The blockchain is probably one of the most overhyped technologies in the world, with many industry leaders saying that it will solve every problem in society, while others believe that it is speculative.
The truth is that is somewhere in between. Whenever a new technology emerges, the first people on the scene are fangirls and haters. But after the dust settles, then a more balanced picture of the technology starts to emerge. Having said that, there is still much to be excited about, especially when it comes to the travel industry.
Indeed, blockchain technology is relevant for so many different industries, but what exactly is it?
An Introduction to Blockchain Technology
In 2009, a mysterious person or group of people known only as Satoshi Nakamoto created Bitcoin. Bitcoin has been the most successful cryptocurrency. It is based upon blockchain technology, which was developed to support digital currencies.
Then another major currency was invented called Ethereum, which introduced smart contracts. Smart contracts are essentially codes that automatically executes a contract once a triggering event occurs.
The blockchain is essentially a network of computers known as nodes using peer-to-peer technology. This concept is not that new. However, the idea of using decentralised peer-to-peer technology to record and validate assets and transactions is a unique concept. The blockchain has a copy of the ledger on every node.
At the core of blockchain technology is encryption. With encryption, it is difficult to make sense of the data stored on the blockchain. When a record is put on the blockchain, it cannot be changed, it is immutable. It is adaptable to different types of cryptography, such as private, public and hash.
Every transaction is represented as a block and verified by a miner before a new block is added onto the chain. A miner is a person who solves a cryptographic puzzle in order to verify transactions by using specialist computer programmes. On the pubic blockchain, the first miner to do this is rewarded with cryptocurrency, usually Bitcoin.
So How Does This Affect The Travel Industry?
The important thing to understand about blockchain technology is that it is an underlying system rather than a technological product. Think of it more as the plumbing behind an appliance rather than the appliance itself.
To understand how blockchain technology can benefit the travel industry, let’s consider some of the main challenges facing the travel and tourism industry. Of course, the travel industry is an umbrella term encompassing a diverse and wide range of different sectors including luxury travel, volunteering, hotels, budget travel and ethical travel among others.
Despite the variation in the industry, blockchain technology is versatile in that it can benefit all of these different subsectors.
So this blog really just takes a general look at how blockchain technology can resolve some of the main challenges for the travel/tourism industry as a whole.
Challenges In The Travel Industry
There are many challenges that the travel industry faces and below I mention just a few:
Payments: At the moment, the travel industry relies upon intermediaries to process payments or to receive payments on behalf of institutions such as foreign exchange companies like Western Union, MoneyGram and PayPal. These intermediaries often charge fees for their services and the presence of a middleman often results in delays when sending or receiving payments online.
Currency Exchange — One of the most inconvenient things about travelling abroad is having to switch between currencies. This is often paired with high fees. Banks often charge high transaction fees to travellers who use their cards abroad.
ID — Another major challenge for travel services is verifying the ID of travellers without compromising security and privacy. Even something as simple as waiting in a checkout line for the airport and handing over a passport can take a long time.
Baggage — Lost baggage is a major problem for travellers. Part of this is due to the fact that there is a lack of interoperability between different airlines, transportation companies and other baggage handlers. Therefore, this sometimes results in luggage being lost, misdirected or given to the wrong person.
Hotels — Hotels are one of many business industries that rely on middlemen for transactions and bookings. Many travellers find hotels via third-party centralised intermediaries which take bookings on behalf of accommodation providers. These third-party services are generally not free. They often charge a fee on top of the usual hotel costs.
How Can Blockchain Technology Resolve These Challenges?
Many of the challenges in the travel industry are due to the reliance on outdated systems and networks used by various businesses in the sector.
Therefore exchanging the underlying systems to a more accurate, immutable and secure one is the key to helping to solve some of these major hurdles.
To demonstrate how blockchain technology can do this, I’ll list the above problems again, only this time, I’ll try to demonstrate how blockchain technology can address those challenges.
Payments: Blockchain technology can facilitate instant payments. While ordinary payments can take days to be processed by a middleman, payments take just seconds to get confirmed on the blockchain and have lower fees.
Foreign Exchanges — Blockchain technology has the potential to eliminate the need for exchanging currency when travelling overseas. It can be used for overseas transactions — but without the fees or time delays.
For example, one startup called Travelflex aims to reduce the costs and fees associated with transactions — particularly those made abroad.
It also plans to roll out a universal traveller’s currency which will be based on the DAG algorithm. According to the creators, it will process up to 1400 transactions per second, which is much faster than, for instance, PayPal (193 transactions) or Bitcoin and Ether — (2 and 20 transactions per second).
ID — Blockchain technology allows tourism operators to simplify the tasks they need to complete and it can collate all the available information about an individual in one place. It would also allow interoperability between different providers, which means less paperwork and delays for the tourist, as well as easier and quicker ways of identification.
One company that is actively working on such a project is Civic Identity Management, which uses blockchains to securely store private information for its users. On the platform, customers retain full control over how their information is used. Any time a third party requires access to their identity documents, they get a prompt on their phone to accept or deny the request. Eventually, this system may help to reduce airport and border crossing queues.
Baggage — Blockchain technology makes it easy to track both the origin and progress of a product line or service. The immutability of the service and the difficulty in tampering with the records, means that it is easier to find a piece of luggage or at the very least see where it was last. This means that it is easier to track which airport the bag was processed in, who handled it and where it ended up. So goodbye to lost luggage!
Rega is among the first companies in the blockchain space to tackle the problem of lost luggage. It is a blockchain insurance platform that has created a “crowdsurance” platform in which the risk of lost baggage is shared across the community. By using this approach, it has been able to reduce costs to only approximately $12 annually for insurance coverage of up to $5,000.
Hotels — Wouldn’t it be great if you could finally eliminate the fees associated with booking hotels online? And you’d be able to tell whether you’re booking a good hotel because blockchain technology would allow you to check the accuracy of online reviews, and see whether the reviewer actually stayed at the hotel. It could even lead to a situation where you don’t have to rely on a check-in desk — it could all be done with the reliability and security of a blockchain app.
One example of this principle in action is the MeetnGreetMe app. It connects people from more than 200 cities across the world. The theory is that local communities can provide travellers with more diverse and immersive experiences than traditional tours.
Then there are the decentralised blockchain apps like WindingTree, which allows hotels and other providers to connect directly with service sellers (independent travel agencies).
No more fidgety hotel cards either — as you could simply connect with the app and verify your identity that way.
Is Blockchain Technology All It’s Cracked Up to Be?
However, as promising as blockchain technology is for the travel industry, it is not completely secure. Blockchain platforms have been subject to hacks in the past, even though the hype that surrounds blockchain technology often suggests otherwise.
Earlier this year (February 2019), it was reported that hackers had gained control of more than half of Ethereum Classic’s network. This meant that it was possible to spend the same token more than once.
The attacker was spotted after stealing more than $1.1 million. A popular cryptocurrency exchange Gate.io, lost around $200.000 due to the hack (although strangely, the hacker returned half of it days later).
While the hack affected cryptocurrency platforms, hacks like these served to demonstrate that the underlying blockchain technology was still vulnerable to attack.
The other challenge concerns accuracy on the blockchain. It certainly seems that blockchain technology will help to improve the accuracy of information, but only if that information is entered correctly in the system in the first place. If it is not, then mistakes will be circulated throughout the system. In other words, the system improves consistency more than it improves accuracy.
It is also important to note that while blockchain technology will go a long way in reducing things such as baggage loss, it won’t necessarily prevent theft. Even if it were combined with other technology such as RFID tracking and GPS (as we see with some laptops), it won’t necessarily deter thieves, or ensure that thefts are followed up adequately by authorities.
Furthermore, while the idea of creating an international cryptocurrency unique to the travel industry certainly seems exciting, it’s unlikely that it will be able to replace the need to exchange currencies just yet. Cryptocurrencies are inherently volatile, so until a stablecoin is developed that can be adopted internationally, the inconvenience and fees associated with switching currencies are likely to remain for some time.
Implementation will also be a problem. While many airports around the world will be keen to utilise blockchain technology to help improve upon some of the biggest concerns in the travel industry, not all airports will be able to adopt the technology.
For these reasons, this promising new technology cannot be considered a panacea for all of the challenges faced by consumers and service providers in the industry.
Despite the above-mentioned challenges, there is no doubt that blockchain technology at its most basic level is at least an improvement upon some of the outdated and expensive systems that businesses are currently relying upon.
Blockchain technology can make life easier for everyone concerned. However, like any new innovation, it won’t solve every challenge the industry faces, nor will it completely eradicate human error.
But let’s be honest, no system is perfect. This technology is still in its infancy and we’ve really only touched the surface of what it can do. And as new solutions and innovations rise to the surface, it is highly likely that many of the kinks mentioned in this article will be ironed out. I’ve met a wide spectrum of leaders across the blockchain industry, and I know that there are people working on exciting blockchain developments as I write this. And those are just the people that I’ve met personally.
As things currently stand, the potential and known benefits of cryptographic technology are certainly very promising and are already helping to make international travel that little bit easier for all of us.
Originally published at https://www.linkedin.com.