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Blockchain in the Sharing Economy Will Blockchain Disrupt Today’S Winning Business Models?

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Blockchain in the Sharing Economy Will Blockchain Disrupt Today’S Winning Business Models? Blockchain in the Sharing Economy Will Blockchain Disrupt Today’s Winning Business Models? Alexander Menne University of Twente PO Box 217, 7500 AE Enschede the Netherlands [email protected] protocols that can be used to build decentralized peer-to-peer ABSTRACT marketplaces [8, 25]; however, they suggest specific design The increasing popularity of sharing economy business models choices and provide little theoretical reasoning. Therefore, we led to some of the most successful startups in the last ten years. want to contribute to the advancement of knowledge in the Blockchain technology could disrupt these businesses, as it offers application of blockchain technology in the sharing economy by unique opportunities for automatization and for giving back the giving a general model for sharing economy organizations based power to the users by decentralizing the settlement service. Most on blockchain technology. Our aim is not to give a specific prior research focusses on either blockchain technology or the protocol, but to present the design choices that have to be made sharing economy. This paper provides insights into the and elaborate on the opportunities and challenges connected to characteristics of blockchain technology and the success factors them. This way, we intend to assess the overall potential of of sharing economy businesses. Furthermore, the chances and blockchain technology to disrupt the current centralized sharing challenges of using blockchain technology in the context of economy businesses. sharing economy business models are discussed. Based on that information, a general model for decentralized sharing economy 2. METHODOLOGY organizations (DSEO) is given, discussing the design choices 2.1 Research Question that are crucial to be made. The main research questions that this paper aims to answer is: Keywords What is the potential of blockchain technology to disrupt the Blockchain, sharing economy, smart contract, decentralization successful sharing economy business models and what design choices are crucial to be made? 1. INTRODUCTION In order to answer this research question in a structured way, we The so-called sharing economy is an emerging concept for defined the following four sub-questions: businesses that enable particularly private persons to share their 1. What are the characteristics of blockchain technology? property or to offer services through online platforms. The leading companies such as Uber and Airbnb offer a centralized 2. What are the success factors of sharing economy business settlement service to connect providers and consumers with each models? other. For offering this service, the platforms charge fees to the 3. How can these factors be included in a decentralized system? users, which in the case of Airbnb can be up to 20% of the reservation subtotal [3]. According to PwC, the five main sharing 4. What are the chances and challenges of this decentralized economy sectors travel, car sharing, finance, staffing, and music system? and video streaming could potentially increase their global 2.2 Approach revenues from 15 billion USD in 2015 to up to 335 billion USD Literature study is an essential building block in this research, as in 2025 [35]. However, these business models could get comprehensive research has been done on blockchain technology interrupted by blockchain technology, which facilitates as well as on sharing economy business models, but way less on decentralized data storage and communication. Furthermore, it is the interplay between the two. To structure the process, we make possible to deploy so-called smart contracts as part of these use of the five-stage grounded-theory method for reviewing blockchains, which can automate processes in a decentralized literature, as suggested by Wolfswinkel et al. [50]. A criterion for manner. Using this technology, several shortcomings of the inclusion of literature in the literature study is its currentness, as centralized systems could be tackled, such as high service fees blockchain and sharing economies are both new and fast-moving and the centralized storage of private data [25]. phenomena’s. As sources, scientific articles, as well as popular Although extensive research has been done on blockchain literature and press articles, are used. The search terms are mainly technology as well as on the sharing economy, there is relatively “blockchain”, “sharing economy”, “smart contract”, and the little research on the combination of these two fields to create a terms combined. We use the literature databases FindUT, decentralized sharing economy platform. There are proposals for Scopus, Web of Science, and Google Scholar. Based on the findings, we develop a general model for Permission to make digital or hard copies of all or part of this work for decentralized sharing economy organizations. We use the personal or classroom use is granted without fee provided that copies are framework for design science given by Wieringa to build the not made or distributed for profit or commercial advantage and that copies model in a structured manner [49]. However, the suggested bear this notice and the full citation on the first page. To copy otherwise, implementation of the designed model (i.e. programming a or republish, to post on servers or to redistribute to lists, requires prior specific permission and/or a fee. decentralized sharing economy application) falls outside the 29th Twente Student Conference on IT, July 6th, 2018, Enschede, The scope of this research. Therefore, instead of the implementation, Netherlands. Copyright 2018, University of Twente, Faculty of Electrical the model is validated by experts in the field of blockchain Engineering, Mathematics and Computer Science. technology. Afterwards, the model is evaluated and enhanced based on the results of the expert validation analysis. consensus mechanisms such as PoW require much computational Furthermore, we present the case of decentralizing Airbnb to power. For instance, Bitcoin has a peak throughput of seven demonstrate the use of our model. transactions per second, whereas the leading global credit card payment companies can process up to 10,000 transactions per 3. BACKGROUND second [48]. Moreover, a recent study shows that the Bitcoin 3.1 Blockchain network consumes at least 2.55 gigawatts of electricity, which is almost as much as the power consumption in Ireland (3.1 A blockchain can be described as a database (also called ledger) documenting all transactions that have ever been executed on it. gigawatts) [47]. The most well-known blockchain is the Bitcoin blockchain 3.2 Smart Contracts which keeps track of all Bitcoin transactions [44]. A Bitcoin Smart contracts can be described as scripts that are stored on the transaction consists of a sender and a receiver address and the blockchain [11]. These scripts are executed automatically when amount of Bitcoin that is sent. To assure that a transaction is addressing a transaction to it. The given transaction data is then valid, the sender signs the transaction with his or her private key processed according to the protocol defined for the smart [23]. The Bitcoin blockchain is publicly accessible and therefore, contract. This mechanism can be illustrated by the example of it is called a public blockchain. This makes it possible for renting a bike: everybody to trace back and check the status of transactions [16]. However, it is also possible to restrict access to a blockchain to a Alice wants to rent a bike from a stranger called Bob. Bob particular audience (e.g. within an organization) – this is referred creates a smart contract, which mainly has two functions: rent to as a private blockchain [11]. and return. In the smart contract, it is defined that when renting the bike, Alice has to transfer a deposit of 0.01 Bitcoin to the As the name already suggests, blockchains consist of blocks smart contract. The costs for the rental are 0.001 Bitcoin per 24 which are data packages with transaction records. These blocks hours. When Alice returns the bike, she gets back the difference are validated by the miners and then get added to the blockchain between her deposit and the actual rental price. So, Alice in chronological order [44]. Each block links to the hash value of transfers the deposit of 0.01 Bitcoin, and the rent function of the the previous block, forming a chain of blocks. The miners can be smart contract is triggered. It registers the date and time of the described as a peer-to-peer network of virtual bookkeepers, as rental on the blockchain and Alice may now use the bike. She they store a complete copy of the blockchain and make sure that returns the bike after four days, and Bob triggers the return all new transactions are valid before they get added to the function of the smart contract, which returns 0.006 Bitcoin back blockchain. For example, a transaction is not valid if the money to Alice’s wallet and sends 0.004 Bitcoin to Bob’s wallet. that is sent is not on the sender’s account or is double-spent. This was a rather simple scenario, but smart contracts have the It is essential that the miners follow the consensus mechanism potential to automatize even complex organizations [21]. These defined for the blockchain to validate transactions, as it ensures so-called Decentralized Autonomous Organizations (DAO) are that transactions are validated in a decentralized manner. For entirely run by its members, and all proposals to change instance, the Bitcoin blockchain makes use of the Proof-of-Work something within the organization have to be approved by the (PoW) system, which uses computational power as security for members [21]. This offers a great chance to democratize the consensus [11]. That means that the miners use their organizations and abolish hierarchies. However, there are some computational power to solve a mathematical puzzle to verify a drawbacks to smart contracts. As data on a blockchain is block.
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