Author: Matteo Montani
In the last 10 years the transportation industry has undergone numerous revolutions. One of the most notable is the application of sharing economy to mobility. Car sharing and ride hailing have become popular practices in various highly developed countries, with Uber being the company in the center of attention in the market of sharing mobility. Though such companies tend to have important market shares, blockchain enthusiast do imagine the potential of blockchain to strive its way in the market. Promising signals arise from the various critiques that have been raised by society, ranging from the protests of Taxi drivers, to the unclear pricing mechanism used to charge fees, and even concerns about Uber’s ‘ghost mode’ that violated the privacy of the riders. Additionally, McKinsey forecasted a 20% annual growth until 2030 of the sharing mobility market. Consequently, these two factors make sharing mobility a fertile environment for blockchain to develop in.
To understand blockchain’s full potential in the ride hailing market a brief background understanding of the market is required. Uber and Lyft, along the other companies operating in the market, offer a platform where consumers (riders) and suppliers (drivers) meet, such that value is added to the supply chain by those who join the platform as they provide services to the riders, not the company itself. Hence, it’s a peer-to-peer interaction in which the company offering the platform controls the all the rides and pricing. Thus, for its services, every time a transaction between a rider and driver is concluded, a commission fee is taken by the company. This not only results in the driver having a lower salary, it also translates into higher prices for the rider.
Blockchain can perfectly slip in this system, it can take the position of the service company and replace it. Thereafter, the technology would provide the service of connecting driver and client, replacing the necessity of a central authority to manage the platform. Therefore, eliminating commission fees, resulting to lower price for consumers. Through blockchain a platform that on the surface would be alike to Uber’s would be created. Drivers would join the application by providing their personal information which thanks to smart contracts would be verified, hence guaranteeing standards of safety for clients. Riders on the other hand, would make an account through which they can book rides. Safety would not be only guaranteed to riders, indeed also drivers can feel safe while operating with the app, as the information of each single ride, such as driver, rider and review of the ride, would be recorded in the blockchain’s ledger, thus, any complains and negative reviews attributed to clients, would be visible to all drivers of the chain. Furthermore, through encryption the personal data of both drivers and clients would be safe from third parties.
Well, now you might be wondering: who does all the programming and backgrounds checks on drivers? A possible solution would be the one on which Lazooz, a blockchain based ride hailing platforms, based its business model upon. Their suggestion was that by replacing a central authority with blockchain, those drivers, programmers and other parties contributing in enhancing the value of the supply chain, would be rewarded accordingly to their merit by being given shares of that extra value that the chain benefits. Therefore, unlike Uber who just hands a percentage of the ride fee to the driver, Lazooz would create a system of incentives, in the form of designed tokens, for individuals to contribute in adding value to the platform. This would imply that individuals working within the chain become ‘shareholders’ of the Lazooz, implying that contributors’ profits would be based much more upon merit than Uber and all the other centralized companies.
Unfortunately, this start-up founded in 2014 hasn’t made the headlines in recent times. Even so, their business model provides insights to what a decentralized, blockchain based sharing mobility would be like. Hence, highlighting its notable strengths. The first one being a reduction in costs for riders. While the second one being greater economic opportunity for the drivers, as they wouldn’t suffer reductions in salary due to commission fees charged by the platform’s holder and be rewarded for the contribution provided.
Summing up, blockchain introduction to the sharing mobility sector can have positive repercussions in the stakeholders of the sharing mobility industry. As the industry is forecasted to grow at a 20% annual rate until 2030, various startups have tried to apply blockchain to sharing mobility. Albeit their efforts, law makers have posed obstacles in blockchain introduction, in the form of regulation, which up until now, have prevented blockchain’s strive in the sharing mobility market.