Is Blockchain the Key to Unlocking the Sharing Economy 2.0?br>
The sharing economy, ushered forth by the likes of Uber, Lyft, and Airbnb, isn’t working as well as it could for workers. As wages stagnant in the United States and around the world, these gig-based jobs that lack pensions, healthcare, and other benefits provide little comfort for people trying to make a living via these apps. All of this comes at a time when the cliché, “while the rich get richer, the poor get poorer,” bears out in the form of a widening income divide. Though the latest technology darling, blockchain, is unlikely to swoop in and save us from the world’s most complicated economic issues, it could be leveraged to form the foundation for a new sharing economy that endows people with more opportunities for wealth generation.
A Thriving Economy Is Good for Everyone
Whether you’re in the 0.1% or the 99.9%, we should all be rooting for a healthy economy. One need look no further than the current situation in Venezuela to grasp the potential consequences of an economy gone wrong, with such repercussions as mass unemployment and a health and refugee crisis. Problematically, recent global economic trends have been somewhat of a mixed bag. Though unemployment has fallen in much of the developed world, wage increases lag behind. According to the Pew Research Center, “today’s real average wage [in the United States…] has about the same purchasing power it did 40 years ago.”
Sluggish wage growth is just one reason for rising income inequality. One of the biggest factors for the widening chasm between the rich and everyone else is that wealthy individuals possess the means by which to generate more wealth. According to the Seven Pillars Institute for Global Finance and Ethics, this process of wealth concentration creates a vicious cycle perpetuated through generations wherein “[children] born in a rich family have an economic advantage, because of wealth inherited and possibly education, which may increase their chances of earning a higher income than their peers.”
Breaking the Cycle
Though the current sharing economy made possible by the mobile app revolution has been disappointing in its capacity for expanding income options for everyday people, blockchain technology has the potential to bring forth a sharing economy 2.0 that is centered in ownership instead of contract labor. This could preempt fears that automation will leave millions out of work in a few short years. One of the first groups impacted is likely to be transportation, given the rapid developments in self-driving cars, and Uber and Lyft drivers won’t be spared.
A sharing economy powered by decentralized systems would allow individuals owning self-driving cars to make money from use of this asset, but the real opportunities for wealth generation lie in blockchain technology’s ability to open doors for ownership of some of the highest performing assets that have previously been unattainable for anyone other than high-net-worth individuals. According to Knight Frank Luxury Asset Index, the highest performing assets over a ten year period are led by classic cars, followed by coins, wine, and jewelry. The Wall Street Journal reported that the best investments of 2018 were wine, art, classic cars, and high-end diamonds—unlikely investments for your everyday Joe and Jane; however, the possibilities for middle-income individuals to invest in such assets could be made possible by fractional ownership.
Fractional Ownership to Democratize Investment in High-Performing Assets
Historically, high-performing assets like classic cars, wine, and jewelry, could only be purchased as whole entities, but blockchain technology’s capacities for secure, digital record keeping combined with tokenization and the governance enabled by smart contracts makes it possible for strangers, or trustless entities, to enter into contractual ownership agreements on the same asset. Imagine if David Hockney’s painting, Portrait of an Artist (Pool with Two Figures), which sold for $90.3 million, could be owned by hundreds or even thousands of people? Ownership could be represented by digital tokens—essentially receipts—that can be freely traded or exchanged by holders.
The real challenge then becomes bridging digital with the realities of the physical world. Where would the asset be stored? What happens if it is stolen or damaged? How are decisions pertaining to the sale of the asset managed and executed? What if maintenance or special upkeep is required? Developers of platforms enabling the fractional ownership of real-world assets will need to address such questions.
Blockchain-powered smart contracts can be leveraged for certain decisions. One could fathom, for instance, developing a smart contract that initiates a vote among token holders every year to determine whether the shared asset should be sold or held, with voting power proportional to the number of tokens held. However, there are a lot of environmental and human factors that will inevitably be challenging to account for, absent years of testing and experimentation. Perhaps big data and AI can speed up the learning curve, but it’s unlikely lawyers will be out of work anytime soon.
An Economy That Works For Everyone
Though blockchain project teams certainly have their work cut out for them, all of us should be encouraging further research, development, and innovation. After all, hope for a more empowered economy hinges on their ability to conceive solutions that work for all of us.