UNIVERSITY OF TAMPERE

School of Management

BLOCKCHAIN TECHNOLOGY AS A NEW WAY TO ORGANIZE PEER-TO-PEER

ECONOMY – CASE AIRBNB

ABSTRACT & BRIEF SUMMARY OF THE MASTER’S THESIS IN ENGLISH

Tuomas Välimäki

bit.ly/blockchainthesis
linkedin.com/in/tvalimaki
ABSTRACT OF MASTER’S THESIS

Author: VÄLIMÄKI, TUOMAS

Title of thesis: Blockchain technology as a new way to organize peer-to-peer
economy – Case Airbnb
Number of pages: 114 pages, 1 appendix page
Date: October 2018
Key words: Blockchain technology, peer-to-peer economy, disruptive
innovation, multisided platform, revenue model, case study

The mentioned master’s thesis studies the potential of blockchain technology to

reconstruct existing organizing models of peer-to-peer economy. This potential is
evaluated from the point of view of multisided peer-to-peer platform’s revenue models
by studying the potential of blockchain technology to remodel these models in some
substantially valuable way for the users of peer-to-peer platforms.
The literature review of the thesis forms from introducing and combining the academic
literature of peer-to-peer economy, multisided platforms, blockchain technology and
disruptive innovations. This combination of the mentioned fields of literature visualizes
the ways that blockchain technology can reconstruct the existing models to organize peer-
to-peer economy. The case studies of the thesis amplify these visualizations as well as
verify and supplement them.

The thesis is a qualitative case study that studies several different organizations. The first
case study focuses on the peer-to-peer accommodation platform Airbnb’s revenue model
basing the study on the preconceived understanding that the author has constructed
himself when working as the chief business development officer of an Airbnb host
company for the past year while working on the discussed thesis at the same time. This
preconceived understanding was combined to secondary material found online, after
which the case study was read by several Airbnb host professionals and supplemented
where needed. The revenue model conducted from the Airbnb case study was then
compared to revenue models of four different peer-to-peer platforms that utilizes or will
utilize blockchain technology in order to become truly decentralized platforms. The
primary material for these case studies were the white papers of the studied platforms.

The results of the study propose the blockchain technology to be a nascent technology,
which nonetheless holds significant potential to reconstruct the digital platforms of peer-
to-peer economy. The blockchain technology enables peer-to-peer platforms to become
more profitable, safe and equal ecosystems for their users to participate in by
reconstructing the value creation and value capture models of the prevailing platforms.

This document is an unofficial summary of the master’s thesis made by Tuomas Välimäki in October 2018.
For the original text and references see www.bit.ly/blockchainthesis
THIS SUMMARY’S TABLE OF CONTENTS

1 INTRODUCTION ......................................................................................................... 1

2 METHODS .................................................................................................................... 3

3 ANSWERS TO RESEARCH QUESTIONS ................................................................. 4

3.1 How does the P2P-economy work? ....................................................................... 4

3.2 What does blockchain technology enable from the perspective of business
opportunities? .............................................................................................................. 6

3.3 What makes an innovation disruptive? .................................................................. 9

3.4 What are the main functions of Airbnb’s revenue model? ................................... 10

3.5 How could blockchain technology reconstruct Airbnb’s revenue model? ........... 11

4 DISCUSSION ............................................................................................................. 12

This document is an unofficial summary of the master’s thesis made by Tuomas Välimäki in October 2018.
For the original text and references see www.bit.ly/blockchainthesis
 1

1 INTRODUCTION

Peer-to-peer economy (P2P-economy) has become the economic success story of our
decade as it has enabled individuals to act as providers of different services in global scale
for the first time and with minimal barriers to act. By deploying individual consumers as
service providers, such as accommodation hosts or taxi drivers, P2P-economy has created
overwhelming model in cost-effectiveness to provide services in various different
industries, which has disrupted the incumbents of these industries along the way. It has
been suggested that creating economic value will happen more and more in the
ecosystems provided by organizations rather than within the organization itself in the
future. We’ve already seen successful examples of these ecosystems in the form of
Facebook, Airbnb and Uber, for instance.

This evolution of the platform- and P2P-economy is however still in its stage of
development. One of the main problems of prevailing P2P-platforms is the inequality in
the distribution of value and power in the mentioned platforms. The value in these digital
platforms is created in the user interface by the users of the ecosystems, such as the hosts
and the residents on the Airbnb platform or the drivers and the passengers on the Uber
platform. The real power of controlling these platforms and deciding the rules of the
transactions is however held by the company providing the platform – Airbnb Inc. and
Uber Technologies Inc. in these cases, which also demands a provision of the created
value to themselves in form of commissions. This creates a paradox where the control of
the platform and the rules of the value creating transactions are held by a small portion of
the user base (the owners of the platform) rather than the majority of the user base (the
users of the platform). This might lead to the company behind the platform running their
own benefits over the benefits of their users, especially if the discussed platform gains
dominant position in its markets. As such, many of the prevailing P2P-platforms has been
suggested to base their business idea in transforming consumer products (such as condos
or cars) to manufacturing assets rather than creating truly equal platforms for P2P value
creation. When thought this way, we can suggest prevailing P2P-platforms to be merely
a new more cost-effective producing method of services when compared to regular ways
to product services.

This document is an unofficial summary of the master’s thesis made by Tuomas Välimäki in October 2018.
For the original text and references see www.bit.ly/blockchainthesis
 2

Blockchain technology has been suggested to be one solution for this perceived problem
of unequal value capture on value creation networks as it enables these networks to
organize themselves in a way where transactions holding economic value can be made
without third parties acting as the intermediaries or the facilitators of these value creating
transactions. As a meta-technology, blockchain technology bases its potential in
redefining the ways of storing data and transferring digital monetary value between
anonymous parties. As such, it also makes it possible to transfer the control of digital
value creation networks from the centralized organizations to the decentralized networks
themselves.

Key points of the introduction chapter and the research questions of the master’s thesis:

- Prevailing digital P2P-platform ecosystems are usually unequal when it comes

to the value capture between the users of the platform and the owners of the
platform
- Prevailing digital P2P-platform ecosystems are usually unequal when it comes
to the control of the platforms, as the control is typically centralized to the
owners of the platform instead of the real value creators (users) of the platform
- Blockchain technology is a nascent meta-technology for storing data and
transferring digital monetary value
- Blockchain technology has the potential to enable us to reconstruct value
creation networks in a way where the control of the network is transferred from
the centralized actors to the decentralized network itself
- As a meta-technology, utilizing blockchain technology is pretty much
dependent from the person utilizing it. It enables us to rethink the several
fundamental areas of modern society as the ways of doing transactions, storing
data and transferring monetized value for instance are under change.
- Blockchain technology is a nascent technology and as such it has gained a lot
of hype around it. However it is still lacking successful real world applications
and only now during the writing process of the mentioned master’s thesis we’ve
seen the first promising decentralized applications (dApps) for reconstructing
P2P-economy to appear.

This document is an unofficial summary of the master’s thesis made by Tuomas Välimäki in October 2018.
For the original text and references see www.bit.ly/blockchainthesis
 3

- The discussed master’s thesis studies the potential of blockchain technology to

reconstruct the prevalent models of organizing P2P-economy. It approaches the
research topic by answering the following questions:

1) How does the P2P-economy work?

2) What does blockchain technology enable from the perspective of business
opportunities?
3) What makes an innovation disruptive?
4) What are the main functions of Airbnb’s revenue model?
5) How could blockchain technology reconstruct Airbnb’s revenue model?

2 METHODS

The blockchain technology has been previously researched from the aspects of privacy
and data security as well as other technical perspectives. The discussed master’s thesis
focuses on the technology from the point of view of social changes that blockchain
technology enables, and it does it by studying the potential changes that blockchain
technology could have for the prevailing P2P-platforms and their revenue models.

This topic was studied first by researching the previous academic and business literature
of P2P-economy, multisided platforms (MSPs), blockchain technology and disruptive
innovations. The idea was to combine these different fields of literature and as such to get
a perspective on how blockchain technology could redefine the current ways of
organizing P2P-economy. The case studies of the mentioned thesis were chosen to
supplement this perspective as well as to verify it.

The case studies of the discussed thesis focused on comparing the revenue model of
Airbnb to the revenue models of four decentralized P2P-platforms that utilize blockchain
technology in one way or another. The chosen decentralized platforms were Rentything,
WONO, Beenest and Staybit. The revenue models of these platforms were conducted by
analyzing the white papers and websites of the mentioned platforms. At the time of

This document is an unofficial summary of the master’s thesis made by Tuomas Välimäki in October 2018.
For the original text and references see www.bit.ly/blockchainthesis
 4

writing, Beenest and Rentything were already in action as WONO was doing its ICO and
Staybit was testing its platform with a MVP. All the platforms work on top of the
Ethereum’s blockchain.

3 ANSWERS TO RESEARCH QUESTIONS

This chapter will cover the main findings of the study by reviewing the research
questions that were defined at the beginning of the writing process.

3.1 How does the P2P-economy work?

In the discussed master’s thesis, P2P-economy is seen as modern way for individual
customers to act as service providers in various different fields of business. As such, P2P-
platforms provide their members an opportunity to get better usage for their unused
resources, such as extra living space or their cars when not used, and to get monetary
compensation for “lending” these extra resources for others who need them. This
phenomena is not new, but instead thousands of years old. However the latest
progressions in information technology has made it possible for P2P-economy to scale
globally. Bank of America has estimated in 2017 the total market value of P2P-economy
to be 250 billion dollars yearly.

P2P-economy is implemented today through digital MSPs (multisided platforms) such as

Facebook, Airbnb, Uber and eBay. These platforms base their core idea in connecting
different user groups, such as drivers and passengers, and providing ecosystem for them
to create value mutually. In other words, these platforms do not usually participate in the
creation process of the services themselves, but instead “outsource” them to the users of
the platforms. Platform’s role in this process is to provide an ecosystem for its users to
make value creating transactions mutually.

This document is an unofficial summary of the master’s thesis made by Tuomas Välimäki in October 2018.
For the original text and references see www.bit.ly/blockchainthesis
 5

Basing to the previous literature of P2P-economy and MSPs it was identified that the
main functions of MSPs in P2P-economy are to:

1) Provide access to markets for its users by creating network effects

2) Provide an digital ecosystem where trust is created between the peers in order
to enable transactions holding monetary value to happen in the first place

Access to markets is provided by acquiring user base enough big for the users to create
value mutually. For instance, Airbnb doesn’t really have anything to offer if there is no
one renting their apartments, and vice versa. So as a result, the companies need to generate
big enough markets to their platforms in order to create value to their users. This however
leads often to one or two dominant platforms to take over markets and as the result
network effects can be seen to create monopolies or oligopolies to the markets applied.
This on the other hand creates problems when these dominant platforms are driving their
own interest over the interest of their users.

Trust on the other hand is created often in these platforms by the platform acting as the
intermediary of the transactions. For instance, when you want to make a transaction in
Uber’s platform, both the driver and the user will know that they will get the payment or
the service, no matter what. And if anything goes wrong with the transaction, there is a
third party to settle it and refund losses where needed. This structure creates trust over the
transaction and makes it possible to happen in the first place. As a result, platforms
themselves take a portion of the value created in the form of commissions when settling
the transaction. Other discovered ways of creating trust between peers in the MSPs was
using public reputation systems and linking platform identities to the real world identities.

Key points on how P2P-economy currently works:

- P2P-economy works through digital platforms where the platform provider acts
as the intermediary of transactions and as such creates trusts between different
users
- P2P-platforms create value by creating effective platforms through network
effects. Network effects often causes monopolies and oligopolies to form.
- P2P-platforms capture value by taking commissions from the transactions
happening in their platforms.

This document is an unofficial summary of the master’s thesis made by Tuomas Välimäki in October 2018.
For the original text and references see www.bit.ly/blockchainthesis
 6

- One of the main questions in P2P-platforms is about the control of the platforms
– who controls them? Wikipedia is controlled by the user community whereas
Uber is controlled by the company owning the platform.
- How are the workers’ rights represented in P2P-economy where legislation is
still in its stage of development?
- Will modern society become more equal as the result of growth of the P2P-
economy and platform-economy in general? Or is it just a change towards more
efficient service production where the owners of the platforms are the real
winners?

3.2 What does blockchain technology enable from the perspective of business
opportunities?

Blockchain technology can be seen as a technical innovation and as a business model

innovation at the same time. It enables us to redefine the ways of how information and
data is stored, as well as how value is transferred between different entities. The discussed
master’s thesis focuses on reviewing blockchain technology’s possibilities from the point
of view of redefining revenue models and as such it focused on how blockchains can
redefine organizational structures and the way how it does it.

Blockchain technology is defined in the discussed thesis as a new meta-technology for

storing information in a way where transactions are saved in a chronological order to a
chain and where the made transactions cannot be altered afterwards. As a meta-
technology it works as a basis for other technologies to be implemented, as well as forms
from several previous technologies itself. Blockchain technology was identified to consist
from four previous technological innovations: distributed or decentralized database, peer-
to-peer network, transparency with pseudonymity, irreversibility of records as well as the
computational logic. These innovations and characteristics of blockchain technology
enables it to do the following, for instance:

Transfer value – Internet provided us with means to transfer information between

peers without anyone facilitating the transaction. Blockchain technology can
basically do the same for digital value, such as money, digital records, ownership

This document is an unofficial summary of the master’s thesis made by Tuomas Välimäki in October 2018.
For the original text and references see www.bit.ly/blockchainthesis
 7

or pretty much anything you can save in a digital form. With blockchains all the
information is public (even though encrypted) and visible for all the participants of
the network. Information is also irreversible, so everyone know that information is
true and there is no space for double spending the digital money, for instance.

Create trust – Blockchain technology has been proposed to be the next significant
add-on to the Internet as Web was the first one. The role of the blockchain
technology in this is in creating trust between anonymous parties, and as such it has
been referred to be the “trust layer” of the Internet. The main idea here is that
blockchains can replace third party intermediaries by acting as a purely
technological solution to do the exactly the same that banks for instance have done
for centuries. With banks the creation of trust has based on their access to data (of
bank accounts) and the fact that they’ve kept this access only to themselves. This
role of the intermediary of transactions can be easily replaced with clever coding
(smart contracts) and distributed ledgers and as such we can create a new
decentralized way to create trust in networks.

Lower costs, faster transactions, higher transparency – as blockchain

technology enables us to replace intermediaries from various transactions with a
technical solution it also drives down costs that have previously been accumulated
from having several third parties in transactions. This also creates trust towards the
network by adding the transparency of transactions. It also lowers the bureaucracy
of the networks and as a result fastens the transaction speeds.

Reliability – consisting of several different databases instead of just one,

decentralized network structures can be seen as “never running computers” which
doesn’t crash when one or two nodes crashes. In other words, there is usually no
single point of failure in decentralized P2P-networks.

Control of data – With blockchain technology the control of data can be transferred
from centralized institutions to the nodes of decentralized networks themselves.
This could mean that when using decentralized P2P-platforms the users could own
their own data and would have possibility to monetize on it. This also increases the
level of security in the network as the cases of data breaches and millions of lost
user identities would diminish.

This document is an unofficial summary of the master’s thesis made by Tuomas Välimäki in October 2018.
For the original text and references see www.bit.ly/blockchainthesis
 8

Key points on what kind of business opportunities blockchain technology enables:

- Blockchain technology is a meta-technology for storing information in a public

and irreversible way. Blockchain technology consist from four previous
technological innovations: decentralized database, peer-to-peer network,
transparency with pseudonymity, irreversibility of records as well as the
computational logic.
- When it comes to organizing P2P-platforms, the main business promise of
blockchain technology is to replace costly intermediaries with a technical
solution.
- Blockchain technology enables us to create decentralized or distributed value
creation and value capture networks where transaction costs can be lower,
transactions can be made in a more transparent and safer way than nowadays,
data can be owned by the users of the network instead of the platform, the whole
network is more operationally reliable and the control of the networks can be
transferred from centralized institutions to the users of the platforms.
- Blockchain technology is however still a nascent technology lacking widely
successful real world applications. There are numerous obstacles to overcome
before the technology will face wide adaption. To mention few of these
unsolved problems are the lack of privacy in networks (when someone figures
out who you are, they got your whole transaction history), safety (people store
their private keys in very unsafe manners), the lack of centralized control (what
happens if your account gets hacked?), costs (the costs of running blockchains
such as Bitcoin are tremendously high because of the PoW-concept applied),
the lack of common understanding as well as the legal barriers that complicates
the wide spread of blockchain based services.

This document is an unofficial summary of the master’s thesis made by Tuomas Välimäki in October 2018.
For the original text and references see www.bit.ly/blockchainthesis
 9

3.3 What makes an innovation disruptive?

In the discussed thesis innovations are seen either as maintaining or disruptive.

Maintaining innovations are the ones that focuses on existing markets and products
aiming on improving them. Disruptive innovations on the other hand are the ones that
create whole new markets as well as new products and services. Disruptive innovations
can be either business model innovations or radical product innovations. The first refers
to redefining the ways how business is done for certain product or service, whereas the
latter refers to creating whole new products while disrupting existing products or services
through them.

Basing on the academic literature of the topic, it is suggested that disruptive innovations
start by serving only niche-markets at the beginning of their life cycle while including a
promise for disrupting the prevailing variants in those areas that mainstream customers
value the most. The disruption itself usually happens by either lowering the price of the
variant product or by introducing new value proposition to existing markets or by creating
whole new markets.

It is identified in the discussed thesis that disruptive innovations typically have three
characteristics: functionality, technical standard and the ownership of the innovation. The
first of these refers to the innovation’s capability to create new characteristics to products
or to create whole new markets. Technical standard on the other hand refers to the
disruptive technology’s capability to take advantage of new technologies (such as
blockchain technology), materials or processes in order to create new products or business
models that are superior to their predominates. The ownership of the innovation refers to
the ways of how disruptive innovations can change the way we see ownership in the
society (centralized databases vs. decentralized databases, for instance). By applying
these three characteristics, the possibility that one innovation happens to be a disruptive
one, increases, but of course is not guaranteed.

This document is an unofficial summary of the master’s thesis made by Tuomas Välimäki in October 2018.
For the original text and references see www.bit.ly/blockchainthesis
 10

3.4 What are the main functions of Airbnb’s revenue model?

Airbnb is the biggest accommodation provider in the world when measured in market cap
and rooms it provides through its platform. The main function of Airbnb is to provide a
platform for consumers to rent their extra living space for other people, such as tourists.
The accommodation process itself happens between the peers directly, but the
communication before and after the accommodation happens through the platform as
does the money transfers, as well.

Airbnb creates value by:

o Providing an opportunity for peers to get better yield for their extra resources
(by providing big enough markets for the value to be created)
o Providing an opportunity for peers to get cheaper, more comfortable, more
culturally diverse, authentic etc. accommodation for their holidays or business
trips (by providing big enough markets for the value to be created)
o Providing an platform for peers to settle transactions digitally in a securable
and trustworthy way
 This trust in the platform is created through review systems etc. but
the most important aspect of this is the one where Airbnb acts as the
intermediary of the transactions. This role enables peers to trust each
other, as they know that the “third party” handles the payments and
settles all the arguments and problems if anything comes up.

As such, Airbnb’s revenue model includes the following

o Create value by providing big enough markets for peers to create value
mutually in the first place (aim for the network effects)
o Create value by providing an ecosystem where trust is created between the
peers. This trust is essential for the transactions to happen in first place. This
is mainly created through identifying the users, taking advantage of peer-
reviews, insuring the transactions and by the platform acting as the
intermediary in the transactions (other ways were also identified, but the
mentioned ones were the main ways of creating trust)

This document is an unofficial summary of the master’s thesis made by Tuomas Välimäki in October 2018.
For the original text and references see www.bit.ly/blockchainthesis
 11

o Capture value by taking commission fees of 3 % from hosts and 13 – 20 %

from the residents (estimated to be 2,2 billion euros in 2017)

3.5 How could blockchain technology reconstruct Airbnb’s revenue model?

o By utilizing blockchain technology, decentralized P2P-platforms can use

tokens in their platforms for organizing several things, such as:
 Organizing global payment networks with minimal costs and
transaction times when compares to traditional payment systems
 Enabling micro-payments to happen on their platforms and as a result
they enable many new activities for their users, such as P2P-insurances
and selling user-owned data for third parties.
o Blockchain technology enables distributed P2P-platforms to become more
secure, trustable, stable and transparent platforms for their users when
compared to centralized ones.
o The main promise of blockchain technology for the current P2P-platforms is
to decentralize them. This refers to the fact that P2P-platforms can be
organized without the “middlemen” as the facilitators of the value creating
transactions. In the case of Airbnb, all of the trust creating tasks could be
“outsourced” either to the blockchain technology itself or the community
behind the platform. The latter refers to the fact that problem settling, for
instance, can be given to other users of the platform instead of the paid
employees of the platform company. As a result, the decentralized P2P-
platforms also become more communal and they appear more compelling to
the users as they’ll get more chances to have impact to the ways how the
platform operates.
 Decentralization of P2P-platforms leads to decreased transaction costs
 The developers of decentralized P2P-platforms monetize their
efforts by owning the platform’s tokens
o Blockchain technology can also take IoT to the next level in these P2P-
platforms.

This document is an unofficial summary of the master’s thesis made by Tuomas Välimäki in October 2018.
For the original text and references see www.bit.ly/blockchainthesis
 12

4 DISCUSSION

P2P-platforms utilizing blockchain technology base on dApps in their current form. The
digital platforms themselves seem equivalent to centralized platforms and work in a
similar way at the first sight – from the point of view of UI one might not even see the
difference between the centralized and decentralized platforms. The transactions however
are direct when it comes to decentralized platforms, which enables us to create such value
creation networks that are similar to current MSPs, but where trust is created through
clever coding and communal activities instead of having a third party facilitating
transactions.

In the discussed thesis there was identified that value creation in MSPs happen by creating
effective markets to the platform, identifying users, building reputation systems, insuring
transactions and acting as the “referee” as well as the facilitator of the transactions. In
addition to be able to do these tasks in a more cost-effective way, the blockchain
technology enables us to create safer, more transparent and communal platforms for peer-
to-peer value creation. In addition to that, blockchain technology enables us to return the
control of user data back to the users themselves and to give them the chance to monetize
on it, if they will. In their current form, decentralized platforms (and blockchain
technology) doesn’t really change the revenue models of P2P-economy, but rather renew
them by replacing the costly trust creating intermediaries with technology while also
creating more equal and democratic as well as cheaper P2P-platforms for their users as a
result.

Blockchain technology is still however a nascent technology only now seeing its first real
world implications to gain wide adoption. There are also many technological and
legislative challenges to overstep before the technology can meet the potential described
in the mentioned thesis. Nonetheless, blockchain technology is seen in the mentioned
thesis to involve significant potential to renew current models of P2P-platforms and P2P-
economy.

This document is an unofficial summary of the master’s thesis made by Tuomas Välimäki in October 2018.
For the original text and references see www.bit.ly/blockchainthesis