Since Bitcoin first appeared in 2008/2009, people have been looking for the next ‘killer application’ for the technology that made it possible: Blockchain. Just like the word – “Cloud”, Blockchain has taken hold of the news as hot emerging technology. But, what are the use cases for travel?
There has been plenty of hype around Blockchain. Bitcoin’s crypto-currency hype has fuelled the mania behind Blockchain. However, this hype belies a shallow understanding of what Blockchain can and can’t do.
There is a danger of building unrealistic expectations as the understanding of the technology lags well behind the hype. Blockchain technology appears to be amazing, but currently, the technology is complex, communicated poorly, and too hard for the everyday person to understand. Regulatory uncertainty and fear of change make it hard for travel brands to make any decisions about using Blockchain.
This is not surprising, as to say you truly understand Blockchain (which is often referred to as “Distributed Ledger Technology”), you would need to recognise and be able to explain the following equation:
Looks pretty tricky? Challenging equations are not something we typically want to spend time working out.
The real issue is that explanations of Blockchain always outline its ‘potential to change everything’, but never demonstrate what Blockchain fundamentally does. For example, you might have read that Blockchain works because it is ‘decentralised’, ‘secure’ and ‘can be read by anyone’.
All fine and dandy, except for one hiccup: if you don’t understand what a technology does, how can you evaluate it? Explaining why Blockchain is so good without resorting to equations and algorithms is difficult. So, for all the talk about Blockchain, Bitcoin, and crypto-currency, few can say exactly how or why it works.
Breaking down Blockchain into bite-sized chunks
The Blockchain is a decentralised registry of assets and transactions – a shared public ledger that underlies the Bitcoin network. Blockchain links transactions together in blocks which are then encrypted, creating a permanent record of all payments. As Blockchains are peer-to-peer, i.e. no central authority is required, they guarantee trust and security, but with no central gatekeeper. In other words, I would have a direct relationship with you for a safe, secure financial transaction, which does not need to be routed via a bank.
Indeed, the abstract from the original Bitcoin Whitepaper, where the technology was first proposed, is illuminating: ‘a purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution….we propose a solution using a peer-to-peer network….the network timestamps transactions …forming a record that cannot be changed’.
The whitepaper goes on to say that Internet eCommerce “has come to rely almost exclusively on banks to serve as trusted third parties to process electronic payments. While this works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model… What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. There would be a public history of transactions recorded that would be computationally impractical for an attacker to change.”
So, the beauty of Distributed Ledger Technologies (DLTs) like Blockchain is that they are secure and distributed databases that can remove middlemen. This allows consumers to trade in an environment where trust is given to the technology instead of the company providing the service, for example, the bank or tour operator. This is because each Blockchain is an accurate, long-term record of a person’s transaction history, as well as other data such as credentials and reputation.
Blockchain and Travel Use Cases
You can see why there are claims that Blockchain is compelling for travel, as it appears to offer a solution to travel distribution challenges. All travel distribution companies are potential candidates for Blockchain disruption, because hotel chains and airlines could carve out the middleman: for instance, a traveller could bypass an intermediary like an OTA, and instead interact and pay the supplier directly using a Blockchain-based system.
However, public announcements about Blockchain adoption in travel are thin on the ground. There are some interesting use cases around what is called the ‘Sharing Economy’: imagine if home, apartment and car rental brands could enable the checking the authenticity of users, and vice versa. As people can create fake profiles or delete one if they receive too many negative reviews, verification is an issue for the sharing economy. A Blockchain would create a permanent record that would ensure trustworthiness. Transaction history on booking sites could be shared with third party companies to create a complete picture of somebody’s payment history.
In terms of public announcements, there are two categories: early adopters, such as TUI and Microsoft, and travel start-ups. Microsoft announced a partnership with WebJet, Australia and New Zealand’s leading online travel agency, to develop a Blockchain proof-of-concept solution to ‘address the data discrepancies that arose in the hotel wholesale distribution chain’.
TUI has moved all of its contracts onto its private Blockchain. “We are using it today predominantly to have mechanisms to swap bedstock between different PMSs [Property Management Systems],” according to their CEO. TUI are talking in terms of putting their inventory on the Blockchain as their next step, as it creating efficiency enhancements in managing hotel capacity.
Blockchain related travel startups include Winding Tree, a company based in San Francisco. They are building a decentralised travel distribution platform for the travel industry. They believe that the Blockchain can reduce the power of OTAs and intermediaries, and change the current concentrated travel distribution landscape. They claim Winding Tree would make travel cheaper for consumers and more profitable for vendors, because no centralised control (such as OTAs) means lower transaction fees and no barriers to entry.
Other Blockchain related startups include Loyyal, a “universal loyalty and rewards platform” which they claim uses a Blockchain-enabled network that consumers could benefit by being able to access rewards from different companies and across industries in one digital wallet. Providers of loyalty, on the other hand, could offer more streamlined programmes without compromising data security and privacy.
Who will be the Blockchain winners?
With Bitcoin constantly in the news, Blockchain might seem like it’s just around the corner. However, Blockchain is still in its infancy in terms of adoption. Most initiatives are still in early stages. Gartner claim that Blockchain is on the ‘Peak of Inflated Expectations’ on their hype cycle, soon to be followed by the ‘Trough of Disillusionment.
More pragmatically, there are simple reasons for delays in the adoption of Blockchain: the language used to describe Blockchain is highly technical and confusing mean that the value cannot be easily explained. Secondly, the volatility of Bitcoin has created concerns about the viability of the technology.
Given the fast-changing nature of Blockchain related technologies and the community of developers working on it, new use cases will be developed. A likely starting point is the creation of private Blockchains — just like having an Intranet versus the Internet — to facilitate transactions between travel value chain partners.
Who will be the Blockchain winners? As of now, it is simply too early to tell. However, like in any industry, the winners will likely be more agile, faster and cheaper than what is currently available, and deliver the right benefits for everybody in the travel value chain: suppliers, agencies, airlines, hotels, and travellers.