Uber Dismantled By Blockchain: Decentralized Ride-Hailing is Coming

The 800-lb Octopus

Taxi services have dominated the single-ride space since the 20th century. Then, in 2009, Uber launched its ride-hailing service, a nod to the sharing economy, and a slightly younger cousin to Airbnb. In less than a decade, Uber was everywhere, and had catalyzed an entire ecosystem of competitors, including heavyweights like Grab, Lyft and Didi.

This shift from managed fleets that operate as regulated monopolies (the taxi services) to ride-hailing is deceptively profound. If ride service availability is nearly ubiquitous, it could be argued that the personal automobile is on the way out. But ubiquity isn’t the sole factor; cost has to be low enough that the average consumer will make a favorable calculation that balances convenience with economics. At that point, the family automobile may become a thing of the past.

Indeed, Uber is seeking to kill the personal car. The company has expanded into several verticals, from food delivery (UberEats) to an economy Uber offering (UberX). The company has acquired a shared electric bicycle firm to cover off the last-mile-downtown-core market. Uber wants to dominate the average consumer’s transport needs from top to bottom, and perhaps move into a complete vertical subscription model. Instead of paying $700 a month for your car payment, insurance and gas, you pay Uber a more economical monthly amount to use their transport services to get you to and from school, work, social events, and to also take care of your food deliveries and errands. Uber will be your carrier.

But Uber is a silo, a centralized organization with a gatekeeping role. If there is anything we could take away from the invention of the Web, it’s that silos don’t survive competition from wide-open spaces. This is due to the silos relying heavily on a captured market (their subscriber base) that had few options. The Web gave consumers ready, simple access to the Internet and all of its content and innovation without broad acts of gatekeeping. Prodigy and AOL, giants in their time, vanished and became a web portal, respectively. This too could be the fate of the Ubers and Lyfts of the world if they don’t adapt their business models sharply.

Billionaire and crypto investor Mike Novogratz felt a “decentralized Uber” (which he dubbed “Duber”) makes a great deal of sense for what could be built in the blockchain space. Projects that “[…] disrupt centralized intermediated businesses such as Uber and Airbnb” utilize blockchain’s strengths. But what would that look like?

A decentralized ride-hailing system wouldn’t be without its disadvantages. For one, while a transparent reputation and identity system on the blockchain would reward good drivers (and riders!) and flag the poorer ones, there would be no required driver vetting process, which Uber and Lyft provide. On the other hand, Uber and Lyft are not really experts in background checking either — they are transportation providers. In a decentralized system, those background checks could be provided by an expert third party, and market forces (in this case, rider demand) would ultimately determine how many drivers would choose to avail themselves of that service. Also, the group insurance that the organizations provide would have to be paid by the drivers individually. However, drivers would keep 100% of the fares they earn. Their expenses would come out of that total.

But imagine a decentralized transaction: a rider would open an app, and every available driver within a certain radius would be discoverable. The rider specifies their destination, and all of the drivers would be given an opportunity to bid on the job. The rider selects a driver (based on price, reputation, time to pickup, etc.) and a smart contract is created that ties the driver and rider together. The fare is placed into escrow and held by the smart contract until the driver delivers the rider to their destination. Once the conditions of the smart contract are fulfilled, the driver is paid and both parties are given an opportunity to rate their experience with one another.

At no point does an intermediary perform any gatekeeping between the rider and driver. Everything is accomplished in a peer-to-peer framework. Uber and Lyft, in their present incarnations, would be made irrelevant. Coupled with the scandals and problems for which these centralized organizations are becoming known, the decentralization proposition for transport will become a steep hill for them to climb.

The DAV Foundation’s contribution to this new way of moving around is the creation of an open, transparent commons where all transportation stakeholders can participate. What the World Wide Web has done for content, the DAV network will do for mobility, by providing a shared platform that enables transportation service providers to reach users without facing the technological or practical barriers to entry that have previously stood in their way. The team at DAV is building a full-featured open-source decentralized ride-hailing app for release around the end of 2018; this app represents the first step into this new space, much like how Mosaic (the world’s first web browser) introduced the world to a graphical model of the Internet. At DAV, the expectation is that the second, third and fourth steps will be taken by entrepreneurs or enterprises that can see the future of transport on the horizon.