Airbnb eyes blockchain integration to build trust

Nathan Blecharcyzk, one of the co-founders of Airbnb, has detailed the company’s interest in blockchain technologies as a way to establish user reputation and build trust. Blecharcyzk revealed in a recent interview that this year Airbnb would be looking into blockchain integration to authenticate a user’s reputation and establish trust on the platform. In a business where trust is a key factor, Blecharcyzk suggests that the site could require higher levels of reputation from users to access more exclusive types of accommodation. “..the question is whether there’s a way to export that and allow access elsewhere to help other sharing economy models really flourish. We’re looking for all different kinds of signals to tell us whether someone is reputable, and I could certainly see some of these more novel types of signals being plugged into our engine…” explained Blecharcyzk.

Airbnb co-founder Nathan Blecharczyk talks Japan, business trips and blockchain

Most kids make it no further than the TV when they’re off school sick. But Nathan Blecharczyk, co-founder of Airbnb, wasn’t like most kids.

Aged 12, at home ill one day, he taught himself how to programme using one of his dad’s – an electrical engineer – books. “I started buying more and more books. It was a hobby at first – I was posting my work on the internet and trying to get people to pay $5 a pop for it. Of course, no-one paid me! But at the age of 14 I got a phone call from somebody who said ‘I saw your work and want to pay you $1,000 to build me something’. I told my dad, ‘someone from the internet wants to pay me $1,000!’ He was like, ‘son, nobody from the internet is going to pay you $1,000.’”

But the man in question paid up, and started to introduce Blecharczyk to other people who needed similar things. This was the start of his first business. In four and a half years, he had made almost $1m, stopping only to press on with his degree at Harvard. “More important than the money was the confidence it engendered in me. I could create things that were valuable to people and teach myself how to do so. I really credit my entrepreneurial mindset to that period.”

Gearing up

Even so, co-founding the world’s most successful sharing economy company was not something Blecharczyk envisioned. “It’s just not possible to imagine something like this. Especially because of how negative people were when we started out. People kept saying, ‘how can you trust strangers?’ But it’s amazing how this has become a mainstream activity. We’ve got over 1m guests staying in other people’s homes each night. That’s a remarkable change in human behaviour.” After finishing his degree (“I decided to stick it out, unlike some of my better-known classmates!”), Blecharczyk got “a normal job. The problem was that things moved too slowly. I worked for the first half of the week, then I’d spend my time trading stocks and reading. When I said I was leaving, my boss said I couldn’t because I was his most productive employee. Then I definitely knew I had to go!”

Most people have heard the airbed origin story of Airbnb – Blecharczyk moved out of the apartment he shared with now co-founder Joe Gebbia, then Gebbia and third founding partner Brian Chesky made $1,000 by putting up three conference-goers, with Gebbia on an airbed. After a tough first year, the rest, as they say, is history.

And most people know how Airbnb works. In fact, many of us aren’t just familiar with the noun, but happily use the verb “Airbnbing”. The 34,000 city, 190 country-strong online marketplace enables “hosts” to rent out their spare rooms or properties, and guests to book them. Hosts create profiles, specifying the type of accommodation on offer, booking periods, house rules and add photos. More recently, Airbnb has automated applicable tax payments for users. And last year, it launched a new programme that gives hosts suggestions on price points. Airbnb makes money by taking a 3 per cent cut on every booking from hosts, and between 6 and 12 per cent from guests. In Britain, Airbnb provides hosts with an average supplementary income of £2,000 a year – “that’s not life-changing, but it is meaningful,” says Blecharczyk – who is a host himself in San Francisco. Last year, the firm was valued at $25.5bn, putting Blecharczyk’s estimated wealth at around $3.3bn.

2016 focus

This year, the company is concentrating on three areas: holiday rentals, business travel and Asia. The holiday rental focus “means not just urban rentals, but more traditional getaway spots close to beaches or skiing and where people often have second homes. We want to make these more accessible than they have been historically.”

On business travel, Blecharczyk says the idea is to give more choice to people wanting to stay somewhere for a week or more, combining business and leisure – “as we all increasingly do”. The focus for the company is “working with employers to make sure it’s a sanctioned option” – how many corporates would currently reimburse an Airbnb stay?

When it comes to Asia, Airbnb is making the most of a staggering growth opportunity. “We grew 700 per cent in China last year, specifically with travellers coming out of China, but Japan is now our fastest growing destination country.” I stop him on Japan. Prime Minister Shinzo Abe’s cabinet has already put forward plans to regulate the renting out of private homes to visitors and, with its immigrant population at just 2 per cent, you can imagine how difficult a step change Airbnb is for some Japanese.

But Blecharczyk isn’t deterred. “It’s a tremendous opportunity for the country. First, they’re trying to prepare for the 2020 Olympics, and they’re already at capacity. So there’s a lot of interest in home-sharing. Second, their ageing population means a couple of things – that they have an excess of housing, and a need for income to support these older people. Airbnb can play a role in that. In the UK, for instance, 30 per cent of our hosts are over the age of 50, and many are in their 70s and 80s. This is a way you can derive a meaningful supplementary income.”

Tech future

Airbnb isn’t interested in long-term lets – “we can do three months or less, but for six to 12 months, would you really want to move somewhere you hadn’t seen?” – but if you think about helping to solve national issues, like excess housing, it’s exciting to think about the kinds of technology the company could plug into its existing infrastructure to heighten efficiency and safety.

In Africa, for example, where Airbnb has 40,000 properties and is now “starting to work actively”, there are questions of whether it could work with microfinance firms like Mpesa. “It’s too early to say what will be on our roadmap, but eventually we may,” says Blecharczyk. This sort of development could hypothetically allow domestic users to pay electronically for stays.

I go on to ask about blockchain technology, which can help build trust in a given network by underlying it with an immutable database. “I think that, within the context of Airbnb, your reputation is everything, and I can see it being even more so in the future, whereby you might need a certain reputation order to have access to certain types of homes. But then the question is whether there’s a way to export that and allow access elsewhere to help other sharing economy models really flourish. We’re looking for all different kinds of signals to tell us whether someone is reputable, and I could certainly see some of these more novel types of signals being plugged into our engine.”

Last year, Blecharczyk rolled out the firm’s Cuban operations, after President Obama re-opened the US Embassy. “Back when the Soviet Union fell, the handouts people were getting suddenly stopped, and that put the country into an economic crisis. As a result, the government dictated four kinds of jobs you could have – and one was renting out one of your rooms. So people have been doing this since the early 90s and it’s quite an established thing down there. But we’ve been able to plug into that existing network and community and give it a global audience, which is amazing.”

Just how amazing it is comes through in income figures: the average Cuban makes $50 a month, but a room listed on Airbnb can make them $40 a night. “There’s been no investment in infrastructure since the 50s, and one of the first things you notice there is that everything is falling apart and crumbling. What’s been really fun to see is how our hosts are using the money for home improvements. And it’s great to hear the stories of Americans who have gone to Cuba; it’s reconnected a part of the world that had lost touch. You just get some of the best human stories – that’s the best thing about this job.”