In the past few months the hype surrounding Blockchain technology as well as cryptocurrencies has cemented the cryptoshpere in public consciousness, so it is an exciting time to observe which industries will benefit most from the new paradigm. There has been a lot of attention paid to the hospitality industry, which looks like one of the areas that will adopt blockchain technology first.
Since Blockchain is a “foundational technology” like development of the internet itself (meaning that is goes beyond disruption and enables a whole new range of activities that weren’t possible before) there will be new industries and products brought to the consumer that weren’t possible a few years ago.
“Blockchain is a foundational technology, like electricity and the Internet”
Irving Wladawsky-Berger – MIT School of Engineering
But, as with the early days of the internet, the projects that address tangible immediate problems stand to succeed early on – so many investors have been on the lookout for the Blockchain’s “killer app” that will get market share quickly. This means that crypto projects that can be readily applied to the existing Marketplace – such as with the hospitality industry – can win big early on. Lockchain.co is one such project. They are in the process of raising funds through an ICO for their hotel Marketplace.
This is a tangible problem to tackle – as their CEO Nikola Alexandrov said: “Our project stands out by being extremely business driven. We do not try to invent a new kind of service, but rather we want to solve a problem in a extremely in-demand service by changing the underlying technology.”
Tackling this kind of industry should be music to investors’ ears. However, shaking up a $500 bln industry is easier said than done, but the Lockchain team have tried to design their solution to meet the needs of users. And this proposition has already started to gain traction, with already over 7,000 properties enrolled to be listed on their platform.
A Blockchain-powered hospitality market: How it works
The Lockchain team have developed an open-source distributed ledger (the LOC ledger) based on Ethereum VM which will list all available accommodation as well as their prices and what transactions have been completed on the blockchain previously (enabling a secure data source on previous transaction history).
Developers will be able to use this blockchain to make decentralized apps for novel accommodation purposes, whether for individual hospitality providers or other purposes. For example, the Lockchain team themselves have created the first app to use the ledger; the main marketplace app which will enable users to book and pay for the properties listed.
This central marketplace will also have other functionality built-in as standard; such as a price hedging system that prevents any fluctuation in Lockchain’s cryptocurrency price from affecting the funds used for payment, and an instantaneous currency conversion mechanism to entice users who are not as familiar with using cryptocurrencies.
The price hedging and currency exchange features are both similar to what is used in the financial and hospitality industries, which should make the leap to crypto much less noticeable for users and property owners.
This entire ecosystem and payment/listing engine is exclusively underpinned by the LOC token. The Lockchain team are currently holding the pre-sale of the token, ahead of the main sale to take place in October.
The main benefit of the Lockchain ecosystem is quite straightforward; they don’t charge commission on rentals and hotel stays. But there are also significant secondary benefits to using Blockchain for hospitality rentals.
What can the hotel industry gain from Blockchain technology?
Booking a holiday has never been easier, with companies like Expedia, Airbnb, and Booking.com delivering a level of speed and range of selection that would have been unimaginable 20 years ago. But the success of these companies shows how much money there is to be made by further improvements. For example, booking a stay at online in a hotel will still usually see around 25% of the transaction being spent on booking platform and financial transaction fees. And consider that those 25% are calculated on the gross revenue, which for example in EU contains additional up to additional 20% VAT. This practically means that hotel owners pay an additional commission to Booking.com on the VAT amount that they remit to the state budget.
Given the fact that the global hotel industry is worth around $500 bln annually, this means that any new platform that eliminates these fees (like Lockchain) could deliver up to $125 bln in value to users each year.
And with the advances possible with Blockchain technology , a new platform would not be another iteration of the same old business model. Much of the 25% that currently goes to the middlemen processors is a “necessary evil” of sorts.
Banks need to process payments, booking platforms need to present and verify both transactions and listings (including reviews), and of course a central currency needs to be backed by governments.
But with cryptocurrencies, suddenly most of these limitations disappear. The network can be trusted to supply the currency and the ledger can serve to verify transactions. Decentralized security and easy verification of data are what blockchains were designed to solve, after all. The accommodation providers and the customers can be allowed to interface directly without risk of double-spending, information disputes (such as fake reviews or denial of payment), or overbooking.
Are Lockchain the team to crack the industry?
The Lockchain project certainly seems to have the components necessary for scaling such a solution. The founders, Nikola Alexandrov and Hristo Tenchev, have been active in cryptocurrency since its early days, at one stage running the world’s 3rd-largest Bitcoin exchange (bitcoin7). They both have a technical background, as does one of the more high-profile team members, ex- President of Bulgaria Rosen Plevneliev.
They are based in Sofia, Bulgaria which benefits from a booming technology scene as well as EU membership, which the team hope will increase investor confidence.
Regarding the ICO, they intend to hold 25% of the tokens for the team (with 25% of this figure going to the founders themselves). This leaves 50% overall for investors to buy, since the final 25% is being set aside for further development.
Like all foundational technologies, Blockchain is looking for the applications that will entrench it in the worldwide economy. A tangible, straightforward use-case like the hotel industry could be one
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