Both the taxi drivers and their passengers are not happy with the aggregators like Uber, Gett and Yandex.Taxi. According to the report from JP Morgan Chase, drivers these days earn half as much as they did just 5 years ago, while the passenger fares continue to grow. Most of the profit ends up in the pockets of the service providers taking advantage of the lack of transparency in the industry. The blockchain technology might provide an unexpected answer to those problems.
Throughout the majority of its history which goes as far back as Ancient Rome, the taxi industry has been developing rather systematically and organically. With the demand for private cabbies increasing, the number of people working in the field increased as well, taxi depots started to appear, morphing into entire companies and corporations later on. However, despite the obvious advantages of private transportation over the public transport system, the taxi service was far from perfect.
Almost every tourist has found himself in a situation when a local taxi driver took the longest possible route to destination, winding up the meter for hours. Also, the price tag of officially licensed taxis is often too big for a lot of people, while opting for an illegal taxi has always been associating with a risk of getting in trouble.
The situation changed dramatically with the advent of Uber in 2009. The company released an application that allowed passengers to connect with taxi drivers and private drivers, order a cab and pay for the ride. Now, you could mark a specific pick‐up point on the map, track the trip and make a cashless payment.
These days, passengers can use Uber in more than 785 cities around the world, with similar services available in every single city in all developed countries. Within nearly 10 years of existence, Uber basically monopolised the market, forcing the officials licensed taxi drivers out. In fact, the drivers faced an ultimatum: join the Uber fleet of essentially lose their jobs.
According to research, last year along, over 25,000 traditional London black cab drivers lost around £10,000 of the annual income, each. They are now preparing a £1 billion class action suit against the company. Uber and similar companies generally employ a rather aggressive policy in terms of dealing with their competition. They are hiring drivers with minimal qualifications, there are no language requirements and almost no background checks.
In 2013, 350,000 Uber drivers from California and Massachusetts filed a class action lawsuit against the company, demanding that they be recognised as employers, not contract workers. Because of this technicality, Uber could pay the drivers below minimal way and not provide benefits, such as insurance, paid leave and so on.
These are just a couple examples of how Uber and similar companies conduct business. The entire list of scandals would be impossible to fit into this articles, as it ranges from completely unethical business strategies to sexual harassment allegation and attacks on passengers.
Besides, despite trying their best to look like it, those applications are not peer‐to‐peer, meaning they don’t actually connect drivers with passengers directly, while the service provides like Uber and Gett have full and undisputed control over the fares. Moreover, they pocket a predatory portion of every fare for every single trip. Because of this, passengers are forced to pay more, while drivers receive roughly the same amount. This leads to drivers having to work for 20 hours a day to make a living, which directly contributes to the amount of accidents on the road.
Centralised control over fares is perhaps the main problem of the modern taxi industry.
What can the blockchain technology change?
The blockchain technology allows for creation of fully decentralised platforms that are not controlled by any single entity or an organisation. All the information and transactions on such a platform are protected with cryptographic encryption, with the inextricably link between each action within the platform being part of the cipher. This makes the information recorder on the blockchain immutable.
Thus, the blockchain technology can facilitate a truly peer‐to‐peer system, capable of connecting drivers and passengers directly with each other, where drivers can set the price of the ride before it begins and the passenger can decide whether the price is fair. Essentially, the pricing of taxi will be regulated by the traditional law of supply and demand, and drivers will be their own bosses, setting the prices and getting 100% of the fare.
Moreover, the blockchains technology allows users to create an online ID of sorts, which can include and set of documents and payment methods. Unlike traditional services, blockchain will enable users to chose exactly when, which portion and who they share their information with, as personal data will not be stored on any third‐party server controlled by a third party. This will allow passengers to know the exact qualifications and experience of their drivers, while both parties won’t have to worry about their private data being stolen.
Originally, the very first blockchain was created to facilitate quick money transfers with little to no fees, so companies making taxi applications on blockchain can take advantage of that and even issue their own cryptocurrency. If such an application goes global, cryptocurrency payments will allow passengers to save on conversion fees and pay the driver directly, without using third parties such as banks and service providers.
It’s not that simple
The crypto‐community and blockchain evangelists like to say that this technology will revolutionise every industry out there. The reality here is that the taxi industry has already gone through the revolution just 9 years ago, it might simply not be ready to go through another one on a global scale.
Besides, it’s worth pointing out that the blockchain technology doesn’t actually promise any revolutionary changes, at least those seen to the naked eye. In fact, taxi applications on blockchains will most likely look exactly like the already existing, centralised ones and have the same functionality. They will be promoting their apps talking about blockchain, disruption and a revolutionary new approach, but the ordinary user won’t see any difference. And it won’t really matter for them.
An ordinary user needs to be able to call a taxi as quickly as possible, and that requires any company to have a large fleet. As it usually happens, the taxi sector is currently filled with tiny blockchain‐startups, that are clearly not capable of competing with the industry giants. In its current shape, the blockchain taxi can not make a revolution, but it can provide an alternative.
This fact becomes even more obvious once you have an in‐depth look at the payment process, specifically the exchange of fiat money for the startup’s cryptocurrency. Companies like A2B Taxi and Rev are trying to solve this issue by providing their customers with a hybrid payment system, where users can either use traditional payment methods or their crypto tokens. Exactly how the exchange will be carried out as well as how the companies are going to handle the fees and the inevitable volatility of cryptocurrencies is still completely unclear.
Besides, using a bank card to pay for a blockchain taxi goes completely against the promises of those startups to create a service that will not rely on any third‐party services. Another possible problem is whether the drivers and passengers will actually want to learn how the new technology works, especially when it comes to creating digital IDs, cryptocurrency wallets and looking for ways to exchange cryptocurrency tokens for fiat money and vice versa.
Finally, blockchain is a database that usually requires a lot of storage space. Usually, in order to fully interact with the blockchain, you need to download a full client, which can take up several gigabytes of storage space. A possible alternative — so‐called ‘light’ clients — are still not safe enough and are vulnerable to hacker attacks. This is a particularly pressing problem for the taxi industry due to the large potential number of transactions as well as the funds being stored by all parties.
Despite the fact that theoretically the blockchain technology can substantially improve the taxi system for both drivers and passengers, in reality this seems like an incredibly complicated process. Perhaps that’s why there are only a handful of very small blockchain‐startups, all of the extremely early stages of their development, working in this direction.
What seems more plausible is one of the industry giants incorporating blockchain technology into their service. This will allow them to improve their service by making it more transparent and honest, but, most importantly, it would be a great publicity stunt.