By: Firdosh Sheikh, CEO and co-founder of DRIFE
World-renowned futurist Bernard Marr once predicted that blockchain technology could kill Uber. I’ve made it my mission to prove him right.
The problems with traditional ride-hailing
There’s no denying that the model used by the industry’s biggest players such as Uber and Lyft has worked exceedingly well. But it’s also hard to ignore the criticism they’ve faced in recent years.
Despite the user experience of these platforms giving the appearance of a decentralised platform that connects you directly with the service providers, these businesses are effectively centralised clearinghouses, connecting drivers with passengers in need of their services.
All of the infrastructure is owned by the aggregators and the mechanism for individuals to transact with one another is entirely in the hands of the platform.
So, what does this mean?
First, there’s the skyrocketing commission – with aggregators taking a big cut of every fare. There is no standard rate of commission and it’s increased over the years from 5%-8% to 25%-30%. Research conducted by the MIT Center for Energy and Environmental Policy Research discovered that almost three-quarters of drivers actually make less than the minimum wage in their territories.
Next, platform dictated pricing means fare calculations often include hidden multipliers or surge pricing. These can be infused into platforms at any time, without there being any way to verify the same.
We’ve seen many instances of prices soaring to levels way above what could be considered reasonable, making them exploitative for passengers, potentially to an unethical extent. For example, hugely excessive prices have been reported in situations like the 2014 Sydney siege hostage situation, when Uber quadrupled its rate to a minimum of $100.
Drivers are also feeling the adverse effects of the lack of transparency associated with these centralised platforms. Once they join these networks, drivers are beholden to their owners and very much at their mercy.
Drivers are typically hired on the terms of independent contractor, but at the same time, are unduly treated as employees because they don’t have the choice or freedom normally associated with independent contractors. For instance, drivers can technically refuse a pickup, but this is heavily penalised in the compensation structure.
All of these issues cement the need for technological innovation that can create a better, fairer ride-hailing experience.
Blockchain can level the playing field
With the industry crying out for a better model, blockchain technology once again finds itself front and centre – possessing the power to redress the balance.
Blockchain’s potential in this industry is truly exciting. To start, building a ride-hailing platform on public blockchain combats the lack of transparency, and ensures fairness in the way platforms are operated. It does this through the creation of a transparent, free marketplace for exchanging rides.
It also increases accountability among the various platform participants and value creators, while at the same time safeguarding user privacy using appropriate encryption and other cryptographic techniques.
Blockchain also brings verifiability through its immutable, indelible ledger, and reinforces trust by leveraging programmable automated self-executing smart contracts.
What’s more, leveraging public blockchain addresses the issues of overinflated prices. It optimises costs by enabling riders to directly connect with drivers through the decentralised platform, reducing the additional costs from the involvement of multiple unnecessary parties.
When it comes to business operations, replacing legacy systems and record-keeping infrastructure with an immutable tamper-proof distributed ledger also helps in reducing costs. By removing the need for third parties to manage transactions, blockchain technology can massively reduce transaction costs.
Reducing these costs enables a platform to eliminate the commission usually charged to cover them, meaning drivers can increase their earnings and pass on cost savings to the rider.
Tokenizing the ride-hailing economy
Blockchain technology also provides the exciting opportunity to tokenize the ride-hailing economy, using various on-chain digital assets of both fungible and non-fungible nature.
To benefit platform users, native platform utility tokens can be used for gamifying loyalty, rewards and incentives, while stable tokens can be used for on-chain macro and micropayment transfers.
When it comes to the governance of ride-hailing, tokenizing the industry provides the opportunity to implement an innovative franchise model. Now, tokens can be staked for acquiring franchise NFTs or FNFTs – which provide the franchisee rights to use the platform’s name and system.
This is a huge step for creating fairer ride-hailing platforms. Platforms being operated by local entities, as opposed to multinational corporations means that riders, drivers, fleet owners, and local transportation and logistics companies have the chance to govern themselves in the most efficient and fair way
When Uber first emerged on the scene in 2009 it was a huge wake up call for the traditional taxi business but with the imminent launch of the blockchain taxi, Uber’s dominance of the ride hailing and taxi ecosystem faces a new wave of decentralised disruption.
As we continue taking strides towards the future, the next logical step is for ride-hailing platforms to accept crypto-currency. And this could be a reality sooner than you’d think, with countries such as El Salvador making Bitcoin legal tender.
With drivers and riders begging for an alternative my team is creating a better blockchain-driven future for ride hailing driven by market dictated pricing, with no more commission to the middleman, no more fare manipulation and the freedom to choose/ride flexibly. Together we can break the cycle and create a fairer system for everyone.