Welcome to the sharing economy, a broad and growing concept whose enthusiasts view peer-to-peer sharing as a fundamentally new way to organize economic activity and growth. The sharing economy works by letting people exchange goods and services among themselves more efficiently. It is empowering individuals to manage and monetize their own assets by removing the middle man. Companies like Airbnb, Uber and Task Rabbit function by using the physical assets of others to fulfill a need.
Enabled largely by online transactions and the collaborative consumption model, the sharing economy is growing in popularity. Just how big the sharing economy is and will become remains somewhat uncertain, because of the broad definition. It can include everything from recycling to ride sharing to cooperatives.
In a 2016 report, the U.S. Department of Commerce noted that information available about the collective size of the “digital matching firms” that make up the sharing economy is sparse. But reports show a clear upward trend based on what we’re seeing in the market today.
For example, a 2016 report by the Brookings Institution, a nonprofit public policy organization, said the sharing economy is estimated to grow from $14 billion in 2014 to $335 billion by 2025. The estimate is based on the rapid growth of companies such as Uber and Airbnb.
And those leading sharing economy brands are taking in billions of dollars, with Uber currently reporting a value of $62.5 billion, and Airbnb said to be worth $24 billion.
Advocates of the sharing economy praise the convenience, open competition, innovation and control that these offerings bring. But critics claim that sharing economy businesses fail to offer proper protections for workers, consumers, and property owners. They also say it’s not necessarily a “sharing” economy but an access economy.
Whether you’re a true believer in this new era of commerce, are skeptical of its promises or just indifferent, the sharing economy clearly has decentralized supply chains and put a spotlight on the security issues inherent in peer-to-peer sharing.
That’s where blockchain comes in. Blockchain is a fully transparent, peer-to-peer distributed ledger or database that securely enables multiple kinds of transactions to take place directly between different participants. Blockchains accept inputs from multiple parties, and the ledger can only be appended when there is a consensus among the group. As a result, blockchain offers a system to decentralize operations removing the need for a central authority. One of its most important properties of blockchain, in fact, is this elimination of the requirement for central authorities and middlemen.
Because of its characteristics, blockchain could become a backbone for the real sharing economy, or perhaps “version two” of the sharing economy. In the current model, every sharing economy service has a central authority, while similar services built and operating on blockchain technology would directly connect suppliers and customers in the most efficient manner available.
What needs to be done for a blockchain-based sharing economy?
The sharing economy, like blockchain, needs security. Individuals acting as service providers don’t have the same liability or protection as a massive hotel chain for example. Blockchain, while efficient, also lacks the necessary level of security when it comes to opportunities like digital currency payments, access to data or monetization of an asset.
To develop new opportunities for the sharing economy built on blockchain networks, organizations need to build in comprehensive security. That means securing blockchain in key areas including providing strong identities and authentication to gain access to the blockchain; securing core blockchain technologies; and securing communications across the blockchain network. With these provisions in place for blockchain, the sharing economy stands to be much more secure.
