Can blockchain kill Uber?

October 15, 2018
Chris Wheal

If blockchain can directly connect passengers with drivers, what’s the point of a third-party interface such as Uber? Put like that and middle-man Uber, currently valued at round $72bn, looks vulnerable, wounded, even.

But does an emerging technology such as blockchain really have the potential to blow the cab doors off the global ride-sharing industry? Don’t expect Uber’s brake lights to flicker yet warns lawyer Julian Zegelman, co-funder of TMT Blockchain Fund.

Uber has lost no speed in capturing global city market share, from San Francisco to Bogota and even Lima

“One of blockchain’s biggest problems is scaleability. I don’t believe there is a blockchain network today that could carry out the same number of transactions carried out on the closed Uber platform,” he says. The system needs to handle a high level of transactions. “We are some distance from this.”

Under African skies

But like anything in the blockchain-crypto space, it depends on where you live and what regime you have to put up with, day-to-day. In Africa and developing regions, a centralised ride-sharing model looks more exposed once the medium-term commercial merits and demerits are held up to the light, Zegelman told OpenLedger.

“For better or worse, developing countries don’t exercise so much control over this industry in terms of qualifications, background checks. It’s much easier to launch a decentralised, peer-to-peer network there and for it to grow.”

The US ride company has little respect for existing industry entitlements, wherever it finds them

Blockchain’s scaleability issues are being addressed with advances such as Layer 2 technology, with computations running off-chain, even if it will be a while before blockchain goes head-to-head with the likes of Visa and its stupendous transaction grunt.

Honk if you wanna ride

In China, ride-hailing player Didi Chuxing (rough translation: “honk-honk commute”) has 450 million users and 21 million drivers. Didi Chuxing is thought to be crawling all over blockchain (this ride hailer’s biggest backer is Japanese giant SoftBank, which is also Uber’s biggest investor).

Little is known about Didi Chuxing’s product timetable. There are suggestions it will be more community-focused “shared between the drivers and commuters…for them to negotiate fares and add on different services to meet their needs” (though how that might go down with SoftBank is anyone’s guess).

Chinese commuters endure suffocating daily smog – but more fare choice is en route

New opponents

Gilles Boisselet is a creative partner at London-based advertising agency UNIT9, which specialises in tech innovation and consumer trends. He says blockchain is a boon for global distribution models.  But Boisselet says Sir Tim Berners-Lee all-new decentralised platform Solid, allowing users to de-couple their data from an application itself, could give Uber pause.

“Uber,” he told OpenLedger, “created a platform to collect data. But blockchain means universal data can be collected by anyone, so it blows the market wide open and this weakens Uber’s monopoly on transport data.”

Sir Tim Berners-Lee – determined to give private – and valuable – data back to their owners

Uber though can develop other business models, such as driverless cars, from its current data says Boisselet. So blockchain wouldn’t crash Uber’s business model immediately.

Alternative data collection services might also be encouraged, pumped up with tax incentives suggests Boisselet. “What about a universal format so that everyone can start sharing data in a more friendly and democratic way?”

So Solid Crew: Tim Berners-Lee’s new baby in brief

  • Solid is a decentralised new web platform with the aim of taking power back from corporations and governments
  • Data on Solid exists “within a Solid pod–which is an acronym for personal online data store,” reported Fast Company, September 2018, in an interview with Berners-Lee. “These pods are what give Solid users control over their applications and information on the web. Anyone using the platform will get a Solid identity and Solid pod”
  • Expect a brawl. News of Solid emerged on 1 October 2018 just after Facebook announced, on 28 September, that 50 million of its users had been hacked

Don’t ignore ApplePay and Waze

Uber could still be undermined by native payment systems such as ApplePay and navigation tools such as Waze if, or when, these systems get combined with blockchain.

“Because Waze is Google-owned,” Boisselet says, “it could be integrated into the Android operating system and combined with Google Pay and blockchain to marry up drivers and users. Similarly, Apple could integrate its maps with ApplePay and blockchain to develop a rival ride-sharing service.”

Waze, Google – and perhaps Apple? Everything to play for, still?

Brian McClafferty, co-founder of Evident Proof, which puts documents and transactions onto blockchain, says meaningful rivals to Uber at this stage in the game are few. Any serious proposition would need the support of its own marketing muscle, “so without someone the size of Uber, Google, Facebook or Apple, I still can’t see it gaining traction,” he told OpenLedger.

Uber: without a care, but for how long?

Armed with smart technology, some seed cash and an app, Uber’s founders took an entrenched utility business stuffed with in-built bureaucracies and detonated it sky-high. They disrupted the market then let the legalities catch up, often arguing that existing regulations didn’t apply (as it did in San Francisco, its first Uber ‘colony’, in 2010).

Uber has consequently spent a ton of money on political lobbying: the Guardian claims Uber spent $3.3m lobbying local politicians in Albany and New York City between 2013 and 2016.

The rest is transport history, skilful marketing and PR gimmicks (sometimes twinned to community ‘causes’).

The mean streets of San Francisco have been fruitful for Uber

Dirty data is Uber-valuable

Is blockchain an Uber-killer? Yes, in theory. In practice, probably not. But lift a nearby stone or two and there’s a range of forces, including government regulation, bearing down on hackable centralised information bases, big-name social media brands or otherwise.

Most people can’t put a value on their own data because they don’t have the tools to measure it accurately – for now.

That’s changing as asset-light operators tap into supply and demand relationships that pivot on timing and basic need, then price it effectively, creating massive wealth. This service-based approach hasn’t impacted on GDP maths yet; our collective understanding of how a service-orientated, digital economy is still in first or second ‘draft’. Meanwhile others get on with the job of exploiting it.

Uber, remember, owns no vehicles. It has no depreciation or oil price worries, or other heavy enterprise expenses. But it may have future data worries – big ones.

Future ride-sharing safety will depend on the power of powerful algorithms

Four future ride industry risks:

Economics. There’s pressure on ride-company operators to provide holiday and sick-pay. A UK government ruling in 2016 appeared to support workers’ rights. Uber goes to the UK Court of Appeal on 30 October to fight a ruling that its drivers are bona fide employees.

On 9 October some of its UK drivers went on strike demanding fees increase from £1.25 a mile to £2. The bottom line is that, unprotected from minimum wage safeguards, Uber drivers don’t make much after costs.

Regulations. Over the summer New York City Council approved new bills to boost ride-hailing oversight. This will demand all trip details – duration, overall cost, driver earnings, as well as the company’s commission. This is a measure of oversight Uber is not used to – and in its biggest market, New York City.

Privacy. There are jitters about the relationship between consumers and ride-sharing companies. “There are more and more concerns about privacy. Uber, being a centralised company, knows so much about us” – Julian Zegelman.

Tokens. Using a native digital token inside the system. “Drivers in certain jurisdictions are not going to be so excited about being paid in a digital currency,” one industry analyst told OpenLedger. “You can’t compare the currency volatility of a first world Oklahoman with a Venezuelan coping with soaring home inflation.”

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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