Startup's rental service fueled by cryptocurrency

SAN FRANCISCO -- Here are two conundrums that Jonathan Chou sees: Despite the hype about bitcoin and other cryptocurrencies, there aren't many places to spend them. And although Airbnb, Uber and other on-demand marketplaces create wealth, much of it resides with elite investors.

In an attempt to address those issues, Chou and a group of Uber, Google and Facebook alumni are starting a San Francisco company called Bee Token that will offer a short-term rental marketplace called Beenest based on cryptocurrency. They call Beenest ``Airbnb on the blockchain,'' referring to the digital ledger that records cryptocurrency transactions.

``Blockchain is all about decentralization, giving power back to the people, removing the middleman,'' said Chou, formerly an engineering lead in Uber's security and fraud division.

Put simply, Beenest will not take a commission on rentals. Airbnb takes about a 15 percent cut, with both hosts and guests chipping in. Beenest plans to keep expenses low by using the community to handle arbitration when disputes or problems arise; arbitrators will earn tokens for their time. Reviews will help determine host and guest reputations, similar to how Airbnb works.

Beenest will charge some fees, including an optional 2 percent fee from hosts for insurance, which it says covers up to $100,000 in damages. Hosts and guests who want to pay or get paid in traditional money will pay a 3.99 percent fee.

At first, it won't be suitable for Aunt Marge's vacation visits. ``We cater heavily to the cryptocurrency audience to start; it's not as intuitive to mainstream users,'' Chou said. ``We think the new need is for people to be able to spend bitcoin currency.'' But he believes cryptocurrency will become much more mainstream over time.

Beenest will start in the next couple of months with a pilot program in San Francisco, setting up a website with pictures of lodgings, calendars for selecting home-stay dates, and so on. Visitors will pay with tokens rather than credit cards (although eventually the company will offer a credit card option). Users can buy the tokens from Bee Token using either bitcoin or ether, the other leading cryptocurrency.

Theoretically, as the company grows, the tokens will increase in value, allowing all participants to share in its success, Chou said. Of course, tokens -- like bitcoin -- could also plunge in value. ``Volatility is a problem we're also considering,'' Chou said, adding that cryptocurrency users. ``inherently have a much stronger tolerance for risk.''

What about enthusiasts who view cryptocurrencies as long-term investments and don't want to spend any? ``Most people aren't willing to sell it for dollars because they think it will go up,'' Chou said. ``One thing we think they're willing to spend it on is meaningful memories and experiences.''

San Francisco has strict vacation-rental rules, requiring all host to register with the city. Airbnb and rival Home Away just kicked off thousands of hosts who failed to register.

Beenest's first listings will be successful Airbnb hosts who are also crypto enthusiasts, Chou said. That will ensure that they are registered. (Once hosts have registered with the city, they can rent out their house on any service.) ``We opted for something that complies with the current status quo rather than being too adventurous,'' he said. Initially, the company will handle remitting the city's 14 percent hotel tax, although it hasn't yet decided whether it will subsidize that or add it as a surcharge.

In addition, an early listing on Beenest will be Serendipia, a North Beach communal house for digital nomads to live and work. It offers 13 bunk beds in four bedrooms with a shared kitchen, a work space/living room and the flavor of a hacker hostel. Visitors typically stay one to three months, and about 80 percent pay the monthly $1,300 rent with cryptocurrency. (By requiring 30-day minimum stays, it is exempt from city registration laws.)

Residents said they appreciate the chance to meet and socialize with like-minded people.

Like Bee Token, Serendipia's founders want a communal operation where everyone owns a piece. ``We have a common vision of people contributing to the community,'' said Liudas Mikal, co-founder and chief operations officer. He was happy to work with Beenest to find more crypto enthusiasts who want to live in San Francisco.

If Beenest spreads worldwide, it's certain to encounter the same patchwork of regulations and opposition as Airbnb. ``Looking into the regulations of every region; they're all different, which is the scary part,'' Chou said.

Based in San Francisco, Bee Token has 10 full-time employees. It's raised $10 million, mainly from angel investors and small funds, and plans to raise an additional $5 million through selling its tokens in the near future. Chou said it has more than 100,000 people on its interest wait list.

Vacation rentals are just the first step. Bee Token is keeping its technology open source and hopes that other on-demand enterprises will take advantage of it.