Blockchain may be able to deliver the ‘Internet of value’ but early use cases are likely to be in creating inter and intra-company efficiencies. Pamela Whitby hears why
Blockchain to revolutionise the complex travel ecosystem or blockchain technology to drive efficiencies in travel companies. Now that the buzz around what blockchain can deliver for travel has eased to a hum, many firms are faced with this choice. But which is the right one?
*Note to readers*: This story was published by Tnooz earlier this week, but now includes additional insights from Winding Tree CEO Maksim Izmaylov
These are issues to be discussed at upcoming EyeforTravel Europe where Winding Tree’s CEO Maksim Izmaylov will be speaking. Winding Tree, which raised $16million in an initial coin offering in February, is the company with the biggest idea - to disintermediate the highly fragmented online travel jungle using what is still a nascent technology.
With some big name backers including Lufthansa, Air New Zealand and Nordic Choice Hotels, the firm has certainly piqued interest. However, as a recent Q1 roundup, penned by Augusto Lemble, one of the company’s seven developers, cautiously acknowledges, “there is a long road ahead to build the decentralized open-source autonomous platform that the travel industry is waiting [for] and needs”.
Says Izmaylov: “Scalability isn't a problem unique to Winding Tree but to all decentralised solutions, and naturally, this is an issue with the current infrastructure. So we're working towards solutions to accelerate transaction times on our side. However, we're also very confident in improvements being made to Ethereum by the whole development community.”
Joerg Esser, a theoretical physicist and RolandBerger consultant, who will be looking at blockchain use cases in an EyeforTravel Europe workshop, says: “There is no doubt that blockchain and decentralised ledger technology holds the potential to clean up the travel industry’s complex jungle of multiple distribution channels.”
Image caption: The current complex jungle
However, while Winding Tree seems to have the potential to be one of the key players in kicking this off, many, including Esser, argues that the early benefits of blockchain technology are likely to be in creating intra or inter-company efficiencies.
The early benefits of blockchain technology are likely to be in creating intra or inter-company efficiencies
In other words, private blockchains along the lines of what Trustabit, which uses blockchain technology with smart contracts to automatically issue passengers with vouchers when their flights are delayed, is developing. In recent weeks, Trustabit signed a partnership with IATA and will sit within the association’s passenger experience arm, which proves, says Saritta Hines, Trustabit founder and CEO, “that the product is a good market fit”.
Trustabit is what Krish Jagirdar, vice president of strategic advisory firm Brand New Matter (BNM), refers to as a Day 1 Dapp, a decentralised application that can deliver value today. He cites the following reasons:
Is a simple use case of blockchain technology
Provides value and improves efficiency for one participant, airlines
Seems like it can be easily implemented into the airline technology stack
Introduces the travel industry to blockchain technology without forcing them through extreme behavioral change
Winding Tree is trying to do something far more complex and Jagirdar’s concern is that the team could face existential risk bringing this to market on top of a nascent technology. “They could do everything right but not be able to reach product/market fit simply because the underlying technology to support a travel platform at scale just isn't there yet, ” he says.
Jagirdar argues that the most exciting developments in the space are taking place at the protocol/middleware layer. “Companies that are taking aim at bringing a blockchain technology to the travel industry should be focusing on improving internal efficiencies through the use of various blockchain value propositions (distributed, immutable ledger, smart contract technology, hash signatures etc).”
Although Esser agrees, in principle, he argues that travel companies today should also be thinking seriously about the possibility for blockchain’s possibility to deliver an ‘Internet of Value’ as the technology matures. “The‘decentralised ledger’ discussion took off on too technical a footing with too much focus on the underlying technology. Instead, the discussion should be on business models and organisational or partnership models. As with Internet protocols, that keep evolving and nobody knows, or cares – and rightly so - the technology will be sorted sooner or later,” he says.
Trusabit’s Hines understands this: “Our users won’t even know they are using Trustabit or blockchain. It will be a seamless experience that happens within the airline carrier.”
Admittedly, Trustabit is doing something far more straightforward than Winding Tree, which is aiming to disintermediate a slow moving industry, where many still have an old-school mentality. But even Winding Tree, as its own diagram below shows, seems to have acknowledged that disintermediation will be relative and there will still be players (namely travel agencies) left, potentially pooling profit.
While the OTAs and GDSs are unliely to disappear overnight, Izmaylov argues that what is changing is the power they hold.
“Think Linux in the 90s. They were by far the smaller player and it looked like Windows would crush them. However, with support of the Opensource community, they eventually won and today over 93% of the Web runs on Linux. It didn't mean Microsoft crashed and disappeared; it simply removed the monopolistic power/unfair advantage they had to manipulate all technology at the time,” he says.
What Winding Tree wants is an environment that facilitates innnovation so that start-ups and small players can thrive. “This will be better for everybody, especially travellers and suppliers,” Izmaylov stresses.
Though Winding Tree hasn’t ruled out consumers booking on the plaform, for the moment it has chosen to go down the B2B road, and says it is 100% focused on working with existing partners on product development, and looking to sign new ones. According to Ismaylov, Winding Tree is in talks with most major hotels and airlines, and announcements are expected in due course.
The idea of evangelising a new way to book that would also require moving onto an exchange, exchanging fiat currencies for some sort of obscurely named cryptocurrency, exposing yourself to volatility risk and then going onto a third-party platform that is nowhere close to as well devleoped as booking.com or Expedia and then making a booking is a big friction.
As for a blockchain-based platform that consumers can book travel on, Jagirdar is not convinced. “The idea of evangelising a new way to book that would also require moving onto an exchange, exchanging fiat currencies for some sort of obscurely named cryptocurrency, exposing yourself to volatility risk and then going onto a third-party platform that is nowhere close to as well devleoped as booking.com or Expedia and then making a booking is a big friction. A huge friction.”
Though not insurmountable, in the long term, Jagirdar says: “In travel, you are talking about thousands of transactions every day, large amounts of money, and in a highly fragmented market. It’s something that requires a strong underlying technology to support it. I’m not sure these monololithic protocols are there yet.”
EyeforTravel Europe, where Maksim Izmaylov, Joerg Esser and numerous others will be speaking about the latest developments in travel technology including blockchain, takes place in London on June 4,5 and 6
June 2018, London