We need to replace platforms that intermediate transactions with protocols built on a universal trust framework like Sovrin to avoid a future of hostage taking and retaliatory regulations.
Platforms service two-sided markets. We’re all familiar with platform companies like Uber, AirBnB, Monster, eBay, and many others. Visa, Mastercard, and other credit card systems are platforms. Platforms are a popular Web 2.0 business model because they create an attractive way for the provider to extract service fees from one side, and sometimes both sides, of the market. They can have big network effects and tend to natural monopolies.
Platforms provide several things that make them valuable to users:
- They provide a means of discovering relevant service providers.
- They facilitate the transaction.
- They help participants make the leap over the trust gap, as Rachel Botsman puts it.
Like compound interest, small advantages in any of these roles can have huge effects over time as network effects exploit the advantage to drive participants to a particular platform. This is happening rapidly during the recent crisis in food delivery platforms.
A recent New York Times article, As Diners Flock to Delivery Apps, Restaurants Fear for Their Future, highlights the power that platforms have over their users:
But once the lockdowns began, the apps became essentially the only source of business for the barroom restaurant he ran with a partner, Charlie Greene, in Columbus, Ohio. That was when the fees to the delivery companies turned into the restaurant’s single largest cost-more than what it paid for food or labor.
Pierogi Mountain’s primary delivery company, Grubhub, took more than 40 percent from the average order, Mr. Majesky’s Grubhub statements show. That flipped his restaurant from almost breaking even to plunging deeply into the red. In late April, Pierogi Mountain shut down.
“You have no choice but to sign up, but there is no negotiating,” Mr. Majesky, who has applied for unemployment, said of the delivery apps. “It almost turns into a hostage situation.”
The standard response to these problems from people is more regulation. The article discusses some of the attempts cities, counties, and states have made to rein in the fees that food delivery platforms are charging.
A better response is to create systems that don’t require an intermediary. Sovrin provides an identity metasystem that provides a universal trust framework for building identity systems that can serve as the foundation for creating markets without intermediaries. When Sovrin has a token it can even facilitate the transaction.
Defining a marketplace requires determining the protocol for interaction between participants and creating the means of discovery. The protocol might be simple or complex depending on the market and could be built on top of DIDComm, or even ride on top of a verifiable credential exchange. There might be businesses that provide discovery, but they don’t intermediate, they sit to the side of the interaction providing a service. For example, I might provide a service that allows a restaurant to define it’s menu, create a shopping cart, and provide for discovery, but I’m easily replaceable by another provider because the trust interaction and transaction are happening via a protocol built on a universal metasystem.
Building markets without intermediaries greatly reduces the cost of participating in the market and frees participants to innovate. And it does it without introducing regulation that stifles innovation and locks in incumbents by making it difficult for new entrants to comply. I’m hopeful that Sovrin and related technology will put an end to the platform era of the Internet by supporting greater, trustworthy autonomy for all participants.