The Sharing Economy: shifting from ownership to a sharing paradigm

From Linearity to Circularity

Traditional economic models are based on a scarce production system of demand and supply, commonly encompassed within linear productive frameworks. Linear economies respond to an industrial mindset in which production and resources are estimated to be unlimited, and economic profits are situated over all other principles. This conformity dates back to the Industrial Revolution, and it has been the dominant model in the market ever since.

Formerly, economic structures did not recycle and perceived the environment and ecosystems as an infinite source to be harvested, as well as a waste vessel for everything that should be discarded. Back then, industrial practices were not foreseen to be as damaging to the environment as they currently are, thus causing unprecedented consequences for the present —and the future—, such as global warming and climate change.

Over the past decades, in the face of an environmental collapse with countless natural disasters occurring worldwide, novel initiatives intended to change the linear economic paradigm and proposed forms to establish a better link to integrate the economic interplay with the environment's needs. The Sharing Economy is a system suggested as a great solution, which is part of a bigger movement known as the Circular Economy. In circular practices, the planet is understood as a finite source of resources but with the help of emerging technologies, there is the possibility to create a closed economic system, one where a circular flow of materials continuously goes back and forth to the original source. The most common approach to this economic framework is founded on the '3R principles'; reduction, reuse, and recycling.

As mentioned, the Sharing Economy can help harness the potential of circular practices and it has reached a substantial ground in terms of consumer acceptance and plasticity to be integrated seamlessly into the economics.

A Closer Look Into The Sharing Economy

In a shared market, peers can share any item or time, with or without the intervention of a central processor or mediator. This business model is applied to virtually any item as well as skills, building a digital library of tools and services provided by and from the people who use it. Each user feeds the Mobile Crowdsensing Platform with the specific tools and assets they own, making them available for other users to borrow and share freely without the need to buy already existing items.

Personal construction tools, such as drills, are rarely used in the lifetime of a regular owner. If a drilling machine is shared within a community, the platform can cut down on the need for every household to possess tools. It could possibly decrease waste, encourage the development of decentralized small industries, and establish closer bonds between individuals or even within a whole community.

Current popular models are run by central businesses, which might take a share of the payment provided by the user in exchange for the other user's asset. Some platforms do not earn any compensation, serving exclusively for the community's connection and functioning with different business models, such as advertising.

The Sharing Economy is also being combined with Blockchain solutions to generate peer-to-peer asset-sharing platforms that democratize services as it could bring down prices or give a chance for lower-income consumers to enter the market. This initiative could decentralize economic power by transforming it from centralized authoritative institutions into permission-based peer-to-peer networks driven by voluntary collaboration. By eliminating the need for central oversight and intermediaries, it could become the backbone for the real sharing economy by connecting supply and demand in the most efficient manner. With the use of Smart Contract, which incentivize innovation and social empowerment, decentralized collaborative organizations involved could reduce hierarchy and transaction costs while encouraging mutual trust.

Extensive networks for social lending, car-sharing, and peer-to-peer travel have already established themselves as major economic forces for sustainability. Often focused on local communities, the spread of lower-cost logistics such as drones and autonomous machines can further increase the cost-benefit ratio of lending, bartering, and sharing. Yet, the lack of regulation, the inconsistency of quality of services, and the absence of insurance are potential barriers that need to be tackled to move forward with the development of such a model.

Sharing Controversies

One of the greatest fights of the 20th century was centered on labor rights. Growing out of the need to protect common interests, unions and collective bargaining strategies helped empower workers in the face of such demand. In the case of factory workers, these institutions fought for better wages, flexible shifts, and safer working conditions. Additionally, this political movement spearheaded efforts to curb child labor, give health benefits to workers, and provide aid and assistance to workers who were injured or retired.

Nowadays, workplaces are quite different. Workers once protected by unions and employee rights are increasingly shifting to jobs as independent contractors, a situation that makes them vulnerable to skyrocketing levels of risk and ever-diminishing or inexistent benefits. On the other hand, the application of big data, new algorithms, and cloud computing have changed both the nature of work and the structure of the economy. Technologies that monetize human efforts and consumer assets could be deployed without the additional onus for traditional companies.

The dissemination of the gig economy and sharing economy has revealed a muddy relationship between public and private spaces in the digital age. This confusion occurs because digital platforms often exploit workers on short-term contracts with no employee benefits. As a consequence, this lack of regulation has again caused a new wave of unbalanced relationships between employers and employees.

In a controversial gathering held in San Francisco in the Spring of 2014 called "SHARE", funders, founders, and enthusiasts of the sharing economy met to inaugurate the sharing model that would soon reach the whole world. The meeting received harsh critics, raising questions of a supposed fairer, transparent, participatory connected economy, in which venture capitalists were taking advantage of a precarious employing system.

In the future, will platforms distribute that capital with users, including providers and users? Will the platforms ensure unrestricted access while extending their user base beyond those who own the platforms? Will they make good on their commitments to contribute with fair livelihoods for providers, the so-called “micro-entrepreneurs”? Or is the oratory only a money-hungry business model that will eventually seize capital from providers and users directly to funders and founders? While it seems too soon to place definitive clues to elucidate these questions, it is crucial to ask the key players involved more critically and analytically.

Key Players

• Airbnb: The start-up has for the last years been a prominent example of the sharing economy, in which the platform allowed travelers to book a room in houses owned by regular dwellers at a lower price compared to booking reservations in hotels or hostels. Before the disruptions of the coronavirus pandemic, the sharing sector was expected to grow from US$15 billion in 2015 to US$335 billion by 2025. But since the World Health Organization declared a health emergency due to a coronavirus outbreak, many nations that relied heavily on the tourism industry have seen themselves deeply affected as well as the companies involved in providing services, such as Airbnb. The Covid-19 exposed the sharing economy's vulnerabilities, and many companies faced decline in the year of 2020. However, according to an article released by Forbes in November 2020, the founders reported that "[...] when the pandemic hit, we knew we couldn’t pursue everything that we used to. We chose to focus on what is most unique about Airbnb—our core business of hosting. We got back to our roots and back to what is truly special about Airbnb—the everyday people who host their homes and offer experiences. We scaled back investments that did not directly support the core of our host community." This change in mindset and strategy made the start-up reverse its logic in the face of a spike in cancellations and focus on long-term contracts to establish a closer bond with providers and users and ultimately enable a stronger trustful relationship.

• Tem Açúcar?: The Brazilian enterprise is the first one in Latin America to offer a borrowing platform service where it invites neighbors to collaborate and share resources locally. "Tem Açúcar" is Portuguese for "do you have sugar?" a reference name to the familiar practice of sharing sugar with your neighbors. In the platform, users become providers too, enabling the exchange of everything from items, skills, rides to surplus food, and even the possibility to find exercise partners. The foundations of this platform is built upon the concept of collaboration as opposed to constant consumption.

• Lime: The company Lime offers a sharing model that enables users to rent and ride e-scooters for a limited amount of time. The rental service is processed through a mobile app; users can find the e-scooters at their precise location, pay for the rental autonomously, and unlock the vehicle for riding by using a code. The e-scooters do not rely on fossil fuel and are powered with electric energy, thus offering a sustainable mobility service. This type of micromobility is "dockless", the e-scooters are scattered throughout the city, without a permanent location, and can be picked up or dropped off. The vehicle, equipped with a GPS chip and wireless connectivity, can be rented once a user locates it and pays via mobile payment. Once the payment is completed, a code is generated to unlock the vehicle. This code is scanned through an interface embedded in the e-scooter. When unlocked, the user can ride the e-scooter inside a perimeter delimited by the e-scooter renting company and then leave it in allowed parking spots, usually public spaces where other small vehicles, such as bikes and motorbikes, are parked. Immediately after parking the e-scooter, the system locks the vehicle, and it is available for other users to rent. However, this model is still only offered by private companies such as Lime. If integrated into a public transportation system, this sharing model would allow citizens to access other modes to move about the city. As this type of micromobility offers users a relatively fast and convenient way to circulate in metropolitan areas, this transportation solution is expected to become a reality in almost every big city pretty soon.

Opportunities & Challenges

By making use of blockchain technologies, the sharing economy model will be able to thrive through the so-called "decentralized autonomous organizations." The low coding and investment requirements help these systems give space to a myriad of new startups created by first-time entrepreneurs, while also being kept and supported by the community. It could bring communities closer together, with micro-businesses established by community members helping achieve specific community-oriented goals. Open-source platform codes could also exponentially expand the reach of these services, making it possible to imagine global scalability, as well.

In this interconnected environment, a novel economic structure can be settled without involving money. By eliminating the storage of value and assets, and replacing the functions of benefit and payment with the algorithmically supported distribution of things and activities, the current social and economic system could evolve into an economy based on trust, not currency. Recently, some big sharing economy companies have taken formal action to make it possible for employees to be compensated with company shares. In the future, this step could be taken by even more companies and even be included in the core of start-up planning.

Although the sharing economy promises to be fairer in theory, in reality, workers are often making less than minimum wage without welfare and protections. While, corporations that rely on other people’s time and resources, like their cars and their homes, have had massive valuations.

As an alternative, with the help of blockchain solutions aforementioned, decentralized collaborative organizations could follow a sustainable and socially inclusive economic model that shares profits gained among the populace instead of free-flowing to private owners. With value distributed in the blockchain, businesses could operate more like communities and ecosystems. These platforms represent a chance to fundamentally rearrange society by integrating sharing into the very fabric of the economy, which could itself lead to a global societal shift from capitalism towards post-ownership.