Thank you. Good morning.

Arcade City is leading the charge into the new sharing economy.

I describe us not so much as a ‘blockchain startup’ but a startup that is excited about blockchain to help solve some of these social issues that arise in decentralized ridesharing and peer-to-peer transactions in general: identity, reputation, trust, and so on.

We’re starting with a focus on ridesharing. I could subtitle this, “Solving Uber’s labor problem.” More on that in a minute.

It’s first important to understand what is going on with the sharing economy.

Blockchain tech and a few other new emerging technologies are changing the sharing economy. These are best explained in a book I strongly recommend called The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism by NYU professor Arun Sundararajan.

I’ve got to share two quotes from it that really explain what’s going on:

And what is arising?

When you think sharing economy you probably think of Uber, you probably think of Lyft.

Uber and Lyft have pretty exploitative relationships with their driver pool. They are corporations with very tight control over their quote-unquote ‘independent contractors’. They come under a lot of flack for treating them basically like employees.

And there’s been significant pushback. There are driver protests relatively often. There are new companies like Juno here in New York that are doing very interesting things around allowing drivers to have shares in the company, and doing very interesting things around allowing drivers to upgrade from independent contractors to employees.

I’m a former Uber driver myself. I’ve identified a very strong demand, shared by a lot of my fellow drivers for Uber, Lyft and others, to be entrepreneurial. To be able to set their own rates, to be able to set the terms of their own transactions, to have the freedom to build up their own recurring customer base that is a direct peer to peer relationship. Not something that they’re relying on a corporate intermediary, a corporate interface to provide for them.

When you rely on a company like Uber and Lyft, and they decide based on their algorithms and their numbers and their track to IPO to cut rates 20–40% overnight with no warning… and if you’re driving 40–50 hours per week expecting to pull home $1200 per week to feed your family, and now you’re pulling home $800 or $900… Drivers are pissed.

So Arcade City began with this idea of liberating drivers. They can set their own rates and terms. And allow the riders to choose their own driver. There’s a big demand for this. If you’re a girl getting out of a club at 2am, do you really want to roll the dice and see if Uber’s algorithm is going to match you with a creeper who now knows where you live — as happens all the time — or do you want the freedom to choose from a group of drivers that are female-only? We had that exact situation arise organically where we have our largest network in Austin. There’s a driver pod that self-organized called See Jane Go and they specialize in that exact situation.

We began with this idea of liberation. But in seizing the opportunity from Uber and Lyft leaving Austin — their eighth largest market — back in May and building this massive, massive peer-to-peer network there in Austin that’s been covered by mainstream news outlets all up and down, we saw that some really interesting things happen when you just provide a clearing and encouragement for people to connect peer-to-peer.

Drivers are self-organizing into pods. There are some pods that now set their own vetting process. So some pods for example require that you not only have driven for Uber or Lyft but that you’ve given at least 2000 rides and have a 4.8 rating. So we have this new market of standards and specializations emerging completely organically.

Studying this, we realized that this fits into David Reed’s theory of group-forming networks, where you have these pseudo peer-to-peer networks like Uber and Lyft that combine some elements of a peer-to-peer model with the outdated ‘broadcasting model’ of the taxis.

Now Uber and Lyft, what little peer to peer dynamics they put in, they are still evolutionarily superior to taxis. But Reed points out that the most evolved type of organization is a group-forming network. Something that builds on peer-to-peer transactions while allowing groups to easily form.

These are problems around allowing people to connect directly peer-to-peer that ConsenSys is working on. We’re really happy to be talking with them about integrating these kinds of concepts on Ethereum.

As to how we approach blockchain: We’re doing some nominal things in the short term, like using Airbitz BitID for login, data security, and Bitcoin payments. But the most exciting thing we’ll begin next year when we seriously integrate some of the blockchain 2.0 concepts like self-sovereign identity; using that as the basis for a reputation system; issuing a token that allows drivers to have a stake in the organization that can be cashed out at any time — they don’t have to wait ten years for Juno to IPO for example. And to provide a true social mesh, an operating system that can systematize this group-forming network of driver co-ops.

We have these informal driver pods now in Austin, but what are some of the pain points there? Well you’re not relying on a central intermediary. For Uber and Lyft you can submit proof of someone throwing up in your car and they give you $200. But if there’s no central headquarters to call home to, is there a way for communities to solve this problem themselves?

Yes. Pods would love the idea to have something built into the app where they can allocate 2%, 3% per ride into a shared pool that then is allocated into a pool for rainy-day expenses.

Carry that concept to this emerging idea of decentralized blockchain-based insurance coming out. There’s going to come a point where the kinds of things that large corporations like Uber and Lyft are providing, like these relationships with their insurers, are going to be completely replaced by having everything on the blockchain.

A lot of these technologies and tools are still in development. We’re not waiting on them to be ready to begin to solve some of these social issues around decentralized ridesharing.

We have a more decentralized organizational model that’s given us tremendous flexibility in entering markets without all of the capital expenditures, where ridesharing competitors to Uber like Sidecar in the past have folded because they’ve needed tremendous capital to play along the same rules as Uber.

We have a more flexible model that we think by the end of this year we’re going to be entering new cities at a rate of 10, 20 or 50 per week.

Our app just launched a few days ago with a gamified system to incentivize people to form these kinds of networks in their area. Once it reaches a certain level, ridesharing services are unlocked.

So Austin will unlock next week, and we expect about three cities per week after that, until by the end of the year we anticipate 10, 20, or 50 per week.

I’m happy to answer any questions.

Arcade City CEO remarks to Blockchain World Congress was originally published in Arcade City on Medium, where people are continuing the conversation by highlighting and responding to this story.

The times they are a-changin’.

Around the world, emerging technologies are accelerating the transfer of power from top-down, centralized institutions to distributed networks driven by voluntary, peer-to-peer collaboration.

The services people once relied upon centralized institutions to provide, they are increasingly able to get directly from their peers.

Their coercive market position eroding, old-world corporations and governments around the world face irrelevance or extinction.

We focus first on one of the largest, most “valuable” privately-held corporations in the world: Uber Technologies, Inc.

Valued at $66 billion, the global behemoth called Uber is encircling the world in a transportation network it hopes will become the world’s dominant transportation and logistics network.

Central to Uber’s growth is a cleverly marketed bait-and-switch where countless millions of dollars are spent signing up new drivers on the promise of self-employment and “being your own boss” — despite a mountain of dissatisfied drivers left in their wake claiming they’ve been treated more like slaves than entrepreneurs.

The dirty secret is that Uber and even their “nicer” competitor Lyft both plan to fire all their drivers at the earliest opportunity, replacing them with self-driving cars. An inconvenient truth they try hard to hide from their drivers.

What perfect targets for decentralized disruption!

First we liberate the rideshare drivers…

Uber talks a big game about its drivers “being their own boss”.

It’s a line of contemptible corporate propaganda parroted by shills who have never had to rely on Uber to make a living.

Real entrepreneurs are free to compete in an open marketplace where they can set their own pricing and the terms of the transaction. Not so for Uber and Lyft, where drivers face massive pay cuts overnight with no warning, and must conduct business ‘their way’ or not at all.

Writes Arun Sundararajan in The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism:

“Are today’s sharing economy platforms really ‘markets’? Or are they simply 20th-century organizations with a new employment model, and thus no more than old hierarchies in digital bottles?”

Yeah. Ask your Uber driver. Meet the old boss, same as the new boss.

But there is hope for drivers tired of their corporate strings. Sundararajan, a professor at the NYU Stern School of Business, continues:

The assortment of behaviors (and organizations) that many of us optimistically call the ‘sharing economy’ are early instances of a future in which peer-to-peer exchange becomes increasingly prevalent, and the ‘crowd’ replaces the corporation at the center of capitalism.

A radical shift is underway.

Yes — the decline of corporations, and the rise of crowds. Specifically:

…a new generation of peer-to-peer systems that promise to expand the potential of crowd-based capitalism significantly over the coming years, transitioning the role of the crowd from being the source of capital and labor to actually owning and running the marketplace in a decentralized fashion.

Do you envision Uber ever letting their drivers ‘own and run’ a ‘marketplace in a decentralized fashion’?

Of course not. Both Uber and Lyft plan to fire all their drivers at the earliest opportunity, using centrally controlled self-driving cars to support their monopoly control over the market. They calculate that their margins will be better, their monopoly control stronger, their IPOs more valuable, if they remove human service providers from the equation entirely.

We don’t intend to let them get away with it.

Arcade City began seven months ago as an idea: Maybe a rideshare company should be run by its drivers.

We touched a nerve. The overwhelming demand by rideshare drivers around the world crashed our servers and sent us scrambling for an organizational model that could allow mass self-organization on a shoestring budget. (Read Swarmwise to understand how we’re doing just that.)

Since then we’ve been grappling with a question no one has yet answered: What should a driver-owned, driver-run marketplace look like? We’ve been exploring cryptoequity, platform cooperativism, and decentralized autonomous organizations.

Technology to implement these bleeding-edge concepts is still early in development and will take time to integrate into our model. We intend to contribute substantially to that development, open-sourcing most of our technology.

For now we are content to hurtle toward the decentralized future using what tools are available to us now. We have developed a model that solves the immediate pain points of rideshare drivers, even on a shoestring budget.

Right now our model frees drivers to:

• Set their own rates
• Negotiate and transact directly with riders
• Build direct relationships with riders for a stable and recurring customer base
• Self-organize into ‘pods’, co-ops, or their own businesses

It’s been working in Austin. Top drivers say they earn two or three times more than they made with Uber — all on their own terms.

That is one key dynamic we want to stabilize and scale: drivers earning way more money with Arcade City than any other platform.

Happy drivers, happy riders.

When we scale that out — limited only by our ability to recruit swarm leaders in cities around the world — every city we launch in is another arrow in the Achilles’ heel of Uber and Lyft.

And that’s only the beginning.

…then we connect everyone else.

Fast forward one year.

Let’s say you’re visiting Austin for a music festival. It’s midnight and you’re leaving a crowded bar downtown, looking for a ride.

You’re an infrequent user of ridesharing apps, and Uber has been ‘good enough’ when you travel out of town.

So you open the Uber app. (Yes Uber pulled out of Austin last year, but they returned after a couple months and crowded out most of the ‘me-too’ rideshare startups that tried to fill the void.)

The map of your area is blanketed in red. Uber shows a 3.5x surge rate and quotes you $110 for the 25-mile ride back to your friend’s house in Dripping Springs. You’re wondering what other options you have. Then you overhear a conversation on the sidewalk a few feet away from you.

“…running a special promotion tonight. Whatever Uber estimates, we’ll cut it in half. And sorry, we’ve got luxury vehicles only!”

The group of six chuckles and nods, yes they want the ride. The guy you overheard is sharply dressed in bright colors. He says into his phone, “Jamie, request for six now, Jackalope to north Austin.”

A girl in the group says, “I have dibs on the XP!” A collective moan, then one of her friends says, “Umm no, we’ll share it. I’ll link the group when we get in.”

A large black luxury SUV hybrid pulls up seconds later, and they’re off.

The colorfully dressed guy turns to you with a smile. “Need a ride? I’m with Arcade City.”

You reply, “Uh yes, do I need to download an app?”

“Well you don’t have to. But new riders get their first ride 100% free if they download the app — so I recommend it! You can search Arcade City in the app store or I can give you a QR code to scan.”

Minutes later and you’re off. Your driver is Sharon, a college student at the University of Texas. You ask her how she got started with Arcade City.

Sharon says she started driving part-time a few months ago. She got more involved in her driver pod called See Jane Go, a group of female Arcade City drivers who take special care to get women home safely late at night.

She described the healthy competition between driver pods, most of which carve out a particular specialty. Some specialize in service for the handicapped, or for the elderly, or for a particular geography, or for deliveries and other services.

Sharon says a number of pods had been competing to provide quick late-night service from the busy Sixth Street area, so they decided to work together. They formed a joint co-op called the Sixth Street Driver Alliance.

The co-op drivers agreed to allocate 3% of each Alliance ride into one joint pool to pay for the occasional rider getting sick in the backseat, and to compensate the ‘street team’ that promotes Arcade City rides on sidewalks around Sixth Street. It also offsets the free rides that Alliance drivers offer to first-time riders.

You wonder aloud how all of that works logistically. She mentions something about a ‘blockchain’ being used to move the funds around and provide security and transparency, but you didn’t really catch that part.

Sharon tells you she’s signed up three transportation companies to Arcade City: a group of pedicabbers in Austin, a taxi company in Fort Worth, and a livery service in Los Angeles. They connected all their drivers to Arcade City and now get most of their rides through the app.

Between those companies and her other referrals, Sharon earns enough money from referral commission — earning between 1–3% on every ride — that she now just drives for fun because she doesn’t really need the money. She spends most of her ‘working’ time growing her pod and the Sixth Street Driver Alliance.

After Sharon graduates UT, she plans to travel to Asia and launch Arcade City in a completely new city. She’s particularly interested in helping to build out the Arcade City delivery service network.

As her car pulls up to your friend’s house, you insist on paying something. Sharon laughs and says not to worry about it — the Alliance loves offering free rides to first-time riders.

Sharon says if you really want to help out, just spread the word about Arcade City. She tells you where you can find your referral code in the app, and says a few of her regular riders have earned enough referral commission that all of their rides are free.

You thank Sharon profusely and step out of the car.

The next day, you delete your Uber app.

From Austin with love

Our ragtag army began our push into Austin right after Uber and Lyft gave 48 hours’ notice they were leaving town, putting 10,000 rideshare drivers out of a job.

Since then we’ve been featured in TechCrunch, The Guardian, National Review, VICE, Austin Inno, CoinTelegraph and more, with mentions in Newsweek, Bloomberg, The Economist, The Atlantic, Reason, Business Insider, and countless local media outlets.

And our app isn’t even out yet!

It just goes to show the awesome power of peer-to-peer networks that they can meaningfully compete against well-funded corporations despite a shoestring budget.

Here’s our favorite summary of the Austin situation, titled ‘Austin Inadvertently Promotes Open-Source Ridesharing’:

Open-source apps [sic] like Arcade City are also making increased headway in Austin since the referendum. In other words, actual ride-sharing — the kind of genuine P2P model that should have supplanted the medallion cabs in the first place — is the biggest growth industry in Austin. And the city government and local voters, deliberately and inadvertently (respectively) doing the bidding of the medallion cab companies, are responsible for bringing it about. By outlawing the fake, hybridized form of “ride-sharing,” they opened up an ecological niche for the real thing.

And now we know from three months of testing and growth just what that ‘real thing’ should look like.

Our primary lesson has been the importance of community.

After witnessing the bottom-up spontaneous emergence of driver ‘pods’ that provide specialized service — and now provide arguably the best service of any Austin rideshare — we realized that we had stumbled onto something even bigger than we thought.

We had created the first-ever group-forming network for the ridesharing industry.

Anyone familiar with Reed’s Law of Group-Forming Networks will see the inherent power of our decentralized, community-centric model. The value of a group-forming network — a network built on peer-to-peer transactions while also allowing groups to rapidly form and flow in accordance with market demand — is exponentially higher than a pseudo-peer-to-peer network like Uber and Lyft.

That is why Arcade City will give Uber and Lyft a major run for their money, despite their huge head start and billion-dollar budgets. We have something they don’t have and never will: an energetic and properly incentivized community.

We’ve restructured our app launch plans to focus on creating these group-forming communities everywhere: scaling the magic we’ve seen in Austin outward to everywhere else in the world.

(Read the ‘Unlock Your Geo’ section of our recent State of the City post to see how to get started in your area.)

Here’s the point: Decentralized, peer-to-peer networks are evolutionarily superior to the bastardized corporate ‘sharing economy’ platforms like Uber and Lyft. Their billion-dollar budgets won’t save them from the inevitability of the blockchain-based peer-to-peer economy.

The decentralization revolution is here.

Stay tuned, friends, to see our growing army of Davids take down Goliaths.

And of course, we invite you to join us.

There’s a new world comin’
And it’s just around the bend
There’s a new world comin’
This one’s comin’ to an end
~ DíSA, ‘New World Coming’

Decentralization and the Future of Ridesharing was originally published in Arcade City on Medium, where people are continuing the conversation by highlighting and responding to this story.