Blockchain startup Winding Tree could upend the travel industry

The travel industry has been pretty stagnant for years. Yes, we’ve seen a number of travel startups emerge, but with a few major players controlling all the inventory (flights, hotel rooms, etc), there’s very little actual innovation going on.

A number of blockchain startups are hoping to change that. Blockchains are, after all, about decentralizing services and removing the middlemen to lower costs, speed up transactions, and add transparency.

While the blockchain startups I’ve seen so far have been lacking (I’ll get to that in a moment), there’s one, Winding Tree, that seems to have real potential — although it’s only just getting started (it will soon be announcing the dates and details for its token sale).

Before we go any further, we need to understand the basic differences between a public and a private blockchain.

A public blockchain is a completely open network that anyone can join and participate in. It encourages open-source, permissionless innovation. Ethereum and Bitcoin are the largest public blockchain networks today. A private blockchain however, requires an invitation or permission to join. There are also restrictions on what type of transactions you can participate in. It facilitates innovation behind closed doors. Ripple is currently one of the largest private blockchains out there.

Now, let us look at some of the ongoing blockchain projects in travel:
Webjet is building a solution which tracks the inventory of hotel rooms around the world using a private version of Ethereum.

Webjet wants to make sure all the intermediaries between a consumer and their hotel get paid for their roles in facilitating the booking. Quite the opposite of what blockchain technology was designed to do in the first place, i.e. remove the middle men…
TUI Group is considering moving all its data to a private version of Ethereum to cut out the middlemen like Expedia and Booking
S7 Airlines has partnered with Russia’s Alfa-Bank to speed up settlement times between airlines and agents. The solution is built on a private version of Ethereum.

Innfinity Software Systems will use blockchain technology to make its online booking tool Innfinite capable of presenting NDC content and to “combine content and offerings in ways that just aren’t currently possible through other standards” according to one of their developers. Their solution is based on a private implementation of Ethereum

IATA presented its concept of an IATA Coin, a digital currency built on blockchain technology, at its World Financial Symposium 2016. Although no details have been given yet, looking at how IATA usually innovates, I would be surprised if the company decided to launch this on a public chain.

There are a few other projects out there, but these are the ones that focus on inventory and distribution.

As you can see, these companies have one thing in common: They are all building their solutions on private blockchains. Not all business processes belong on a public chain, so this isn’t necessarily a bad thing. But I would argue that if you don’t need any of the features of using a public chain — network effects, lower operational costs, increased security, interoperability, decentralized control, virtual currency, and collaboration with other developers — you might as well go with MySQL.

So the motivation for most of these companies seems to be securing their own role and staying relevant rather than truly disrupting the industry.

Indeed, some of the industry incumbents who have decided to invest in blockchain at this point are reacting to blockchain in a similar way as the banks — trying to embrace something that was designed to make them irrelevant, or at least seriously threaten their business model.

Winding Tree appears to be an exception to this trend. It is the only open source, public blockchain project I have come across in the industry so far. Built on public Ethereum, it is a full-fledged crypto economy project, with its own currency. In the words of the founders, Winding Tree is “a blockchain-powered B2B marketplace for travel inventory (air travel, hotel rooms, car rentals, tours and activities, etc.)”

It aims to remove any rent-seeking intermediaries from the distribution landscape by building a platform where suppliers can regain control over their own inventory, and list it at almost no cost. In fact, Winding Tree will not charge you any transaction fees; the only cost is that of posting the transaction itself to the blockchain, i.e. to cover the miner’s fee. Reading information from the chain is free, however, so pulling data, like doing an availability search, will cost you nothing.

So what is Winding Tree?

What is Winding Tree actually building? It is not an app, in fact it doesn’t have any user interface at all. In their own words, it is “just a set of APIs.” That is a modest statement. One of the most exciting aspects of the blockchain tech stack is how it encourages innovation at the protocol layer to a much larger extent than what we saw happen with the Internet. Investing in the shared protocols of the Internet (like TCP/IP, HTTP, SMTP, FTP etc.) did not generate a lot of income for most players. Most of the fun stuff was, and still is, happening on top of these few protocols — in the application layer. This is where the Googles and the Facebooks live.

In crypto economy projects and companies we see quite the opposite happening. Most of the value in the blockchain stack is being concentrated at the protocol layer, and we see new protocols being built on both new and existing blockchains almost on a daily basis — the large majority on Ethereum. The protocols and their tokens are usually made available to the public through an Initial Coin Offering (ICO).

Winding Tree is going to be a basic infrastructure that other travel companies can build their own decentralized applications (dApps) and even new protocols on top of. Suppliers can list their inventory on the platform, and agents and others can book through it. APIs will be released to allow for easy integration with the platform. Existing travel and hospitality data exchange standards like NDC, OTA, HTNG, and others will be supported. This means that if you are a supplier and have an existing solution built on any of these standards, you can simply point to Winding Tree’s API endpoints instead of the existing infrastructure’s.

Winding Tree’s token, Líf, will be a spendable currency with scarce supply. Suppliers will pay their miner’s fee in Líf when posting their inventory to the blockchain. Agencies will need to spend Líf to book a hotel room or make any type of transaction on the network. If you are a little tech-savvy yourself, you can even use it to book your own travels through Winding Tree. Winding Tree lets you Líf to fiat currencies at the time of a transaction to avoid concerns about cryptocurrency volatility.

Winding Tree is incorporated as a non-profit foundation in Switzerland. It want to fund and support community projects like open source databases, APIs, and protocols. And so funds from its token sale will be locked away in a smart contract (like escrow) and allocated to this type of project.

Developers at travel companies will primarily use the Winding Tree APIs to build their own solutions on top of it, but they will also be able to submit their own ideas as to how the platform could be improved. With it all being open source and fully transparent, anyone can study the code and propose changes. This could open up a period of industry wide developer collaboration like we’ve never seen before in our industry.

I imagine early adopters of Winding Tree are likely to be smaller companies that need an easy and inexpensive way of listing and accessing inventory, as well as startups that are passionate about the Winding Tree project.

If Winding Tree does succeed with this initiative, we could hopefully see some of the larger incumbents becoming interested too. Fear of missing out could force innovation. The founders have said they would like to see all kinds of travel companies, and even travelers, participating in the governance of the marketplace to prevent a centralization of power.