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  • Martin Schmalzried

Let’s get rid of blood sucking third parties


Uber, Deliveroo, the protests and resistance to the “gig economy” are growing all around the world for a myriad of reasons: precarious work, no rights (pension, healthcare, unemployment benefits, work accidents), tax avoidance/evasion… So far, however, the protests have focused on trying to bring these new solutions into the realm of the rule of law, only to find out that it’s not so easy to regulate it and that these companies can easily use the rule of law against workers: for instance by forcing them to declare themselves as “auto-entrepreneurs” or “independent workers” thereby legally shielding themselves from having to pay social benefits.


But perhaps there is another way, another alternative, which could not only benefit the workers but society as a whole: getting rid of the middle man and going into fully decentralized/cooperative type solutions.


Let’s take a look at all the “gig economy” platforms: Uber, Deliveroo, AirBnB, TaskRabbit and many more… What they propose, in the end, is extremely simple: they are an intermediary between people looking to provide a certain service, and people looking for that service. Uber will facilitate the contact between drivers and passengers, AirBnB between renters and travelers… In the end, what is the real “added value” they provide? Three things essentially:


  • Reaching scale/critical mass: with heavy marketing/advertising, these solutions enable to reach a sufficient number of customers and workers to make their business viable and useful, as opposed to many of the “voluntary” open source platforms which usually struggle due to the lack of user take-up.

  • Liability: a fully decentralized platform with no intermediary would struggle with liability. Who would be responsible in case a customer is unsatisfied? Who makes sure that the payments are secure and are effectively paid out?

  • Innovative features/continuous development: in a decentralized solution, who would be fixing bugs or innovating?

Yet if we manage to address these hurdles, we could get rid of the “middle-man” and make sure that workers get a fair share of their work while customers still enjoy a competitive price.

From a purely technical perspective, putting in touch two people via an application or the Internet is extremely easy. It has been done in a myriad of ways throughout the years: email, live chats, forums… Some alternative solutions exist already, where users get together to circumvent “commercial” platforms. We can mention simple exchange platforms like Craigslist, or buy/sell/donation pages on Facebook where users from certain cities/countries subscribe to avoid going through eBay or other commercial solutions, but the problem is always the same: there is no “fall-back” in case of problems, something many users have experienced first-hand. Take Facebook pages for selling/buying/donating stuff. When it works well, it’s great, but let us not be naïve, there are plenty of issues with those solutions: these pages are used by thieves reselling their loot, or less problematically but not less annoying, some users promise to buy/sell certain items, never showing up to collect them or refusing to sell them.


In order to work, a decentralized solution therefore needs to check the same boxes as a centralized one.


Let us look at an alternative to Deliveroo or Uber:


1) Reaching scale/critical mass: While it may have been difficult for an “open source”, decentralized solution to reach scale up until now, with no advertising/marketing budget, there are reasons for hope. First, thanks to commercial platforms reaching scale/critical mass, there is no need for making a “market study” to see if there is enough demand for a service. Second, due to the blood sucking, exploitative business model that most of these platforms apply, the protest from their work force is growing stronger, which can create a massive momentum for switching to an alternative, fairer model. Uber or Deliveroo drivers/bikers could easily mass shift to a decentralized platform by spreading the word between themselves and helping such a solution reach scale relatively quickly thanks to the viral potential of online sharing. Thirdly, with the GDPR (General Data Protection Regulation) entering into force, the right to data portability might also help drivers/bikers to “port” their data (consumer reviews, previous trips,…) to a decentralized app, along with users and businesses which could also shift their data/preferences/contacts thanks to data portability. This last point is the most important: the users and businesses, in short, the “demand”, also needs to shift to such a decentralized solution, and the “bet” here is that the “offer” needs to exist first and be more attractive than existing commercial platforms. A decentralized solution, unfortunately, will not have paid for public relations and marketing people who could mass contact businesses/users to encourage them to use their solution instead. In this regard, it might have to be the drivers/bikers that spread the word directly, taking part of their time to convince their former businesses/customers to make the switch.


2) Liability: This might be the most problematic part and is more than about liability, it is also about trust and keeping both users/businesses and drivers/bikers honest. First, data portability can again be of certain help. If all workers of a centralized platform port their data to a decentralized platform, that data should also contain information about delinquencies (for instance, customers refusing to pay) or accidents (the fact that a Uber driver or Deliveroo driver had an accident). That data may be useful for workers setting up a decentralized service to agree to also creating a form of “collective insurance” based on smart contracts (automatically pay out a compensation in case certain conditions are met like if someone had an accident – see Ethereum and smart contracts to see how that might work in practice) and the premium they need to pay has to be based on the data collected over the years by existing platforms. Alternatively, decentralized platforms can also rely on a democratic decision making process where its workers are asked to “vote” on the level of premiums they wish to pay (since it is in their interest to be covered in case of an accident, their decision should not go against their interest) and the conditions under which a user has coverage (how many accidents per year are you entitled compensation for, or what is the maximum amount that can be covered in case a user has an accident). A similar “insurance” can be put in place to cater for customers failing to pay, or other such problems. However, with cryptocurrency type payments or rewards, these “failure to pay” problems might not even be an issue since these rewards will be paid based on the underlying code (for instance, mining by driving as is the case for La’zooz). Perhaps decentralized solutions will only work with cryptocurrencies/tokens and never with “official” money, given the limitations and problems in making/receiving payments in Euro, Dollar or any other “official” currency.

Relations with consumers can be handled via a number of systems: consumer reviews to rate the quality of service provided by the decentralized services’ workers, with a possible appeal in case of clear abuse (harassment or so) against a worker (a “jury” of randomly chosen workers would examine whether the comments are harassment or not, and only they would have the power to remove/reset them). Consumers could also launch a complaint if they were a victim of fraud, first to the concerned worker who can either accept or reject responsibility, and if the conflict escalates, again, a randomly chosen jury of workers would examine the claim and decide whether or not to compensate the consumer out of the “collective insurance” set up for that purpose. If the jury declines the complaint, then it agrees to provide the contact details and all necessary information about the worker concerned by the complaint to allow the consumer to launch a formal legal procedure. This is probably the most problematic part. Since in decentralized services there is no “central authority” or “central liability”, it is the workers themselves who are personally liable for their actions, which makes redress problematic. But at least, this time, the workers are “real” auto-entrepreneurs or freelancers. Besides, centralized services have not been necessarily any better at responding to consumer complaints in a satisfactory manner.


Finally, these decentralized platforms could outsource liability to other decentralized solutions specialized in conflict solving/liability/accidents etc. That is to say, we could very well see decentralized solutions where the service that the workers provide is responding to complaints, hedging risk from accidents and other factors, in essence, taking care of liability against an agreed price that the first decentralized service has to pay collectively (its workers have to approve the “premium” or “fee” paid to that other decentralized service for handling liability). This system is already in place, in a certain manner, in centralized services: outsourcing moderation of the content on their platforms or outsourcing customer service…


3) Innovative features/continuous development:

In a decentralized system, who is supposed to propose innovative features, roll out updates or fix bugs? Looking at some of the decentralized blockchain initiatives out there, we find many different answers. In the case of Bitcoin, the very first blockchain to come into existence, it seems that no one is really responsible for continuous development. This is partly due to the fact that no one really knows who “invented” Blockchain, as Satoshi Nakamoto, the nickname under which the Bitcoin initial white paper was posted, remains to this day anonymous. So for now, the most influential developers in the Bitcoin community propose changes to the code and hope that a majority of Bitcoin users/miners will follow their recommendations. This is currently the case regarding attempting to fix some scalability issues of Bitcoin. If the proposal is not adopted by all users/miners, the blockchain underlying Bitcoin will “fork”, or split in two: one holding on to the initial Bitcoin protocol, the other adopting the new proposal. This is usually not a good thing.


In a decentralized Uber or Deliveroo, it would be quite problematic if both the workers and users of the app would split in several different solutions each time there is no consensus on updating the app.


In other blockchain initiatives like Ethereum, the development is in the hands of a “foundation” which includes the founder (Vitalik Buterin) and some competent and dedicated developers. Here, the community using Ethereum rely on Vitalik’s decisions and hope/trust that he will make the best decisions in the interest of the community and of the Ethereum technology. In essence, this is an example of a decentralized technology with centralized continuous development, and it can work perfectly so long as the people in charge of the development do a good job and retain the trust of the community.

Such a system could work for a decentralized Uber or Deliveroo, but one has to examine what is the (financial) interest of the group of developers in investing their time and energy into developing such initiatives. If they become a “new” intermediary, taking a large slice of the profits in exchange for their services, then we may as well stick with the Ubers and Deliveroos!


Finally, we could envisage that a community of developers similar to the Linux one grows around these decentralized apps and ensures their interoperability in case there are multiple versions, meaning that even if workers and users are not using the exact same decentralized app, they can still “order” a ride or delivery even between two different versions of a decentralized app. The most important thing here is to agree on the fundamental features which must stay compatible, like for instance the smart contracts allowing for setting up a “collective insurance”.


In order to ensure that there is an incentive for developers to maintain, innovate and fix bugs in these future decentralized initiatives, workers can agree to pay out a small percentage of their earnings to remunerate a foundation or a community of developers.


Conclusion


While transitioning from centralized platforms like Uber and Deliveroo to decentralized ones can be challenging, ultimately, everyone stands to gain (except power/money hungry CEOs and greedy VCs and investors/shareholders). Customers and workers get to negotiate prices and conditions with no one taking a percentage out of their transaction (save for the State via taxation).


Some decentralized solutions are already being proposed, such as La’zooz, but so far, they do not address all the issues raised above. La’zooz provides an economic incentive to reach critical mass (rewarding early adopter drivers with “zooz” tokens which will be traded for rides once the network becomes big enough), but liability still hasn’t been addressed and there is no system of “collective insurance” in case something goes wrong (accidents, conflicts…) although a blockchain token reward makes it easy to ensure payments are made (since these are guaranteed by code).


Finally, it will be interesting to see how decentralized solutions, regardless which problem/market they try to address, work alongside offer and demand mechanisms. Online platforms have already been criticized for putting in direct competition workers from all over the globe, which puts tremendous pressure on the remuneration of workers. If decentralized platforms adopt a 100% “free market” and “offer and demand” approach, workers may be even worse off than with centralized solutions which dictate the price! La’zooz seemed to have adopted a “democratic” decision making process by which users themselves (drivers, passengers, developers, designers…) “vote” and decide on the level of reward each contributor gets.


The debate about what is “fair compensation” still remains open for the years to come. I will have a stab at it in a separate article. In the meantime, let’s follow the emergence of decentralized platforms and apps as it may well revolutionize our economies, hopefully for the better!

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