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The View | How blockchain can save Chinese bike-sharing firms from the pitfalls of selfishness
- Ethan Lou says China’s bike-sharing sector has been hard hit by low profit margins and a high rate of bicycle theft. Companies would benefit from using a blockchain platform that frees them from the responsibility of mediating in cases of dispute
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The fall of China’s bicycle-sharing sector, culminating in the December debacle of industry giant Ofo, is symptomatic of a bigger problem. It indicates that the wider sharing economy has plateaued, unable to meaningfully progress beyond cars and homes to realise its vast potential.
The solution could be blockchain, the technology behind bitcoin. Born 10 years ago, just like sharing-economy stalwarts Uber and Airbnb, blockchain can make the sector truly peer-to-peer, an overhaul it badly needs.
In December, Ofo faced cash-flow problems so severe that a Beijing court placed spending restrictions on its founder’s lifestyle. The company even considered bankruptcy, capping a painful three years for China’s billion-dollar sharing start-ups. Ofo is backed by Alibaba, the parent company of the Post.
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The bike-sharing business has few barriers to entry and its oversaturation led to intense competition, hurting profits. But at the heart of the problem was the unpredictable cost of human selfishness. Company after company went bust after losing bikes to theft. Other shared items, such as umbrellas, also got stolen.
This issue, which has proved costly for the Chinese firms in the sharing business, can be alleviated if they imitate Uber and Airbnb and merely connect users, instead of owning the shared assets. But even then, the cost of selfishness persists.
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