Blockchain Technology and the online travel industry

originally published on August 16, 2021

Blockchain Technology 101

The first thing that surprised me while reading academic papers on blockchain technology was the decades of research in cryptography, programming, and mathematics that were necessary to build real-life applications that worked. The feeling you often get with blockchain is this wild west free for all that appeared out of nowhere in 2008 from someone using the pseudonym Satoshi Nakamoto.

If you are interested in the academic papers that led to Bitcoin and the overall development of blockchain technology, I'd recommend reading this article by Rishi Sidhu.

In a nutshell, blockchain technology is not a piece of hardware or a cryptocurrency, but a system or method to keep track of information. 

You can think of it as a shared Excel document with sheets that each contain a block of information. The designers of the Excel sheet give it a purpose and create a set of protocols on how information gets verified, recorded, and added to the sheets.

As soon as this Excel goes live, collaborators have access to all of the information that is on the sheets, are able to suggest edits and can see the changes that have been made in the past.

We move from a reality where you have one person or entity that has access and is in charge of approving and changing the document to one where the process of editing and maintaining the information is mostly distributed and automated.

To be clear, we do not need blockchain to collaborate on excel sheets; this is an analogy and over-simplification of a technology that has evolved a lot since 2008. I'd highly recommend reading more introductions to blockchain; here is a good start.

This system is what Satoshi Nakamoto used in his Bitcoin White Paper to create a viable digital currency, describing it as follows: "A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution."

Applications for the Online Travel Industry

There are a multitude of applications for blockchain technology in online travel; here are the three most impactful ones in my opinion.

N.1 - DisintermediationAs I wrote in the previous newsletter, the current state of the industry is highly centralized, with only a few players owning the main distribution channels. These are global distribution systems (Amadeus, Sabre, and Travelport) or online travel agencies (OTA’s), such as Expedia or Blockchain technology provides a unique opportunity to remove or reduce the layers of intermediaries in online travel. By creating global protocols for exposing inventories and purchasing them, we can democratize the act of selling and buying travel products, and along the way possibly reduce the high commissions that these intermediaries ask for.

**Main Benefits:
**✔️ Democratised access to travel inventories
✔️ Re-empowerment of suppliers and buyers
✔️ Simplification of selling and buying travel products.

Active projects:

N.2. - International PaymentsThe adoption of cryptocurrencies, whether it is Bitcoin or those that will eventually be issued by central banks, will be a game-changer for international payments and compliance. Businesses operating in the travel industry incur high costs for dealing with international payments, transfers, and exchange rates. This also applies to travellers who pay high bank fees or endure laughable exchange rates. Cryptocurrencies will eventually make paying and transferring money internationally as smooth as using your Apple Pay.

**Main Benefits:
**✔️ Reducing costs for international payments
✔️ Reducing the complexity of international payment compliance
✔️ Making the experience of paying for goods and services easier while travelin

Active projects:

N.3 - Personal Identity & PrivacyTired of uploading your passport every time you book a flight? Cryptographically securing personal identity will be a game-changer for identity verification in travel for both governments and travellers. Governments will be able to tap into a more reliable international system, which stores travellers’ identities and securely verifies who is who; travellers will reduce the number of times they have to expose private information to databases that could become easily compromised. This could contribute to the reduction of identity theft or credit card fraud. Of course, this application will have more far reaching implications than just the travel industry.

Main Benefits:
✔️ Reduce the risk of personal identity fraud
✔️ Facilitate verification of personal identification
✔️ Provide more security and privacy to travellers sharing their IDs.

Active projects:

Challenges & Roadblocks

So why are we still not booking hotels and flights through blockchain systems? With any new technology, there is an adoption curve and a lot of heavy lifting required both in building the technology and getting people to use it. For now, here are a few of the many challenges and roadblocks that lie ahead:

Operability with legacy systems

Think channel managers, central reservation systems, property management systems, etc. The new protocols and systems will need to integrate with some of these to drive adoption.

Building out a digital infrastructure 

For these new systems to work there is a need for simple front-end and back-end interfaces that make it easy to plug and play.

Adoption from small and medium businesses

In general, airlines have a massive scale and are able to invest in these types of new technologies early on. However, real change will come when small-to-medium sized businesses (independent hotels, museums, etc.) join the new world of travel distribution.

Blockchain Projects

I have already referred to some current projects that are building blockchain-based solutions for the travel industry, there are more so I created a database; to add a project, click here.

overview of projects board
overview of projects board
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