Within the past few decades, we’ve seen the rise of the sharing economy, with companies like Lyft, Airbnb and countless others.
At the core of the sharing economy is a sense of community through creating access to items for a specific period of time. While it would take quite some time to save up for a large home in the south of France, Airbnb provides the opportunity for consumers to pay a fee to stay there during vacations or business trips. Instead of paying the car loans and other vehicle maintenance fees that come with owning, Lyft gives consumers the option to pay someone else to use their car for a quick trip.
Everyday consumers are taking innovative ideas for products and services into their own hands and going directly to the public to help mobilize them. In a sense, the sharing economy has taken a reverse approach to business startup life. Rather than the traditional centralized route of going to countless investor meetings to raise funds and fill out the red tape paperwork, business ideas are spread in a decentralized manner through social media and crowdsourcing fundraiser sites like GoFundMe. In order to thrive, the sharing economy requires various people to lend their resources.
Centralized vs. Decentralized
This move from a centralized system to a decentralized system is bound to have an impact on the way businesses operate. We spoke with IBM’s VP of global blockchain market development, Jesse Lund, to learn more about how this move via the sharing economy is changing business as usual.
“Central banking,” he said, “is still the core of virtually all transactions in commercial jurisdictions around the world and will likely continue to be for the foreseeable future. However, the balance of influence is shifting, mimicking the trend of the social internet, where the loudest voice is no longer the central governing entity or transaction intermediary, but rather the collective voice of the network of participants who want to interact directly with one another. This trend is just beginning to make its way into digital commerce around the world, forcing central banks and incumbent firms to rethink their strategies, particularly with respect to fees and the overall end user experience.”
When it comes to whether or not centralized business systems will have a place in the future, Lund surmised, “Perhaps not always, but for the foreseeable future, yes, the need will remain because of the existing investment in these systems and the governance of monetary policy at large. Systemic change doesn’t happen overnight, but the shift in favor of new models has begun.”
Crowdsourcing vs. Sharing Economy Defined
Some may confuse the concept of the sharing economy with crowdsourcing, but Lund clarified the topic: “Traditional crowd sourcing is an appeal to a collective network of interests usually for a single beneficiary or common endeavor, whereas the sharing economy is a network that operates for the collective benefit of all participants. This is a rudimentary understanding, of course, but it serves to underscore the idea that blockchain is an ideal foundation for a variety of network-centric economic models, both of these included.”
As we move further into the sharing economy, there will no doubt be a myriad of barriers facing anyone wanting to enter or participate in it. The decentralized system presented by this movement brings about a healthy level of conflict.
Lund shares what he believes to be the top three barriers to the future of the sharing economy:
- Friction in real-time, cross-currency financial clearing and settlement
- Incumbent resistance / lack of incentive to innovate (i.e. the pioneer of the last paradigm shift who has become the leader today can be the last to adopt the next paradigm shift)
- Jurisdictional conservatism / protectionism: Legacy structures and systems serve a purpose in providing stability but have inherent controls that prevent rapid change. Clearing a path to rapid adoption that simultaneously preserves stability can be challenging.
Blockchain Technology and The Sharing Economy
To help with these barriers in the sharing economy, there is one technology that would likely help move the needle significantly by addressing any concerns of safety for all parties involved: blockchain technology.
Through the way blockchain technology securely transfers money in a decentralized manner, there’s no need to involve a third party like a bank, which can sometimes slow down the process. Given this, blockchain can be viewed as an enabler of the sharing economy.
Lund shared the similarities between the two areas: “Distributed Ledger Technology, a.k.a. ‘blockchain,’ offers a new paradigm for commerce that is consistent with the social internet, where everyone ‘owns’ the network by way of their participation in it, but there is no central intermediary that has full control over it. In this way, the digital economy is becoming the sharing economy, following the same evolutionary pattern as the internet did for information sharing.”
Is implementation of blockchain technology the key to enabling the sharing economy?
Lund said, “It’s the acceptance of the paradigm of information sharing and transparency applied to financial services (i.e. shared accounting systems across firms, even with competitors) that is the true key to fully enabling the ‘sharing economy.’ Blockchain is just one implementation detail that makes the concept work. At the end of the day, it’s the experience and collective benefits that participants are focused on with regards to the use cases enabled by blockchain, not the technology itself.”