Connect with us
Sharing Economy Sharing Economy

Commodities

Blockchain and the Sharing Economy: The Future Relationship

 7 min read / 

The real credo and fundamental technological belief behind blockchain is decentralization. What is really empowering about it is that individuals do not need a hierarchical organization to manage organizations and contracts that have always required a centralized position of power, which has tended to be related to corruption and human error. A decentralized system that records information with digital immutability – which is a completely new concept – powered by proof-of-work cannot be modified, and this feature changes many things. This is where the concept of smart contracts comes in handy.

Smart Contracts

Smart contracts are agreements between parties that do not need an intermediary that checks that conditions are met. They facilitate the elimination of a third party and the urgency of trust and transparency when underwriting legally binds obligations. A software written in a smart contract is identified by its universal execution, as it runs the same way on every computer on which it is performed. It is always consistent and most of the time interactions are done by means of transactions.

The smart contract technology opens new frontiers and business opportunities. Payments – which are a form of contract – can indeed be triggered at predetermined times and in response to previously set circumstances, like sending an automatic money transfer to the bus as soon as it detects one’s presence, or while scanning groceries at the supermarket.

Companies and entrepreneurs have never been so happy; the rate at which new projects are created – and funded, especially with the phenomenon of ICOs – is a clear picture of the excitement these new platforms and technologies are generating.

Slock.it, for instance, has developed several micro-devices reminiscent of a lock that anyone can pair via Bluetooth and other wireless technologies to objects. Once something has been secured with a lock, the owner shares it automatically on a network permitting anyone to freely use it. Indeed, the owner sets a deposit and a rental cost, so that anyone interested can unlock it and freely use it by sending the cost set in advance by the owner directly to the lock. After the rental has terminated, the device sends back the deposit to the user and assigns the cost to the renter. What is interesting about the project is that it overcomes the main complications that the sharing economy can encounter, completely bypassing steps like matching users, organizing, and, most importantly, security.

Golem is the first worldwide supercomputer on which anyone can run tasks, from simple operations of individuals to very complex and powerful ones like those performed by companies. What is peculiar about this supercomputer is that it is not located physically anywhere, but it is the sum of all the computing power shared by individuals on the network. This means that anyone can rent its computer – whose computing power is going to add up to that of other people – and get a monetary return. Golem represents a new way of distributing computers, where users can sell redundant computer power for others to use, having complete control on how much CPU and disk space they want to provide.

Similar to Golem, there is a startup developing an alternative to cloud services offered by companies like Google and Apple, whose main characteristics is decentralization centred on participants’ sharing of resources. Storj.io ’s solution offers the most secure, largest and cheapest cloud storage available. People share part of their computer storage on the network and get the same amount of cloud storage in return, also adding the opportunity to rent idle space present on their computer. Security is provided by the fact that every file uploaded to the network is “shredded” and then encrypted so that no one has access to it but the owner. Given the fact that the network has no point of failure and is distributed among all participants, there are no slowdowns and every node contributes to making the system lightning fast.

Besides impressive business models, what these companies are concretely doing is setting the basis for a future in which renting will be less costly than actual owning, smoothening and easing up mechanisms which companies like Airbnb and Uber have based their businesses on and have struggled with.

Indeed, the main obstacle current players face is ownership, which, with blockchain and smart contracts, will soon be dismantled. Network nodes can, in fact, be objects which can share information about who their owner is and how they changed their status over time. Moreover, property rights can easily be stored and transfers of ownership can be made in a matter of seconds. Blockchain allows people to obtain the same results as from a bureaucratic infrastructure whilst avoiding the costs of one through automating the whole process. Middlemen will cease to exist and the sharing economy’s capabilities can spread to any object that can be imagined.

Disruptors Will Be Disrupted

Uber and Airbnb, two companies that have succeeded in the sharing economy trend over the past years, see the blockchain’s capabilities as a worrisome threat to their business models. What these companies do is match supply and demand of cars and houses that people are willing to share through their platforms; this can contain inefficiencies such as high costs and processing fees, together with providing centralized points of failure that threaten the entire system. Moreover, dominant market positions – their markets can be approximated as duopolies – can attract the focus of regulators trying to foster competition and limit firms’ power. Indeed, even though they may appear as decentralized companies which empower people and offer them alternate streams of revenue, they serve their ultimate business model of making money off commissions and fees, crippling innovation and approving a waste of economic resources which could be entirely put to better use – for instance, devolved to peers who share their vehicle or to tenants and homeowners.

Moreover, owning the platform implies owning the whole network which, in turn, means that they can dictate rules and arrangements as well as pricing. These seem to be very far from a real sharing economy scenario in which peers transacting are in complete control of modalities and conditions over their property.

In a “blockchained” peer-to-peer world, most people would not own assets because sharing them would become much cheaper and easier. Communication between users would be done on an encrypted platform which, through smart contracts, can also easily overcome frictions modern companies face. These include security check-ups of drivers, which would be done automatically by looking up their history on an infinite and always up-to-date digital ledger containing criminal records, previous driving, vehicle ownership, safety inspections and insurance.

To avoid being conquered, Uber’s possibilities are limited: it should predominantly try to pivot its business and begin owning fleets of autonomous cars orchestrated by smart contracts. In fact, Uber is highly investing in self-driving cars and trucks which would lessen the blockchain menace and allow the company to ride the decentralization wave.

On the other hand, the future may not look so bright for the home-rental marketplace company Airbnb, as Slock.it is a clear picture of where the sector is going hereafter. Enabling homes to be self-managed with the possibility for renters to “unlock” them by simply paying the door and be granted access for a predetermined time is a solution the company could opt for in the short term, but, again, at that point having a company supervising the whole process would be totally useless and only result in a dissipation of resources.

Conclusion

The future will see people renting their homes and their cars with no companies such as Uber and Airbnb to coordinate economic agents: all actions will be regulated by self-executing smart contracts giving the power back to the people, with fresh disruptive companies approaching the end of the tunnel sooner than they think.

 

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Asia

Saudi’s $7bn Renewables Push

Saudi Arabia renewables

Saudi Arabia intends to deploy $7bn into renewable energy projects this year. 

Editor’s Remarks: The drive will focus on building solar plants and tenders are to be issued later this year for eight separate projects with a total capacity of 4.125 gigawatts. The move is part of a wider drive to feed the kingdom’s growing demand for energy, which is currently eating away at oil the country intends to export. This latest move is also part of Prince Salman’s wider plan to diversify the economy and rely less heavily on crude production. This strategy has played out in a number of ways to date, including heavy investment into SoftBank’s $100bn Vision Fund.

Read more on Renewables:

Keep reading |  1 min read

Commodities

Oil Prices Climb to Three-Year High

 1 min read / 

oil prices

Oil prices climb to a near three year high with Brent Crude trading at just under $70 a barrel. The recent rally has led to highs of $69.62 per barrel, up from $67.69 at the beginning of the week.

The price of oil has been a depressing case for a while now. Three years ago, overproduction led to an oil glut that had already seen a five-month slide. However, in November 2014,  the Saudi-dominated oil consortium, OPEC, refused to slow production, leading to a Thanksgiving bloodbath with prices tumbling nearly 15% by Christmas.

From summer highs of $101.94, prices continued to fall reaching lows of $34.37 at the beginning of 2016. It was not until November of the same year that OPEC conceded to international pressure and curbed output.

If the rally continues, oil prices could potentially surpass $70.15, not seen since the Thanksgiving meeting.

Keep reading |  1 min read

Asia

Turmoil in Iran: Will It Push Global Oil Prices Higher?

 5 min read / 

Global Oil Prices

The price of oil finished 2017 with a mini rally. The new year has started with protests and instability in Iran. Some analysts believe this might drive the oil price even higher – but the opposite actually looks much more likely.

Is the Recent Recovery Temporary?

U.S. oil prices have been on a steady rise in recent months and as expected ended 2018 strongly, above $60 a barrel. According to The Independent, the good news has continued into the New Year, and on Tuesday this week prices opened higher than at any time since 2014, driven in part by OPEC and Russian supply cuts but also by news from the Energy Information Administration (EIA) that the huge U.S. stockpiles are now falling.

Since 2016, US oil production has rocketed by 16% to almost 10 million barrels per day. In October crude exports rose to a record two million barrels per day, with production slated to rise as much as 20% over the first half of 2018. This means US supply is now close to parity with top producers, Russia and Saudi Arabia, and, according to the IEA earlier in the year, will likely create a supply surplus in the first half of 2018.

But is this recovery only temporary? And how will the Iran situation play into this backdrop?

Iran May Not Increase Prices

The demonstrations in Iran initially began in response to high food prices and the weak economy, but in recent days the rallies have taken on a distinctly political dimension. Protesters have begun chanting anti-government slogans and hundreds of people have been arrested. To date, more than 20 people have been killed in clashes with the Revolutionary Guard and the protesters show no signs of backing down.

This is turning into the biggest show of public defiance since 2009 and the Iranian leadership has been quick to respond, blocking access to social networks including Telegram and Instagram on Sunday. Though Iranian officials appear conciliatory, acknowledging the protesters’ grievances, one should not bet on this approach lasting very long at all.

Meanwhile, there are reports that the protests sweeping the nation are being used as a cover for militants operating within Iran, giving them the opportunity to strike at key infrastructure and oil production facilities. Ansar al-Furqan, an al Qaeda-linked jihadist group based in Iran, claimed to have blown up an oil pipeline near Omidiyeh in the southern Khuzestan province, the scene of other attacks by Arab separatists.

Traditionally, Middle East turmoil pushes up the price of oil, and the current spate of protests in Iran have undoubtedly played a part in recent price hikes. But while bad news from the Middle East can prompt an initial buying frenzy, sending prices soaring, there’s no reason to believe this hike is anything other than temporary.

In fact, in June last year, when the Middle East was at its most tumultuous, Brent crude remained unmoved. Years of oversupply kept reaction muted, and many market watchers now expect any further gains to be within a tight range.

The substantial growth spikes of the past are now unlikely and there is, in fact, a reason to believe that the world is on the cusp of big price fall.

Temporary Price Rises Prompt Selling

There are some good reasons to doubt that recent rises are part of a sustainable upward trend. Higher prices may tempt OPEC producers to cash in, release more output, and cause the production deal to fail. The non-OPEC producers (such as Canada and Brazil), not bound by the deal, will see the rises as an opportunity to increase production, and higher prices have already led many US drillers to boost activity.

But by far the most significant indicator of price slump caused by over-production is what’s happening in the US shale sector. Technology and new government regulation are two major forces that could tip world oil prices into a catastrophic slump.

To date, oil giants have been slow to capitalise on the opportunities presented by shale. But over the last six months, they’ve begun to focus on creating efficiencies by taking offshore automation and digitisation technologies and adapting them for use in shale drilling. For example, shale oil drills can now plunge deeper into the earth, pivot and tunnel sideways for miles until they hit an oil pocket.

The US isn’t the only country that appears to be taking energy security more seriously. The EU is also now looking at ways to bolster its own supplies, which could lead to a shale or renewables push in the UK and on the continent. Some people have also recently started looking at alternative, cost-effective renewable sources, like biogas Anaerobic Digesters. This could further increase new competition for oil.

This push by the big players in the US oil industry will bring more wells to production at a lower cost and could ramp up future output and company profits. In addition, the Trump administration is focused on oil. It has already approved the controversial Keystone XL pipeline, brought forward plans to allow oil drilling in the Arctic National Wildlife Refuge in Alaska, and is reported to be considering loosening offshore oil drilling regulations. These moves could easily cause an oil race and create a huge over-supply.

Conclusion

While the turmoil in Iran is playing into the price rises that have been seen in recent days, it’s only a small part of a very big picture. Rather than focusing on how the Middle East affects prices, the world should be lifting its vision and focus on the US and the major non-OPEC nations. It’s what they do next that will determine what happens to prices in global oil prices in 2018.

Keep reading |  5 min read

Trending

Send this to a friend