Chapter 2 Literature Review
2.4 Sharing Economy Issues
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blockchain, like Bitcoin, means that it is open, anyone who downloads the software can participate.
Users download the software, then become a node, and they have a full picture of the ledger, that distributed ledger is distributed to their node, and anyone can enter this process. However, there are also permissioned blockchains. A permissioned blockchain involves requirements or governance structures or restrictions on entry. In other words, only individuals, organizations, computers or devices which have been pre-approved can join into the network, can access the information and can potentially contribute transactions.
Blockchain does not necessarily involve cryptocurrencies. A blockchain based system at its base is a distributed ledger which is encrypted, maybe with an additional layer of smart contracts on top. The individual data entries can be anything and the communications between those data entries do not necessarily involve any sort of currency.
One of the most powerful applications for this technology is in production processes.
In the food market, the providence of pork, or a bottle of wine can be proven by the blockchain system from its creation, its history, its movements documented throughout that system.
Therefore, any eventual possessor can document both the origin as well as the lifespan of that particular pork, bottle of wine, diamond, or artwork. The real power of blockchain is in building systems which are potentially highly secure, permanent and highly transparent.
2.4 Sharing Economy Issues
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Currently sharing economy companies and their users face several issues, most of which can be resolved with the use of blockchain technology.
2.4.1 Safety and Crime
While most of Airbnb and Uber users have positive experiences, some horrifying incidents still occur from time to time. According to reports from CNN, 103 American Uber drivers were accused of harassment or abuse and almost a third of them had criminal records before. Companies like Ola in India and Grab in Malaysia have similar stories in the news (Niam & Shamika, 2017).
2.4.2 Data Security and Privacy
As reported by Bloomberg in late 2017, Uber has experienced a massive customer data breach. Despite security measures, hackers had gotten the data of over 57 million users.
Uber’s Chief Security Officer was then laid off for having taken a part in making a
$100,000 silencing payment to the hackers (Niam & Shamika, 2017).
Other sharing economy businesses also have the same data security problem, which is why it is more secure and helpful for avoiding some of the vulnerabilities of centralized servers to decentralize databases across multiple nodes. Even if an attack on a decentralized database happened, it would be difficult to hide this event from the public.
2.4.3 Monopolies
Consumers have shown a great interest in all types of services provided by sharing economy in short-term loans, hospitality, delivery, transportation, labor, consumer goods and retail. Decentralization helps take the control of the platforms like this from
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the monopolies and give it back to the users. In the future, this crowd-based model is predicted to penetrate into many industries and the monopolies will have to adjust their business models.
The valuation of Uber and Airbnb, two of the leading companies in the sharing economy industry, has grown significantly and indicated the potential of this sector.
These significant increases state that these firms are still at the beginning of their life cycle. Only fundamental innovations integrated into the business operations can help them sustain this growth. Being global at their core, these firms depend on their ability to adapt to local conditions and new technologies in order to expand.
Figure 1. Increasing valuation of Uber and Airbnb (Niam & Shamika (2017).
One of the most valuable aspects of sharing economy businesses is the flexibility provided to their users. The U.S. Office of the Chief Economist focuses on this aspect of the sharing economy platforms and characterizes them as “digital matching firms”
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schedules. According to Brookings Institution, “2.7 million Americans currently work as independent contractors (i.e., 15+ hours/week) via such firms, a 4,700 per cent increase since 2012. This massive growth is reflected in Uber’s 2015 valuation at $62.5 billion, which would have put it in the top 20 per cent of firms in the Standard and Poor’s 500 index had it gone public.” (Niam & Shamika, 2017).
According to the research conducted by Jonathan Hall and Alan Krueger called “An Analysis of the Labor Market for Uber's Driver-Partners in the United States”
uncovered significant demographic and earnings-related information. In comparison with regular taxi drivers, Uber drivers are, on average, better educated, less diverse and younger. Indeed, whereas Caucasians only make up 26 percent of taxi drivers, they make up 40 percent of Uber drivers. (Niam & Shamika, 2017). The Uber drivers’
average age is opposite that of taxi drivers, being rather young than old. It has been found that women’s rate among Uber drivers, although being only 13.8 percent, is double of the female taxi drivers. (Niam & Shamika, 2017). In terms of earnings, the researchers found that while over half of all Uber drivers across U.S. cities drive 1-15 hours/week, the greatest per-hour compensation is achieved when driving between 15 hours/week and 34 hours/week (Niam & Shamika, 2017).
2.4.4 Price Discrimination
Price discrimination is something that is very hard to control. Even if it was illegal, firms like Uber and Lyft could charge everyone the same prices but offer discounts and coupons to some clients only. This would be an indirect form of price discrimination that is very difficult to prove illegal.