The New Challenges of The Sharing Economy in 2016

The Challenges of The Sharing Economy in 2016

The Challenges of The Sharing Economy in 2016

The sharing economy has developed rapidly over the past few years. We have seen the massive and seemingly unstoppable growth of organisations like Airbnb and Uber which have changed their respective markets considerably.

Yet as explained by Helen Goulden (2015) of Nesta, 2016 is going to bring something new to the table. Airbnb and Uber and others have been disrupting their markets, but Goulden believes that 2016 will see disruption for those disrupters. Models are going to be changing yet again, just as we got used to the last change. Goulden argues:

“In 2016, we will see the disrupters being disrupted, as the next technological revolution simultaneously cracks the challenge of trusting strangers in the sharing economy while ripping up the rulebook for how those same platforms make their money.”

Sharing economy businesses that have seemed transformational in many senses have thus far made money in a very traditional way – specifically through being middlemen. They bring together buyer and seller and charge a commission. This is a model that has been around for millennia, so it is not as innovative as it might at first seem. When such platforms were being launched there was a lot of discussion about how the situation was new, and how technology allowed people a way to connect that avoided traditional organisations, in fact, these businesses are straightforward middlemen businesses, it is argued.

It is postulated that a technological solution that would allow total disintermediation would be good. This would totally remove the middle man. It would need to be free of fraud, free of ownership and free of commissions. It is predicted that sooner or later platform coops will appear offering users better and fairer alternatives.

On the other hand, Nesta’s article predicts that Blockchain provides the opportunity for new ways of tackling the sharing economy. Blockchain is the innovation that Bitcoin is built on. It can be seen from this example that it is possible to have a transparent system that is completely distributed and not owned by anyone. Blockchain creates the opportunity for transactions between different parties with no third party involvement. This is true for individuals, government entities or firms.

Blockchain is starting to take off. It is explained that nine investment banks began working together in 2015 to crease open standards for technology for Blockchain so that financial services could be built on top of it. There was also the launch of a service which has created a technology stack for a decentralised sharing economy, called Slock.it.

If the sharing economy were to be based on Blockchain concepts there would need to be new business models. OpenBazaar, for example is a proto-blockchain type of eBay. Even though OpenBazaar it might fail, but will lead the way for other similar organisations that may just succeed. In particular, it is suggested that such services will be free to use. These types of services will require investment to succeed. Nonetheless, it is believed that they will do just that – succeed. There will be no middleman, and this will make it cheaper for transactions. In turn this will lead to the Goliaths of the current “sharing economy” having to change their ways.

Screenshot of site OpenBazaar

Screenshot of site OpenBazaar

Trust is a common concept assigned to the sharing economy. The sharing economy allows trust to be built through reviews and rankings. Yet it is very difficult to completely ensure trust between people. Blockchain is argued to remove problems of trust. That’s because it creates a system that is hard to break, and it keeps track of every transaction, with clearly set parameters and contracts.

There is not even any longer a need for an idea of trust between people who do not know one another. This is because regulations can be coded into the system. An example is provided of where this is already being done, with WikiHouse. This is a concept where houses are designed and built using so-called “rules based regulation” in a sharing economy.

Screenshot of site Wikihouse

Screenshot of site Wikihouse

Much was promised when the sharing economy arrived in the latter half of the last decade. Yet little of what was promised – inclusion and sustainability – has actually been delivered. Blockchain based innovations have the opportunity to push past this and succeed where early innovators could not. It will be fascinating to see how the current titans respond to these predicted changing circumstances that will not be in their favour.