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How decentralization and DIMO can solve the problems of Uber and Lyft

May 25, 2023

Decentralized rideshare apps will disrupt the existing web2 industry’s business model. By building on top of web3 infrastructure like the DIMO platform, developers will be able to replace the duopoly of Lyft and Uber with decentralized applications. Innovation of the economic model will be a win-win for drivers and passengers. New web3 apps will create a rideshare system that eliminates middlemen, lowers costs, and increases safety.

The web2 rideshare industry is flawed, and it’s hurting everyone

Uber and Lyft claim to take a 25% fee off of every financial transaction. Drivers say they take even more. In the vast majority of the U.S., Uber and Lyft are the only options for ride-sharing companies. This virtual monopoly leaves no incentive for either company to lower their fees or innovate.

This cuts driver profits. Any rideshare driver will tell you they’re not happy with Uber and Lyft fees, to say the least. Yet, both centralized companies have still failed to reach profitability in the current economic model. The biggest problem in the driver gig economy is that workers aren’t getting paid enough real money.

Meanwhile, consumers aren’t getting a great product, but they're paying higher fees. Uber’s fees have jumped +80% since 2018. Safety and reliability issues with Uber and Lyft have plagued consumers. Unsafe and poorly maintained vehicles are common, and can make the rider experience unsafe and unreliable.

These issues put Uber and Lyft in a strange predicament that is hard to escape:

1. They can’t pay drivers more while operating at a loss.

2. They can’t continue to raise the price of rides or they’ll lose riders.

3. They can’t build a better project or transition to web3 without hiring more developers.

Uber and Lyft have a duopoly. They have little incentive to invest in improvements to their product because of their high market share of both drivers and riders. Despite high adoption, there is low loyalty amongst both groups. Drivers often drive with both companies simultaneously, and consumers check both apps in search of the lowest ride cost. As closed platforms, only high cost, internal dev teams create new features.

The way to improve the ride-sharing industry is to build an innovative solution that can maximize profits for drivers while simultaneously lowering fairs for riders. Only decentralization can solve this problem.

How to take out the middleman? Decentralize it.

Customers win when there’s more competition. Decentralization makes mobility-based applications easier to produce. When the go to market cost decreases, competition increases.

The DIMO platform lowers the barrier to entry for any startup founders interested in web3 projects for the rideshare industry. Uber and Lyft have spent millions, if not billions, of dollars developing their app features. Through DIMO's decentralized platform, developers have access to a prebuilt infrastructure with verified driver data, vehicle information and trip details. DIMO provides an open, secure, and neutral protocol that utilizes blockchain technology.

If building a decentralized ride-sharing application is 100x easier, there is an opportunity for small teams to build apps that compete with some of the world's largest tech companies.

A web3 rideshare company that builds an app with an efficient team of 10-30 can charge 5% fees instead of the 25% that Uber charges, upending the industry economics. Lower barrier to entry will create a free market in the rideshare industry. With lower startup costs, developers can focus resources on value creation for users and drivers while still reaching profitability. Better prices and features will encourage the transition of riders and drivers from legacy web2 products to new web3 apps.

To make it even easier for new developer projects, DIMO is already working towards mass adoption of rideshare drivers into the DIMO platform through a native token reward system and attractive benefits in the DIMO Marketplace.

Written by: Alex Rawitz Cofounder

Alex Rawitz has spent his career in and around startups in the crypto and IoT world, and is always looking to put these technologies to work making people’s lives better. Prior to DIMO, Alex worked with exchanges, defi protocols, and fintechs at Chainalysis. Before that he worked in sales at Servato, an IoT company in the telecom space. He started his career at a startup accelerator, The Idea Village, in New Orleans.

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