Governing the Sharing Economy through Blockchain-based Smart Contracts
Stefania Fiorentino - University College London, Bartlett School of Planning, United Kingdom;
Silvia Bartolucci - Imperial College Business School - Centre for Financial Technology, United Kingdom
-- The sharing economy is based on people sharing goods and services, usually via the internet, through platforms or so-called peer-to-peer (P2P) networks. The idea behind the rise of the sharing economy was centred around the democratization of goods and resources, leading to the creation of sustainable and more inclusive markets. However, the original P2P networks have rapidly expanded to become so-called tech unicorns (e.g. Airbnb, Uber, WeWork, Lyft, etc.). The capital produced through the sharing economy is often not redistributed between users: it remains concentrated at the level of corporations managing the platforms, producing a number of “disruptive” consequences at the local level.
Short-term lettings via Airbnb, for instance, impacted on local authorities in terms of city and tourism taxes collection, and on the whole existing hospitality industry, drastically changing the established dynamics of travellers. Concerning the local rental market, this phenomenon has contributed to the lack of affordable housing and gentrification issues in cities like Barcelona, Paris, or London. Additional issues are related to security risks, with guests staying in let or sub-let properties without being legally registered or pre-vetted. For other sharing economy resources and services such as co-working spaces, the discussion is centred around the way operators manage the spaces, the risks and costs associated to leasing a space to multiple tenants – in particular to risky businesses like start-ups for very short periods – and the collection of business rates from such volatile tenants.
In our paper New Governance Perspectives on the Sharing Economy. A Blockchain Application for the ‘Smart’ Management of Co-Working Spaces with a Return for Local Authorities we discuss the use of blockchain-based smart contracts to address some of the typical disruptions of the sharing economy. We create a working prototype of a blockchain-based platform for listings, tenancy applications and management of co-working spaces. Endorsed tenants and landlord can interact over the platform, where all rent transactions are then immutably recorded. Moreover, using smart contracts, taxes can be automatically paid to local authorities by tenants and landlords. Our prototype is built using the Digital Asset platform, a permissioned blockchain that provides an effective tool to implement complex business processes with a tailor-made smart contract language and a versatile testing environment.
1. The two diagrams show the different contractual dimensions and the interactions between stakeholders in multi-tenant leases and platform based short-term lettings of working spaces or flats. Left: the current situation. Right: using a blockchain-based management system (BMS).
The introduction of this technology would benefit all the stakeholders involved in the process at different stages.
· Improvements to the platform
Improved transparency of the platform and smoother regulatory process.
Significant cost reduction thanks to the elimination of intermediaries and the automation of processes via smart contracts.
Multiple case-specific functionalities can be built to allow for the tracking of complex processes on the platform (e.g. rating systems, intellectual property and patents registration, etc.).
· Benefits for local authorities: potential access to tenants records usable for fiscal (tax collection) or even security purposes (dataset storage for smart cities monitoring purposes, record of tenants’ IDs and number of rented days, etc.).
· Benefits for property developers and/or managers of the spaces: landlords would be able to directly manage their portfolio of properties; leases and tenancy agreements with multiple tenants become less risky and easier to access, manage and control.
As an additional value, this system would allow for storing and generating a continuous stream of data that could be used for research purposes or to compile public registries. Similarly, a simple real estate application would be selling suitably anonymised data to third parties to produce statistical analysis and reports on general real estate trends, transaction costs, rental market trends, etc. Other possible applications include innovating and digitalising land registry systems, planning application submission portals and similar smart cities services.
In summary, this platform-based approach and the automation of processes via smart contracts encourages the cooperation of individuals, corporations and the local authorities, simplifying processes, reducing costs and increasing monitoring capabilities of urban processes.