who would normally serve as the trusted platform providing the services. This would reduce operational costs, thereby lowering costs for the renter while the provider of the good or service earns more.
With around 23 billion devices connected in 2018, we’re now able to share, locate, and track more assets reliably. Thinking beyond the current items in today’s sharing economy, there are many other resources to be added that are currently overproduced but underutilized. What if houses with solar panels could reallocate their unused electricity to neighboring houses via a power grid and families earned money instead of the power companies?
What about renting the extra disk space we have on our hard drives, or the extra 20GB of internet data in our monthly plan that we never use? Currently, it’s easier for people to buy their own plans and hard drives (whether local or cloud-based). But, what if there were convenient and affordable options for renting out these unused services that you pay for regardless?
It’s estimated that within the next 10 years, more than 50 percent of the global economy will be created from the major sharing economy sectors: peer-to-peer lending, music and video streaming, automobile sharing, house sharing, and online staffing. However, this could be significantly greater if we develop current and future technologies to increase accessibility to what we can share with one another. In a time where we are using too many of the earth’s resources, this could be a solution to today’s overconsumption and waste of resources.
We may also see a shift in the distribution of the economy as technologies such as blockchain allow everyday users to capitalize on their own assets. Of course, regulations, security, and policies still to need to be developed as we iron out what the sharing economy is and what it means.
It’s clear that consumers now have greater options for selecting products and services, while giving lenders the ability to offer their unused goods or services to a much larger audience. The economy works off supply and demand, and with the introduction of more services available, more competition will inevitably continue to foster innovation.