The following interview in brought to you in association with EyeforTravel Europe 2018, where we will be discussing blockchain along with critical trends like machine learning, AI, marketing and content best practices and much more!
Blockchain may have not hit the travel tech mainstream, but in recent months it has certainly entered mainstream discourse, most recently for the role it may play in the airline sector.
As Bobby Healy, CTO of travel tech firm CarTrawler, who "loves" that the airlines are innovating, put it in a recent interview (watch this space): "The critical thing for airlines is inventory, and managing, inventory and that is what they [airlines] currently use older legacy technologies for. Blockchain can replace that technology infrastructure on a like-for-like basis.
So it's pretty interesting that in October the German airline Lufthansa threw its weight behind Winding Tree, a blockchain-based decentralised open-source travel distribution platform.
It's also interesting that in November, SITA, the specialist in air transport communications and IT released Flightchain, a white paper exploring the implications of blockchain, which it conducted with British Airways, Heathrow, Geneva Airport, and Miami International Airport. The FlightChain paper considers whether blockchain can be used as "a single source of truth for flight data" to address one of the industry's big challenges - that data is held in different silos and this can lead to conflicting flight statuses.
The difference between Winding Tree and FlightChain is that the former is the only 'public permissionless' blockchain' for the travel industry, while FlightChain is of the 'private permissions' variety, like those proposed by TUI and WebJet elsewhere in the travel space.
More on the distinction between public and what Izmaylov calls 'nonsense' private blockchains in: Blockchain blockbuster: is the travel industry's invisible battle over?
Also check out today's EyeforTravel blog Blockchain: the end of the sociopath CEO and the rise of consensus? where we share a fascinating recent talk by technologist, serial entrepreneur and bitcoin expert Andreas Antonopolous.
Below, however, are some additional candid insights from Maksim Izmaylov, an other self-confessed serial entrepreneur, hacker and the founder of Winding Tree.
EFT: Why the name Winding Tree?
MI: 1) A tree is a good symbol in all cultures. Trees are awesome.
2) For a tired traveller, there is no better place to rest than under a tree.
3) In computer science, there are data structures called 'trees'.
4) The dot.com was available.
EFT: There is a lot of hype at the moment around blockchain, and it's still very early days. What would you say is your biggest challenge?
MI: Yes, there is a lot of hype and I would say that educating people about the technology is the biggest challenge. There is a lot of confusion and the problem is that people see IBM, for example, saying that they are leaders in the field and they blindly trust them.
[For the record, SITA's FlightChain uses Ethereum and Hyperledger-Fabric - Fabric being one of the blockchain implementations resulting from Hyperledger and developed by IBM.]
EFT: But IBM is a technology leader so what's different about what they are doing with blockchain and what you are doing?
MI: There are a number of travel-related initiatives out there, but Winding Tree is the only public not-for-profit blockchain. We are working to create a platform that the whole industry will benefit from. Private blockchains like those of TUI, WebJet, and many others, want nothing else but to be the next intermediary.
EFT: At EyeforTravel, we're always hearing that it's all about the consumer, and a big part of this is building trust, which the 'monopolies' you speak about have invested heavily in. So I get that WT is enabling innovation, and levelling the playing field, but why does this matter to the consumer?
MI: Let me try to explain with an Internet analogy. Thirty years ago you had no choice when you wanted to make an international call. You had your phone company, which dictated the prices. There was no competition and the cost of that call was pretty high. Then boom, the Internet appeared. It wasn't a network, but a protocol - a set of rules (or standard) that computers use to communicate - and this allowed anyone to build applications that drove the cost of the international call down to zero.
Today I have a whole screen of apps that I can use to call people around the world for free. How did that happen? Precisely because of competition! The technology was no longer controlled by one company; it was there for anybody to access. As a consumer you have very obviously benefited: now you call your friends and family for free. Today you can even make video calls, which in 2000 you could only dream of.
EFT: So what then are the implications for travel?
MI: We want the same transition in the travel industry. We're creating an open-source communication layer that anyone can easily access and build applications on top of.
EFT: And this then has an impact on what you would call the travel monopolies?
MI: Yes exactly. Increased competition, which would lead to lower prices (free calls) and better service (video calls)…There is a great white paper from MIT professors called Some Simple Economics of the Blockchain. Their thesis is the technology removes intermediaries and leads to:
- Cheaper transactions (no one can dictate prices because they are a monopoly)
- Cheaper cost of audit (because it's an open ledger)
As a consumer, therefore, you will be able to buy tickets from a wide variety of sellers that would compete on user experience and features (eg. Skype vs Zoom) but the cost would be as low as possible due to increased competition ie: up to 20-25% cheaper.
EFT: But if Winding Tree builds a great platform that everyone starts to use then surely the platform, in a sense, becomes a monopoly?
MI: You could argue that, but because Winding Tree is backed by a public permissionless blockchain, even the creators of the platform cannot change its rules. That's how smart contracts work: once you deploy it, you can't change it or remove it. It will be stored on the blockchain forever!
Concrete example: if we deploy a smart contract with 0% commission fee, we can't change it! But if Amadeus uses a private blockchain (or any other database, like MySQL), they control everything. By definition, they can change the rules and the commission fee any time they want.
EFT: Okay then, summarise the difference between the two models.
MI: The difference in the two models is this:
- Amadeus or Expedia will make money by just charging you 20% because they can; it's the definition of rent-seeking behaviour.
- Winding Tree will only make money if the platform works for you; we aren't building a monopoly. On the contrary, we prevent further creation of monopolies.
EFT: But don't companies with vast amounts of data like booking.com and Expedia, for example, have a massive advantage. As this tech might end up taking a chunk out of their business, they could be the fastest movers?
MI: Potentially, these big companies have a massive advantage over companies who are just starting out. It's their brand, it's the data that they have, etc. But what we're doing here is precisely that: opening up the data that only Priceline/Amadeus has access to today. So we're trying to help these smaller companies to build novel solutions.
The giants are inherently slow; for them it takes a lot of time to innovate. We want to enable Schumpeter's 'creative destruction' here.
EFT: Some people argue that for blockchain to become mainstream, it will require economies of scale to make it pervasive, and in the travel space this could be an alliance or consortium of airlines. At what point do you see the technology becoming mainstream?
MI: I think we can pin point these state transitions only in retrospect. When did the Internet become mainstream? A critical mass of participants will be required, that's for sure. How many tx/companies/users exactly? We can only speculate.
EFT: In an ideal world, when will the average consumer be aware of Winding Tree? Not at all, in other words behind the scenes, or as soon as 2018?
MI: Definitely as early as 2018.