Guest article by Thijs Zwienenberg, Simon Hazée, Arne De Keyser, and Martin Paul Fritze.
Blockchain technology has become the talk of the town, poised to revolutionize various aspects of our lives and digital business processes. Essentially, a blockchain is a decentralized and distributed digital ledger used to record transactions (such as cryptocurrency transfers, smart contract executions, asset tokenization, supply chain movements, voting records, and identity verifications) across many nodes in a way that ensures that the recorded transactions cannot be altered retroactively without the alteration of all subsequent blocks. In this viewpoint, we explore how blockchain’s impact on the sharing economy can be harnessed through two key changes, namely (1) enhanced transparency and (2) disintermediation and automation. Also, we identify some fruitful avenues for future (service) research.
Consider the case of Airbnb, a pioneer in the sharing economy that has revolutionized how people discover accommodations. Frequently, guests and hosts face uncertainty regarding the other party’s reliability. Blockchain technology has the potential to introduce an unprecedented level of transparency to platforms, which can then serve as a new, solid foundation for trust. Imagine a scenario where a room is booked through a blockchain-powered platform, and every step, from booking to check-in and check-out, is meticulously recorded in an immutable and transparent manner. This would enable guests to access verified information such as the previous guest reviews and guest-verified photos. If a host provides a false representation of their property, like inaccurately advertising a luxurious space, the blockchain-based platform would document this information, alerting prospective guests and holding hosts accountable. A blockchain-powered platform would also enable hosts to get an indication of the guest’s platform participation performance and payment history and ability, getting a more transparent perspective on the consumer who wants to make use of a hosts’ personal assets. Moreover, blockchain reduces verification costs by securely validating users’ identities, which can be seen as a novel, more reliable reputation system. Such enhanced transparency would ultimately empower users to make more informed decisions, and foster cooperation through enhanced trust—a cornerstone of the sharing economy.
Stories of subpar product and service quality as well as security concerns have also cast doubts on the reliability of the assets shared through sharing platforms. One effective way to alleviate these concerns is by integrating blockchain technology, enabling all parties involved to track the quality of goods whenever possible. For example, organizations like MOBI (Mobility Open Blockchain Initiative), in collaboration with automotive giants like BMW and Ford, have launched VID II–a digital blockchain-based identity standard for vehicles. This serves as a type of “car birth certificate” that allows manufacturers and consumers to access crucial vehicle information, including registration, maintenance history, and odometer readings that are being written onto the blockchain. Users can scan the vehicle ID in advance or receive real-time information from car-sharing platforms about the car’s condition and safety. Interestingly, platform providers can also leverage this data to understand when their products require maintenance and track incident times more effectively, as data is transmitted in real time at specific intervals to the blockchain through IoT sensors.
In addition to reducing risks stemming from the lack of reliability of both actors and assets, blockchain can enhance sustainability, amplify resource sharing and consumption reduction by enhancing transparency in the sourcing and sustainability practices of sharing economy platforms. Similar to H&M’s initiative, who recently partnered with the blockchain startup Textile Genesis, a fashion sharing platform like Rent the Runway could document the entire journey of each garment—from the creation and sourcing of materials to each rental transaction. Customers would have access to detailed information about the item’s environmental impact, encouraging them to make more eco-conscious choices.
This first key change enabled by blockchain raises a new set of questions that warrant further research: How do customers and peer service providers respond to blockchain-enabled transparency? While transparency and reliability are built-in to the technology, does this factually increase actors’ trust and willingness to participate in the sharing economy? When does transparency backfire and amplify actors’ privacy and data management concerns? Does having access to the complete usage history of a product through blockchain reduce customers’ concerns about contamination and misbehavior? To what extent does blockchain’s transparency in sourcing and sustainability practices encourage more sustainable consumer behavior? Are consumers willing to pay a premium for sharing products and services with a transparent sustainability record on the blockchain?
Disintermediation and automation
In the context of the sharing economy, platforms like Uber and Lyft have already transformed transportation by directly connecting drivers and riders, effectively bypassing traditional intermediaries such as taxi companies. Blockchain technology can take this advancement a step further by introducing fully automated peer-to-peer transactions. Picture a scenario where you request a ride through a blockchain-based app. Smart contracts (contracts written to the blockchain that automatically execute when predefined conditions are met) seamlessly manage the entire process, from selecting a driver who meets a users’ personal criteria to automatically and securely transferring payments when the destination is reached. Disintermediation and automation have the potential to significantly enhance efficiency and reduce transaction costs, allowing drivers and riders to engage directly, free from intermediaries, mitigating or eliminating the often-high service fees associated with current firms and allowing a more transparent, fairer distribution of earnings. For instance, Uber imposes a 20% service fee, while Lyft charges a commission ranging from 20% to 25% per trip, and Airbnb imposes a 14% service cost on consumers. While there may be minor fees for writing data to the blockchain, transferring funds to smart contracts, and rewarding validators/miners, these fees could be substantially lower than non-blockchain sharing economy services. The blockchain sharing initiative DTravel, for instance, only charges 3% on completed reservations.
Smart contracts also enable (peer) service providers to receive funds immediately upon the conclusion of a service, eliminating the waiting period (e.g., 3 to 5 days for Turo, 5 to 7 days for VRBO) associated with traditional intermediary banking systems. Moreover, blockchain-powered sharing economy services have the potential to democratize access to goods and services, especially benefiting underserved populations such as unbanked and low-income people. Unlike traditional sharing economy services (e.g., Airbnb, Lyft, Taskrabbit), which necessitate a bank account for fund transfers, blockchain-based digital payment wallets can be easily created using basic smartphones—a system often referred to as decentralized finance (DeFi). This opens opportunities for underserved populations to access previously inaccessible products or services as consumers and participate as providers, thereby facilitating social inclusion.
This second key change also raises numerous questions that require service researchers’ attention: How does blockchain affect transaction costs, service fees, and earnings distribution for both service providers and consumers? Setting up personal (crypto) wallets to interact with smart contracts can be difficult—Are all individuals capable of comprehending and interpreting the specifications of smart contracts? What resources do actors need to effectively navigate the complexities of blockchain technologies? How can sharing economy platforms effectively educate users? What factors influence the adoption of blockchain-powered sharing economy platforms, especially among underserved populations? When considering platform branding, should sharing platforms consider co-branding with blockchain firms? What are the necessary resources and capabilities that sharing platforms need to transition from centralized to decentralized marketing management? How can real human interactions be effectively integrated into a closed blockchain-based ecosystem? How might the emergence of new sharing platforms owned and operated by users, without third-party involvement, impact identity and roles within these platform ecosystems?
The blockchain technology connects with fundamental underpinnings of the sharing economy and opens up new ways to implement them technically. Empowered by blockchain technologies, the sharing economy could become the ‘new normal.’ In this new landscape, collaboration between industry players and researchers will play a pivotal role in realizing a transformative impact on providing value for customers, businesses, and society at large.
Technische Universiteit Eindhoven
Associate Professor of Marketing
Université Catholique Louvain
Arne De Keyser
Associate Professor of Marketing
EDHEC Business School
Martin Paul Fritze
Professor of Marketing
Image credit: Shubham Dhage