There has been a lot of activity in the cryptosphere regarding hotels and accomodation, with progress towards the creation of a new landscape of bookings and payments. Some commentators have suggested that hospitality could become crypto’s killer app. The $500 bln hospitality industry is an enticing prize for the many crypto projects looking to disrupt this space.
Among them a European Blockchain project endorsed by the former President of Bulgaria. It has an enticing customer value proposition for travelers and hoteliers ahead of its token pre-sale this week. Lockchain.co is aiming to decentralize the hospitality industry, completely cutting out the middleman by enabling customers and property owners to rely on the inherent benefits of Blockchain technology.
Considering that the global hotel industry was worth $494 bln last year, this will for sure grab the attention of crypto investors given the sheer size of the market and the number of transactions involved. On top of that, the nature of renting accommodation is tailor-made for a Blockchain solution, and as a result, several promising Blockchain projects are capitalizing on this.
The Lockchain team, headed by founders Nikola Alexandrov and Hristo Tenchev, reckon they have the innovative solution needed to really disrupt the hospitality space.
$500 bln problem: inefficient and non-transparent hotel marketplace
There is a good reason why holidays cost big bucks; from credit card fees to booking commissions to currency exchange charges, the whole set of transactions can incur significant costs. These hassles have always affected traveling and were worse until very recently; the likes of Airbnb, Booking.com and Expedia have made billions of dollars from eliminating inefficiencies and making information more accessible for travelers.
But Blockchain technology can take this a step further. Lockchain is one of the teams that want to make this a reality. Currently, customers and hoteliers can expect that anything up to 25 percent of the value of a transaction to go to middleman processors like search providers, booking platforms and financial service companies.
This is a huge cost for the supplier and the customer - the annual money going to middlemen (anything up to $125 bln annually) is almost as much as the entire market of all cryptocurrencies combined (approx. $150 bln).
Until now, this has been a necessary feature of the hotel industry. Centralized actors like banks and booking platforms provide security in a financial system where transactions are hard to securely verify in a timely manner, while information is scattered.
But these challenges are exactly what Blockchain technology is designed to solve. So the current marketplace (that requires credit cards to verify payments, booking platforms to verify and present reviews, and a central currency for transactions) has problems that shouldn't exist in a Blockchain-powered world.
The reality is that the existing hotel marketplace has never had access to the component of crypto and Blockchain technology like double-spend-proof transactions, smart contracts, information immutability and low transaction fees.
Ecosystem as a solution: crypto-powered hospitality transactions
Lockchain looks set to leverage these features of cryptocurrency in their solution. The way that the Lockchain team plans to deploy the possibilities of Blockchain technology is through a ledger that lists all available accommodation, as well as pricing and transactions, accessed from a marketplace which property owners list their rooms on and customers can browse.
Their decentralized LOC ledger is the bookings engine and database which will hold all information about hotel listings, their availability and booking requirements. This ledger will operate solely with the LOC token.
This ledger will be open-source and built on the Ethereum VM and will be free for the public to access and use. With all the listings transparently available through the ledger, users, property owners and developers will be able to develop a range of applications on the Lockchain ledger to help customers find the ideal room easily.
Aside from the ledger, the Lockchain marketplace is built to provide the first functionality for the new ecosystem. The team has planned some interesting value-added features for the main marketplace, which should entice users.
This includes instant currency conversion in order to make sure that users are not dissuaded by booking exclusively in a new cryptocurrency. Also, to insulate the ecosystem against price fluctuations, a hedging model as (used in the financial industry) will use Buy and Sell calls to balance the transaction (which is then liquidated when the hotel withdraws its money).
And of course, the big draw of the marketplace will be the zero percent commission required to carry out the transaction. Lockchain will operate a freemium model, which means that the majority of users will be around 25 percent better off compared to the existing market channels.
This is the core of the ecosystem, and it is ready to launch soon. As founder Nikola Alexandrov explained:
"Our goal is to launch a decentralized engine in combination with a user-friendly marketplace which will be fully integrated to the engine as an immediate proof of concept. As of this moment, we have reached a preliminary agreement with travel industry hosts, that supply more than 7,000 properties worldwide.”
To that statement Hristo Tenchev adds the next ambitious goal:
“We aim to give users the opportunity to immediately use their tokens to book properties even during the pre-sale and the main event."
This should sit well with investors since a criticism of many ICOs is their lengthy wait times before any product actually launches. Also of note is the relatively straightforward problem they're solving: unlike other Blockchain projects there is less of a leap of faith involved since the online marketplace for hotels does not need to be created, it just needs to be moved to a new ecosystem.
The team behind Lockchain
As mentioned, one of the more interesting aspects of the project is that it has the participation of the former President of Bulgaria, Rosen Plevneliev. Both he and the founders have a strong technical competence, being trained software engineers. The founders have experience and projects under their belts in the crypto world specifically, having founded one of the first Bitcoin exchanges, Bitcoin7.com, way back in 2011, which at one point was the third largest exchange in the world per trade volume.
It is a pretty developed team outside these members, with over 150 contributors (including a Member of the European Parliament) and is fortuitously based in an EU capital (Sofia) that has developed as a tech hub in recent years. The team hopes that being based in an EU country (unlike many ICOs which have opted for offshore locations) will bolster investor trust.
Pre-sale announced for September 29
The team has stated their goal is to create a sustainable and realistic ICO, and 25 percent of the tokens will be allocated to the team as a whole, of which a quarter (6.25 percent) will go to the founders. Another 25 percent will be set aside for future development, meaning that investors have the opportunity to buy 50 percent of the token during the ICO. It will use Ethereum as the payment method, and the token presale starts on Sept. 29.
The future of hotels
Whoever gets user traction with a Blockchain-based solution stands to gain an immense initial market share considering the publicity that crypto is getting in the press now. Other industries like finance have already adopted Blockchain wholesale, but a winner-takes-all-effect is likely to be most present in other industries.
Whoever this winner is, they stand to make a lot of money.
- Eoghan Gannon, Guest Author
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