17.

  Decentralization as a new framework for the

sharing economy
Marc Rocas-Royo

INTRODUCTION
This chapter describes the opportunity that blockchain technology confers to the sharing
economy through the development of decentralized autonomous organizations (DAOs)
as an alternative to centralized platforms. It first introduces the concepts of blockchain,
smart contracts, and DAOs, then explains the implications that the development of a
DAO have for the sharing economy. It introduces decentralized organizations from the
point of view of governance and suggests potential lessons from their best practices, then
illustrates different ways to approach DAOs through the description of some projects at
an early stage of development.

THE CONCEPTS OF BLOCKCHAIN, SMART CONTRACT, AND

DAO

The blockchain is a decentralized, open-source technology that allows trusted and

immutable transactions between peers (Antonopoulos 2014; Mougayar 2016; Swan 2015;
Tapscott and Tapscott 2016) without the need for a third-party intermediary such as a
bank (Swan 2015). The blockchain is, at the same time, a cryptocurrency, computing
infrastructure, transaction platform, decentralized database, distributed accounting
ledger, development platform, open source software, financial services marketplace, peer-
to-peer network, and trust services layer (Mouyagar 2016). Five basic principles define
this technology: every party has access to the entire ledger, communication occurs without
central nodes, data are transparent with pseudo-anonymity, records are permanent and
cannot be altered, and users can program algorithms for the automatic writing of records
(De Filippi 2017).
In 1994, the computer scientist, legal scholar, and cryptographer Nick Szabo coined
and defined the term “smart contract” as “a computerized transaction protocol that
executes the terms of a contract” (Szabo 1994). Szabo argued that the digital revolution
was making it possible to embed contractual clauses in the software and hardware that
we deal with every day. Smart contracts can deal with all type of valuable properties
controlled by digital means.
In 2013, Vitalik Buterin, a cryptocurrency researcher and programmer, released a white
paper in which he described a new open source, public, blockchain-based distributed com-
puting platform called Ethereum (Buterin 2013; Ethereum White Paper 2018). Ethereum
was designed to satisfy three primary goals. The first was about being able to transfer any
asset on the blockchain. The second consisted of being able to track the supply chain of

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 Decentralization as a new framework for the sharing economy  219

products. The third provided Szabo’s idea of smart contracts as preprogrammed pieces
of code able to autonomously execute a set of instructions, depending on some external
inputs, as a series of “if-then” clauses (Botsman 2017, 225–6). Note that saying that the
contracts would be mediated by the blockchain is similar to affirming that those involved
parts do not require trust in each other (Beck et al. 2016; Davidson et al. 2016; Shermin
2017). When applied to digital assets, these goals imply the materialization of those digital
assets. In other words, the blockchain allows distinguishing between different units of the
same digital asset and, consequently, transferring or sharing them as we do with physical
resources (Swan and De Filippi 2017).

DAOS AND THE SHARING ECONOMY

A contract is an agreement between two or more parties to do something in exchange

for something else. What smart contracts add to the traditional definition of contracts
are autonomy, self-sufficiency, and decentralization (Swan 2015). They are autonomous
because, once launched, the contracts and their initiating agents do not need to be in
contact. They are self-sufficient because of their ability to assemble resources when
needed. They are decentralized because there is no single point of execution, as all the
nodes can self-execute smart contracts. Despite these features, and because of the interac-
tion between two or more parties, smart contracts need to rely on some degree of external
information, or so-called “oracles” (De Filippi and Hassan 2016; Wright and De Filippi
2015). Oracles feed the “if-then” conditions defined by the involved parties. Oracles,
therefore, are the triggers for the execution of smart contracts.
The ability to run smart contracts confers to blockchain technology the capability to
run autonomous systems, from a simple transaction, or a simple “if-then” condition, to an
entire decentralized autonomous organization (DAO). A DAO is a set of agents perform-
ing “preapproved tasks based on events and changing conditions” (Swan 2015, 24), “a
cryptographically enabled nexus of contracts that codifies an entity that is autonomous,
in the sense of the legal framework is cryptographically codified” (Elliott et al. 2016, 19),
and an “open, self-organized network coordinated by crypto-economic incentives and
self-executing code, cooperating around shared goals” (Field 2018, 3). Vitalik Buterin
coined the term in 2013 as an evolution from the term “decentralized autonomous
corporations” (DAC), previously coined by Daniel Larimer (Buterin 2014, 2016). Smart
contracts and DAOs can grow and define the governance for the machine-to-machine
and machine-to-human interaction of smart devices and sensors (De Filippi and Hassan
2016).
The Internet of Things and the sharing economy also can benefit from DAOs (Belk
2017a; Christidis and Devetsikiotis 2016). Buterin (2014) classifies DAOs as organiza-
tions with automation at the center and humans at the edges. As machines can share some
resources with less reluctance than humans, the evolution of artificial intelligence and the
potential of DACs and DAOs should lead us to analyze the impact of automation on the
market economy and capitalism (Morris 2015).
The term “decentralized autonomous organization” is used in different ways depending
on the degree of human intervention. On one hand, a DAO is as a network of devices
(agents) that interact with each other and exchange information and value through the

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 220  Handbook of the sharing economy

execution of previously defined smart contracts. On the other hand, a DAO is a human-
distributed organization that replaces some of the typical processes of governance for
centralized organizations by the summation of a set of smart contracts and a procedure
for human participation. When applied to the sharing economy, the boundaries between
these two types of DAOs are unclear. Consider, for example, the case of Bird, a dockless
electric scooter company founded in 2017. Anyone can find and unlock a Bird with the
company’s app and take a ride. Once the trip finishes, the rider locks the scooter and leaves
it in a public space, so Birds are dropped off anywhere. During the night, the company’s
contract workers, called Bird hunters, are rewarded for charging and leaving the scooters
in high-demand zones, ready for the next day (Lorenz 2018).
This case includes some elements common with other sharing economy platforms, such
as an environmentally friendly discourse, the promotion of the gig economy, and the free
use of the public space. A DAO that satisfies all involved stakeholders could implement
the same service. An open community of riders/platform owners could replace the role
of the company. They would take care of the maintenance of the network. A set of smart
contracts would define the platform’s governance, and the distribution of token shares
would give the holders the property of tokenized scooters and a set of complementary
defined rights and revenues distribution, in a type of decentralized co-operative (Atzori
and Ulieru 2017). The system itself could manage the availability and density of the fleet
of scooters autonomously through a system of incentives for the user.
This example shows that blockchain systems can decentralize and evolve the current
sharing economy platforms. Platforms are only a specific case of the potential power of
transformation that blockchain shows. This is the main reason why this chapter takes a
broad vision of sharing economy activities to include as many blockchain-based imple-
mentations as possible. Consequently, in a similar way to the case of Bird, a DAO system
could be developed for implementing any sharing economy activity that falls into the four
broad categories that Schor (2016) describes: recirculation of goods, increased utilization
of durable assets, exchange of services, and sharing of productive assets.
The blockchain enables the creation of trust-free systems without intermediaries
to transfer value according to terms defined on smart contracts. The management of
trust is a critical aspect of sharing economy activities. Hawlitschek et al. (2018) identify
three types of trust related to sharing economy platforms: trust in peers, trust in the
platform, and trust in other targets. Trust in peers refers to trust between providers and
­consumers, hosts and guests, drivers and riders. Trust in the platform refers to the belief
that the centralized organization that manages the platform is going to fulfill its function.
Trust in other targets involves any other belief or behavior that interacts with the trust.
Blockchain-based systems embed technological trust into the system.
Regarding trust between the users of the decentralized sharing platform, current
blockchain-based platforms exploit the feature of the immutability of data for building a
system of reputation. Concerning reputation, it is possible to use as many multi-signatures
as needed to verify behaviors that affect one’s reputation. It is reasonable to think, there-
fore, of a global system of user reputation that platforms can look up and update. So, in
the same way that we have one identity, it makes sense to maintain a unique reputation.
It also makes sense to use our identity as a specific claim of our reputation, without the
need to reveal other unnecessary data. The same indelibility of data, however, makes the
use of smart contracts in a blockchain-based platform highly sensitive to programming

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 Decentralization as a new framework for the sharing economy  221

errors or malicious code. This was learned in 2016 when a bug in the code allowed a
hacker to extract US$50 million of a smart contract from The DAO, a decentralized and
autonomous mechanism for crowdfunding Ethereum projects (DuPont 2018; Shermin
2017). Trusting in the code requires trust both in the ability of the programmer to not
write bugs, and in the content of the coded version of an agreement.
As Lessig (2006) points out, cyberspace requires choices. It is about building an envi-
ronment for the protection of our fundamental values or allowing them to disappear. In
blockchain technology, the code, mainly through the programming of smart contracts,
turns into law. “Code is law” (Lessig 2006), often misunderstood as “the tyranny of the
code,” means that the code reflects the law. In a future world based on digital transactions,
however, it is reasonable to think that the law is going to be natively defined as code or, in
other words, that “law is code” (De Filippi and Hassan 2016).
This “law” also has to do with the governance of those newly created DAOs. The
community involved in the decentralized organization needs a system to make decisions,
and blockchain allows the implementation of powerful, online, commons-based systems
of governance. As Bollier (2014) writes: “A commons arises whenever a given community
decides it wishes to manage a resource in a collective manner, with special regard for equi-
table access, use, and sustainability.” Ostrom (1990) found empirical data from hundreds
of case studies in which people tend to cooperate to actively maintain common resources
over the course of generations (Pitt and Diaconescu 2014).
This cooperation for the development of DAO-based sharing communities happens at
local, urban, and global levels. At a local level, a blockchain can manage the transactions
of a small community of neighbors with solar panels who buy and sell energy as needed
among them (Christidis and Devetsikiotis 2016). At an urban level, the role of cities is
significant as peer-to-peer markets are exceptionally robust, efficient, and advantageous
in densely populated urban areas (Sundararajan 2016). Cohen and Muñoz (2016) clas-
sify sharing economy activities from the view of sustainability and the role of cities in
five categories (that is, energy, food, goods, mobility and transport, space sharing) and
18 subcategories (that is, energy co-ops, group purchasing, community gardens, edible
communities, shared foods, shared food prep, 3D-printed goods and facilities, loaner
products, pre-owned goods, freecycling, libraries, repair cafés, car-sharing, bike-sharing,
ride-sharing, crowd-shipping, workspace, places to stay). Each of these categories and
subcategories could be developed into DAO-based sharing communities. At a global level,
some decentralized solutions aim to create a market for a user’s idle resources, such as
Golem for CPU or hard SIA and Storj for disk space.

THE PRECEDENCE OF EXISTING DECENTRALIZED

ORGANIZATIONS

Once interactions and organizations can be predefined by smart contracts, and people
or machines can interact without having to trust the other party (Wright and De Filippi
2015), it seems necessary to explore the kind of rules to be defined. The governance of
decentralized organizations consists of three levels or layers. At the lower position, we
have governance of the technological platform. This layer is responsible for the decisions
related to the use of technology to implement the communication, production, and

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decision processes involved in the organization’s activity. The second layer defines the
governance of the community, understood as those people (or machines) working for
the organization. At the upper position, we find the governance of the delivered service,
that is, the making of decisions that involve the relationship between producers and
­consumers, and the friction of the organization with the markets in which it operates. In
the case of centralized sharing economy platforms, such as Airbnb or Uber, the company
has a monopoly on those three types of governance. The process toward distributed
systems involves fragmentation of the governance of platforms. DAOs can naturally
replace the technological and community layers, but the service layer involves humans
making high-level decisions, such as deciding a strategy, allocating resources, or thinking
of a marketing campaign.
Other decentralized organizations have faced the challenges of such fragmentation.
Some precedents are the commons-based peer production (CBPP) model of socio-
economic production (Benkler 2004, 2006), the governance of co-operatives and open
value networks (Bollier and Conaty 2014; Pazaitis 2017; Pazaitis et al. 2017a; Pazaitis et
al. 2017b; Troncoso and Utretel 2017), the “Platform Cooperativism” concept (Scholz
2016), and the commons-based system of governance (Algan et al. 2013; Bollier 2014;
Hess and Ostrom 2007; Ostrom 1990). There is an intersection space between CBPP,
peer-to-peer (P2P) sharing economy practices, and a type of governance inherited from
co-operativism. Conaty and Bollier (2014) see and defend P2P production on open
platforms as a way of replacing the dynamics of capitalism with a commons-based model
of governance (Ostrom 1990).
Open value networks and platform co-operativism are two examples of this intersec-
tion. An open value network (OVN) is a network of open enterprises that can perform
all the functions of a traditional business with the same flexibility of open source systems
(Siddiqui and Brastaviceanu 2013). An OVN is based on three fundamental principles:
open membership (anyone can join and leave at any time), transparency (access to
information, knowledge, and processes), and open access to participation (to create an
equal opportunity for value creation) and contribution (any effort from a member that is
part of a use value). Two examples of OVN are Enspiral, “a network of professionals and
companies aiming to empower and support social entrepreneurship” (Kostakis et al. 2016,
6), and Sensorica, dedicated to the design and deployment of sensor systems (D’Amours
2015; Pazaitis 2017).
The main principles of platform co-operativism are: “cloning the technological heart
of Uber, Task Rabbit, Airbnb, or UpWork”; promoting solidarity and a change in
ownership for platforms; focusing on benefiting all, instead of only a few; looking for
a balance between technology and cooperativeness; and shaping the social organization
of emerging technologies (Scholz 2016). Some examples of platform cooperativism are
Fairmondo, Loconomics, and Stocksy.
Blockchain technology shares most of these principles. Some of them are rooted in
the origins of the technology, such as transparency and open access. It then seems logical
to think that blockchain is a promising candidate for becoming the core technology of
decentralized sharing economy organizations (Clippinger and Bollier 2014; Cohen 2017;
Davidson et al. 2016; De Filippi 2017; Muñoz and Cohen 2017; Swan 2017).

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EXAMPLES OF BLOCKCHAIN-BASED ORGANIZATIONS

This section introduces the operation and principles of governance for some organiza-
tions belonging to three types of blockchain-based organizations. First are those provid-
ing global sharing-economy services, such as Golem and Storj; and second, there are
sharing economy-related organizations that define themselves as DAOs, such as Swarm
City. Third, there are organizations that enable the setting up of open platforms, DAOs, or
even decentralized borderless voluntary nations (DBVN) to their users, such as Aragon,
Colony, DAOStack, and BitNation.
Golem defines itself as the Airbnb for computers. Users can rent unused CPU/GPU
cycles from their computers and get paid in cryptocurrency. Alternatively, other users can
benefit from high computing power for rendering, machine learning, or scientific comput-
ing applications. Similarly, Storj offers users to pay and get paid for renting free disk space.
Storj is a decentralized cloud storage platform that enacts smart contracts to automate
how users rent out unused hard disk space and how other users make use of it (Swan
2015). Users get a decentralized alternative to a service similar to Dropbox. Both Golem
and Storj are private companies that have full control over the three layers of governance.
Swarm City is a blockchain-based decentralized commerce platform that allows P2P
transactions. The organization’s aim is to provide anyone with the necessary tools to
develop commercial transactions. For this purpose, Swarm City identifies three functional
tools: a tool to transact (a wallet), a tool to communicate, and a tool to create attractive
graphic user interfaces (storefronts).
Aragon is an organization that aims to create two primary structures. The first is the
Aragon Core, an ecosystem that enables anyone to create and manage a decentralized
organization and cover the following needs: identity, ownership, voting, capital, people,
outreach, payments, accounting, and insurance. The second is the Aragon Network, a
global digital jurisdiction that provides arbitration for any given dispute between two
parties.
Colony defines itself as the future of firms, and a platform for open and online
organizations. Once a new organization (a “colony”) is born, Colony’s software helps
to determine what tasks have to be done, assigns them, keeps track of each member’s
contribution to the organization, and rewards people for completing them, depending on
the member’s reputation. It also helps to resolve disputes and to make crucial collective
decisions.
DAOStack defines itself as the “Wordpress for DAOs.” DAOStack provides the
foundational tools for the creation, operation, and governance of DAOs. The three
central concepts behind the DAOStack project and its vision about the future of work are
self-organization, shared goals, and cooperation (Field 2018).
Bitnation defines itself as the world’s first DBVN (Tempelhof et al. 2017). The organi-
zation, created in 2014, is responsible for the first blockchain marriage, birth certificate,
refugee emergency identification, world citizenship, and DBVN constitution. The Pangea
software is a tool for creating “nations” and conducting P2P arbitrations.
All of these organizations and projects have some things in common. They establish
a nested structure that supports the creation of new communities and takes care of the
development of the system. All of them have a legal form, such as a limited company or
a foundation. Some state that this is only a temporary stage until they can become DAOs

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(for example, Aragon, DAOStack, Swarm City). They all are based on the Ethereum
blockchain, which provides two tools elemental to decentralized organizations: a token-
based system and a structure of smart contracts. They use tokens as transmission of value
and a system of incentives and rewards. The smart contracts implement the functioning
logic of the organization. Moreover, they all implement systems of reputation that allow
development of governance systems based on meritocracy.
The general adoption of meritocracy for developing reputation systems deserves a
few extra words. Meritocracy refers to a social system in which individuals earn rewards
in direct proportion to their efforts and abilities (McNamee 2018, 2). In co-operative
organizations, under conditions such as when voting takes public decisions and each
member freely decides the degree of participation, three factors limit meritocracy (Beviá
and Corchón 2018). These are efficiency (too much meritocracy encourages too much
work), incentives (meritocracy encourages sabotage), and voting (inefficient rewards
are preferred as long as they are profitable). McNamee (2018) refers to the inequality as
a source of non-merit factors that distort the efficiency of meritocracy. Some of these
factors are social capital (who you know), cultural capital (what you need to know to fit
into the group), and discrimination. Discrimination refers, for example, to the technologi-
cal gap that limits the access to the technology, to the gender bias that affects especially
women in technological fields, or to the income bias that affects the available time for
participating in such systems. One possible solution to discrimination is affirmative
action, a set of practices to assure the equality of opportunities, but none of the described
systems considers this option.

CONCLUSIONS

The sharing economy can follow four possible paths in the near future (Codagnone et al.
2016). The first is “the great transformation,” and it consists of developing a green, fair,
and socially oriented prosperity. The second is “growth-oriented globalization,” which
describes a neoliberal environment driven by the markets. The third is a pessimistic view
called “barbarization.” Finally, the fourth is called “regulated sustainability,” suggesting
that regulation is needed to develop the sharing economy properly in the coming years.
Blockchain technology, like other technologies, is not neutral, but a technical artifact
with a specific architecture (De Filippi and Hassan 2016). The way blockchain networks
and incentive mechanisms develop may lead to an evolution of platform capitalism
(Parker et al. 2016; Srnicek 2017) instead of the desired implementation of sharing
decentralized platforms (Atzori and Ulieru 2017). As DuPont (2018) argues, the task of
defining algorithmic systems of governance for decentralized systems is a challenging one,
and it requires different forms of experimentation. It is necessary, however, to implement
systems of governance based on the experience of governance rules that have proved to
be successful in satisfying the utopian view of a decentralized, commons-based sharing
economy.
These design principles include the findings on governance of the commons (Algan
et al. 2013; Bollier 2014; Hess and Ostrom 2007; Ostrom 1990), the evolution of CBPP
(Benkler 2004, 2006), the principles of platform co-operativism (Scholz 2016), and the
successful experiences of OVN (Bollier and Conaty 2014; Pazaitis 2017; Pazaitis et al.

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2017a; Pazaitis et al. 2017b; Troncoso and Utretel 2017). These blockchain-based sharing
platforms, once created, must coexist with incumbents from the centralized platform
capitalism.
This coexistence implies two significant developments. The first is the development of
a regulation that protects any developed alternatives. This regulation must look for the
solution of unresolved issues that the sharing economy ecosystem has: taxation, negative
externalities, information asymmetries, licensing and certification schemes, data and
privacy, and competition law potential implications (Codagnone et al. 2016). Regarding
the second, blockchain-based, sharing economy platforms must develop a strategy of
competition through differentiation in a race to provide more value than the incumbents,
usually with fewer resources. It also makes essential the existence of active governance sys-
tems for the community to make those strategic decisions necessary to compete. It is not a
competition for profits; it is a competition for designing a tempting value proposition. The
provided value becomes the driver towards “the great transformation.” In the meanwhile,
the tokenization of the economy creates some frictions with the existing systems, and the
role of the regulator is here critical for allowing the “great transformation” that a part of
the society demands.
The rise of alternative systems of governance for most DAOs reflects the emergence
of an unsatisfied generation of centennials. This generation sees decentralized systems of
sharing among peers as an opportunity to replace the current sources of power. However,
as Rushkoff (2016, 150) states, “decentralized technologies do not guarantee equitable
distribution; they merely allow for value to be exchanged and verified in ways that our
current extractive, centralized systems do not.”
The analysis of the cases exposed in this chapter indicates that the creation of decentral-
ized platforms for the sharing economy is technologically feasible. There is, in fact, healthy
competition among different organizations at a similar degree of development for the
establishment of a standard platform that allows the development of sharing communi-
ties. This is a typical feature of the emerging stage of industries.
Nevertheless, there are some dark clouds in the sky. First, there is a lack of full
transparency about those newly created nest platforms that provide the infrastructure
for the establishment of sharing decentralized communities. Second, the governance is
centralized. The “team” decides in most of the cases how to develop the platform. Third,
they all adopt a legal form, most of them as a foundation or a limited company. Some
promise that they will evolve into a DAO when possible, but they do not provide more
information about how this is going to happen. Fourth, all of the presented cases choose
Ethereum. This preference could lead to a high probability of remaining captive to this
technology, or at least of incurring substitution costs.
Fifth, most of them adopt meritocracy and reputation systems like those for making
decisions. There are no mentioned policies for promoting equality and avoiding the
creation of an elite controlling the governance of those communities. As it seems natural
to integrate the reputation of a user in several different sharing communities, there exists
the possibility of extending those reputation systems to other aspects of life and creating
a social credit system. Sixth, there is no mention, in any of the provided examples, of
the role of machines and artificial intelligence in the governance of the created DAOs.
Seventh, there is a lack of interaction with existing political and economic institutions
(the case of Bitnation is an exception). Eighth, there is a lack of development of common

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initiatives with city councils. Ninth, motivations and incentives for participating in this
new sharing economy could lead to a “neoliberalism on steroids” (Morozov 2013, quoted
in Murillo et al. 2017), especially if the platform’s property, governance, and wealth are
not properly distributed. Tenth, those presented solutions avoid the classic discourse of
the sharing economy but, instead, there appears to be a new discourse about the benefits
of decentralization.
Future studies should consider the impacts that the incentive and reputation systems
of these platforms have on the motivation of their participants for being part of them,
either as users or as active collaborators. It also would be necessary to study the social
capital created on those sharing communities, as well as the impact of the materiality of
digital assets on them.
Finally, the existence of DAOs does not involve the existence of a decentralized
autonomous society (DAS). As long as the number of implemented DAOs rises, provid-
ing a different value, each one of us will freely decide if we want to join them or not;
similarly, an employee chooses to be part (or not) of a circle in a holacracy (Robertson
2015). Some of these DAOs can be seen, then, as virtual gated communities, in which the
“gate” is a permeable membrane defined by the nature of their activity. It depends on the
governance of these newly created gated communities to promote “sharing in” practices in
preference to the “sharing out” ones that we find today in the so-called sharing economy
(Belk 2017b).

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