Decentralized Blockchain-Based Electronic Marketplaces

https://cacm.acm.org/magazines/2018/1/223888-decentralized-blockchain-based-electronic-marketplaces/fulltext

by rbanffy • 9 years ago

151 109 9 years ago

cacm.acm.org

sktrdie2• 9 years ago

Aren't you guys tired of this whole blockchain thing? I'm a bitcoin proponent and love the technology, however it's becoming a truly "fake news" type of environment where new cryptocoins are so complicated to understand that only the creators know how they work.

I'm mind blown by the fact that none of these new-cryptocoins are getting hacked - there's an enormous bounty out there for who's able to figure out how to double-spend these things! How's it possible that they all work well, but are based on different principles? My conclusion is that there are hackers that are currently double-spending to their advantage: without telling anybody and without making it clear that it's happening.

Also, the whole idea of "scarcity" (which was my main attraction to this field) doesn't exist anymore because of forks: if a group of people decides to fork the software, your coins are duplicated and aren't scarce anymore, so it's not even like gold anymore.

Sometimes I wonder if we'd be better off without a blockchain, and instead with a system where we trust lots of big entities to record the ledger in a way that still allows us to get some level of freedom-of-use, anonymity, censorship-resistance and anybody-can-enter kind of system.

ThomPete7• 9 years ago

Scarcity still exists because the fork creates another coin than the original but a fork. Keep in mind that scarcity is due to trackability (history).

nerdponx2• 9 years ago

Is anyone actually auditing all these blockchains?

sktrdie2• 9 years ago

With the Bitcoin Cash fork I can spend my coins on both histories. That is the opposite of being scarce.

empath752• 9 years ago

Scarcity doesn’t exist because anyone can start their own blockchain and pretty much anyone who can has. There’s nothing preventing anyone from relaunching an exact duplicate of bitcoin with all of its strengths and weaknesses at any time other than inertia.

philipodonnell• 9 years ago

I am going to guess that you did not study economics (not an insult, just observation). Many of the things you point out (lack of understanding in non-practitioners, the role of scarcity in pricing, the effect of forks on market cap) all have ready parallels within our existing financial systems and all are legatimite problems that are explicitly what blockchains are trying to address.

Dismissing it because it is still struggling with the same issues seems premature.

askafriend5• 9 years ago

I think you're underestimating how truly small and how early the space is still. Normal people still can't easily buy a majority of the tokens/coins/cryptocurrencies out there. Every major exchange is having trouble scaling and many have closed user registrations. Coinbase has more active users than Schwab at this point by a couple million. Binance is the fastest growing private company to hit $2Bn in valuation ever in history (it only took them 6 months)...

It's a very very small amount of people involved in Crypto globally - certainly not big enough to collapse any economy anywhere. The whole space is still in the process of being erected, the foundation is being built as we speak which is why money is going in rapidly and valuations are growing rapidly. The amount of noise Crypto makes in the media is disproportional to the amount of people actually involved and invested in the space. It won't be like this forever and there will be corrections, but for this small window of opportunity where everything seems crazy - it won't seem so crazy when you zoom out a year or two from now.

As a result of that, there will be scams and people trying to get in on the unregulated gold-rush but at the same time there are still legitimate projects being started right now that could become very valuable in the next couple of years.

rublev• 9 years ago

but at the same time there are still legitimate projects being started right now that could become very valuable in the next couple of years.

Care to name a few?

spookthesunset2• 9 years ago

I think you're underestimating how truly small and how early the space is still.

What the heck are you talking about!? Kodak, the former camera company, announced at CES they were going to be selling cloud miners and have their own cryptocoin. Juice companies are announcing blockchain projects. People you run into at grocery stores are randomly bringing up bitcoin...

This is as big as bitcoin gets. And when it pops, that's it for Bitcoin. You can't get bigger than a juice company announcing it will be doing "something with the blockchain". Once it's over, Bitcoin will have lost its original purpose (a currency) and people will leave because its current purpose ("store of value") will have proven worthless too.

The ones that took out $50k from their life savings will be fucked. The drug dealers, crypto-ransomware writers, and murder-for-hire people will have moved onto some other coin. The non-criminal market will write the whole cryptospace off as a scam and go back to using VISA and Mastercard to pay for their lattes.

This is it. This is peak bitcoin. It will never get this high again because the core of Bitcoin is fatally flawed for countless reasons that have been discussed since its creation 9 years ago.

mtgx• 9 years ago

1. Wonders how come blockchain technologies are so secure

2. Thinks that maybe we should get rid of them, and replace them with one of those big companies that exposes hundreds of millions of user accounts every year

Do you really not see what you're arguing about here? These technologies use blockchain because of its security. All of those trillions and trillions of hashes ensure that it's not easy or cheap for anyone to hack the network.

Also the last part, how could you have anonymity and censorship with a big few entities? That's like the antithesis of anonymity and censorship-resistance. Haven't people here been arguing for years that having apps centralized in an app store like Apple's will lead to more censorship (and it has) vs installing any app you want from the "decentralized web"?

jhwang52• 9 years ago

Are you treating all blockchains as equal; there are different degrees of decentralization. You can have blockchains that are run by oligarchies of miners. Look no further than the mining pools behind Bitcoin.

dsnuh• 9 years ago

This is only tangentially related (btw I agree with you, it's out of control) but I always think back to the novels _Daemon_ and _Freedom_ by Daniel Suarez when it comes to the future of decentralized autonomous technologies. If you haven't read them, they are a fast and enjoyable read imho.

surrey-fringe• 9 years ago

No, I'm not.

mirekrusin• 9 years ago

Please keep in mind that money on the blockchain is just a part of what's being worked on; there are many systems being built that don't involve money (directly) at all. Arguably money, as in - keeping an integer for an address - is one of the least interesting areas of systems you can build.

SamPatt• 9 years ago

A decentralized marketplace based on cryptocurrency already exists and has thousands of users right now. It's called OpenBazaar.

gitgud• 9 years ago

Another big decentralized exchange is BISQ

https://bisq.network/

SubiculumCode2• 9 years ago

A decentralized marketplace could avoid the problems with near-monopolies like Amazon because the cost overhead on transactions could be made minimal. The problem is that in order to not become the black market like OpenBazaar, the decentralized market would need to be able to comply with local and regional laws and regulation; laws and regulations which change over time. That is a tall order, and in not easily reconcilable with decentralization.

zeptomu• 9 years ago

How does a decentralized marketplace make transaction fees minimal? Currently transaction fees are the hot topic and seem exorbitantly high.

I guess both customers and merchants want to buy or sell stuff and not read about things like the lightning network.

SubiculumCode2• 9 years ago

You could be right, but I was mostly referring to the Amazon take.

joshfraser2• 9 years ago

There are four reasons I think decentralized marketplaces are inevitable:

1) Throughout history middlemen have suffered a common fate. They get squeezed out at every opportunity. We have a chance to cut out the rent-seeking middlemen, with revolutionary new business models that allow fees to go to ~zero.

2) Blockchain technology gives us a censorship resistance. Not only from governments that like to ban certain types of marketplaces, but also from centralized marketplaces which like to pick and choose who is welcome on their platforms. Just look at Uber and Airbnb as examples. They have been banned in cities all around the world & have likewise banned certain individuals for life from ever using their marketplaces.

3) We can redistribute value to the people who actually contribute the most value in the network. Uber and Airbnb wouldn't be here today if it wasn't for the first 100 drivers/hosts, but what did those drivers/hosts get in exchange? Meanwhile, the early employees, investors and founders get filthy rich. New token economics give us a "better than free" business model that incentivizes people to use a platform that rewards early participants in the network.

4) Blockchain powered marketplaces are instantly global. This is a non-trivial advantage over anyone who attempts to create a centralized marketplace and has to wade through the local laws and banking regulations for each and every jurisdiction in the world where they wish to operate.

EGreg3• 9 years ago

On the one hand, decentralization cuts out middlemen.

On the other hand, for matching, you get the greatest selection if there is ONE marketplace.

joshfraser2• 9 years ago

True, but that one marketplace can live on a smart contract, that is not owned or controlled by any one entity.

chrischen2• 9 years ago

1) Throughout history middlemen have suffered a common fate. They get squeezed out at every opportunity. We have a chance to cut out the rent-seeking middlemen, with revolutionary new business models that allow fees to go to ~zero.

Capitalism takes care of this. Through a competitive marketplace of marketplaces, marketplaces are forced to reduce middlemen fees to the lowest necessary. Even a block-chain middlemen-less implementation will have costs associated with decentralization (see PayPal vs Bitcoin transaction fees). Fees will never achieve zero because fees cover things like fraud, service, etc, that even decentralization can't remove.

2) Blockchain technology gives us a censorship resistance. Not only from governments that like to ban certain types of marketplaces, but also from centralized marketplaces which like to pick and choose who is welcome on their platforms. Just look at Uber and Airbnb as examples. They have been banned in cities all around the world & have likewise banned certain individuals for life from ever using their marketplaces.

This is false. Unless your blockchain distributed app purely runs on the blockchain (has no oracles in the case of Ethereum, has no real world data dependency, has no point where it converts or interacts with the real world such as enforcing an exchange of goods) then the real world can enact regulations on it and shut it down. Silk road was hidden using Tor, but not something a distributed app can necessarily be better at. The one advantage of crypto coins is it allows internet transactions that share some properties of cash like non-reversability. Try to run a non-sanctioned cryptocoin in China to resist censorship. You will not be able to do it.

3) We can redistribute value to the people who actually contribute the most value in the network. Uber and Airbnb wouldn't be here today if it wasn't for the first 100 drivers/hosts, but what did those drivers/hosts get in exchange? Meanwhile, the early employees, investors and founders get filthy rich. New token economics give us a "better than free" business model that incentivizes people to use a platform that rewards early participants in the network.

The first few drivers were commodities. You measure their reward based on the risk they put in and frankly those early drivers may have been early, but certainly did not put in the risk. If anything, uber/lyft/airbnb probably served them well by giving them employment that they otherwise would not have had. So the capitalist system is already working for the most part and a crypto-anarchist system is not necessary to make this point any fairer.

4) Blockchain powered marketplaces are instantly global. This is a non-trivial advantage over anyone who attempts to create a centralized marketplace and has to wade through the local laws and banking regulations for each and every jurisdiction in the world where they wish to operate.

For trading in information yes since cross-border information flow is mostly unregulated (except for China). But for anything that requires shipping, until you can ship it through a fiber cable then no. Local laws and banking regulations have a purpose, and simply having a distributed app does not make it easier to circumvent laws.

tiuPapa4• 9 years ago

To be honest, the cryptocurrency movement feels like an attempt to shift the power from people who control money to people who control the technology.

subsubsub• 9 years ago

I think you make some good points, but I'm not sure about the following...

1) "We have a chance to cut out the rent-seeking middlemen"

In the case of Amazon, is there really rent seeking? They provide lots of benefits as the middleman - trust, support, consistency (YMMV).

2) "...centralized marketplaces which like to pick and choose who is welcome on their platforms."

Again, for me this is a feature, not a bug.

3) "...but what did those drivers/hosts get in exchange?"

Money.

"New token economics"

What are new token economics? And why are they any better than what preceded them?

The token sale doesn't reward participation, it rewards speculation

cgmg9• 9 years ago

Again, for me this is a feature, not a bug.

And for some people, it isn't. The point of decentralisation is that you can opt-in to centralized systems if you want to. The converse is not true.

UncleMeat• 9 years ago

I consider network censorship to be a feature, not a bug. I want airbnb to be able to enforce that hosts are not able to deny service to black people. I want my uber driver to have insurance and a quick background check. From the perspective of somebody in the marketplace I prefer having people who break the social contract removed. Now there can be marketplaces that screw this up and perhaps there is some place for a truly censorship immune marketplace but they will be niche rather than taking over existing systems.

Development is not free. Users generally want new features over time. A distributed 2000-era netflix service where people mail each other dvds wouldn't survive in 2018. Who does development without a middleman? Part of the reason why something like uber works is because drivers do not have the technical capacity to build their own system.

The idea that cryptoassets and associated systems is going to bring about a revolution that frees people from capitalism is insane to me. Wealth is amazingly concentrated among early adopters and difficulty curves are generally weighted hard towards benefiting a few early people. Why would a distributed marketplace suddenly bring the power to the people? You still need the capital to buy a car to be a distributed-uber driver after all.

wyager2• 9 years ago

I consider network censorship to be a feature, not a bug.

No one’s going to stop you from using an unfree, censorious system if you want to. However, we’re going to object vociferously if you try to force it on everyone else.

I want my uber driver to have insurance and a quick background check.

The advantage of censorship-resistant markets is that added features are opt-in. I don’t really care if my uber driver is regulated according to taxi union rules, so I’d rather not pay the associated costs.

dane-pgp• 9 years ago

The feature you are looking for is not "censorship" but "reputation metrics" (in fact, they should be "uncensorable reputation metrics"). If a trusted third party (not necessarily Uber) told you whether a given driver had insurance, then your decision to transact with the driver could be based on that. (More likely, whoever made the app you use would do the "has insurance" check for you, and not show you any drivers that don't have insurance, and they would list this filtering as a feature of the app).

As for who is going to pay for this, the users can still pay money for the individual apps (perhaps they would get a commission from each ride they enable, unless a Free Software alternative emerged), and the app makers could pay a licensing fee to the third party that provides the insurance check or other reputation metric.

The real unsolved problem is how to decentralise a reputation system without it being subject to Sybil attacks or breaching people's privacy.

atomical• 9 years ago

My experience with Airbnb is that they overlook some nasty, inappropriate behavior that hosts exhibit in favor of profit. Companies like Airbnb and Uber aren't self-regulating at all.

cgmg9• 9 years ago

From the perspective of somebody in the marketplace I prefer having people who break the social contract removed.

This statement is meaningless. What are the contents of this alleged social contract you're referring to? I bet your answer is going to differ from mine, or from the next person's.

adventured• 9 years ago

Decentralized marketplaces will never become dominant because the average consumer will never trust them. They could already exist, they don't for that reason: the majority of consumers have zero interest in them.

Throughout history middlemen have suffered a common fate. They get squeezed out at every opportunity.

Be sure to let Priceline.com know how that theory actually works in practice, versus an 85 year old industry that should have squeezed out all middlemen by now.

Google search, Facebook, Twitter, Instagram, Whatsapp, Tumblr, Reddit, Snapchat, Spotify, Netflix, these are all middlemen products/companies.

eBay, Craigslist, Amazon, Walmart, Costco, Poshmark, Overstock, Alibaba, Target, Aldi, Ikea, CVS, Walgreens, the app stores, and on it goes. All middlemen stores/platforms.

Visa, Mastercard, Discover, Amex, PayPal, Square, Stripe, JP Morgan, Bank of America, Wells Fargo, Citi, Ant and so on. All middlemen financial products and companies.

Your premise is exactly wrong. History says, over and over again for hundreds of years now, that middlemen thrive in every industry perpetually. What changes are the details of which ones thrive or fail at a given time.

There are zero examples of decentralized anything of scale similar to any of the giant platforms and it's not because we can't build them, people have tried over and over again to get users to use them. There's a reason for that persistent failure.

spynxic• 9 years ago

with revolutionary new business models that allow fees to go to ~zero.

Assuming fees are derived from the mining ability of the network, as more activity brings value to the network the mining fee should literally approach 0 cost.

astura2• 9 years ago

Throughout history middlemen have suffered a common fate. They get squeezed out at every opportunity.

This is just... Absolute nonsense. Just factually incorrect. Middlemen, example Amazon, have never been stronger. People complain about it on HN all the time.

Anyways, people use middlemen and are happy to pay the cost because they provide a useful service. They aren't just arbitrarily injecting themselves into transactions.

joe_the_user• 9 years ago

The only trend of ending middlemen is that small middlemen are being replaced by large middlemen.

samolang• 9 years ago

Middlemen, example Amazon, have never been stronger.

The strength of a middleman can be directly measured by how much they mark up prices. Does amazon really mark up prices more than the brick and mortar retailers it replaced?

visarga2• 9 years ago

We can redistribute value to the people who actually contribute the most value in the network.

Actually that is how I envision people becoming self-reliant in a post-job society. Being jobless and with little money means you got: 1. free time, and 2. needs to fulfil. But jobless people are not without skills - we don't suddenly forget everything we learned when we lose our jobs. There's plenty of skilled people with time and a motive to work.

So why not get services in exchange for services, from jobless person to jobless person? In order to do that we'd need a "human coin". Humans can make a lot of what they need directly - grow food, build houses, repair cars, supervise and educate kids, make clothes. These services should be obtained in the service-for-service system, without money. It leads to a more self-reliant society that doesn't depend on state money, or worse, on transferring money from corporations to people - we all know it's going to be hard to part corporations from their money in the name of social good.

UBI is demeaning and robs people of agency, self-reliance is the exact opposite. Using a "human coin" we could create a marketplace of skills and services without corporate money. Self-reliance should exist at all levels - personal, family, social group, city and country. Each level should be as self-reliant as possible, reducing the need for international commerce and dependence on external factors. When self reliance reaches 100% there would be almost no need to use money, perhaps just for raw materials, so we should be researching new materials that are plentiful and can be produced locally.

panda88888• 9 years ago

How is the human coin different from existing currency? They are both store of value so a person can still exchange for goods and services when he or she doesn’t have things that the other party wants? I don’t see how the human coin can be more efficient and easier to use than standard currency, especially for local transactions.

siruncledrew• 9 years ago

Using a "human coin" we could create a marketplace of skills and services without corporate money.

That system has existed since civilization began - it's called bartering.

edo• 9 years ago

Yes! But let's give the human coin a better name; how about calling it the Dollar? And while we're at it, we need to figure out a way how to make the exchange rate fluctuate less, so let's back it with some real world materials that we know are pretty stable in perceived value; how about gold? Oh, and for some tasks and jobs I'm pretty sure we will need bigger groups of people working together. These are more complex tasks/projects that sometimes require hundreds, maybe even thousands of people working in cohort. How about we call those groups startups, and corporations? But who will decide to start these groups when it is deemed necessary? Let's decide anyone can; and we name them founders. And because they will start these groups, they probably get to decide how many of the dollars which contributor in the group gets from customers right? Because who decides how these dollars get distributed among the group? Someone needs to do that right, at least until we get a sufficiently capable AI to determine qualitative value to the end user. And let's call these rights of distribution of these dollars stocks, like a kind of certificate to the future profits.

nora45• 9 years ago

In my view what you are saying is a libertarian pipe dream. A fully decentralized world (mostly I mean web) will be a nightmare. People are already mad how Reddit/Twitter are so abusive as platforms. And these are still centralized systems, albeit more free compared to Facebook/Instagram. Just imagine the kind of hate, racism, nazism, *-ism that will be unleashed in a fully decentralized system. We are already complaining about Fake News and its torpedo effect on US democracy and the world. Now imagine if on top of that Facebook and so were in fact decentralized and permissionless.

In one corner of the web, I hear people being mad when Twitter doesn't ban the POTUS. And on the opposite side I hear you complaining about centralization. I can't somehow get around both of these angry voices operating at the same time (even maybe by the same people). Do we want a centralized system at the end, or a decentralized permisionless system with all the nasty things it entails? For me, I don't know. I lean toward preferring centralized systems. I rather embrace the devil I know.

Not sure, why you are so in love with decentralization. Are you sure we really want it? It's not all roses and flowers with decentralized systems.

cgmg9• 9 years ago

There's a simple solution: Filter out what you (or your community) don't want to see, but don't force your sensibilities on everyone else.

kakarot• 9 years ago

For high-cost items, an escrow feature is often deemed necessary by both parties in any marketplace.

Furthermore, without an escrow feature, buyers will tend to stick to highly reputable sellers, creating a barrier for new competition and enabling price and power consolidation.

How might this be solved in a decentralized marketplace?

empath752• 9 years ago

revolutionary new business models that allow fees to go to ~zero.

Blockchains are spectacularly inefficient. Fees aren’t going to go to zero on any blockchain that deals with any significant amount of traffic.

jvdizz• 9 years ago

For a community of technology enthusiasts, it's surprising to see the amount of misconceptions people here have about blockchain, as it pertains to cryptocurrencies, as well as general angst towards a new technology with a ton of future potential.

protomikron• 9 years ago

Ok, maybe I missed something, but can someone explain to me why a decentralized marketplace is an important thing to have?

Apart from the fact that you can pay there with Bitcoin (which you can also do at other e-commerce stores), it seems similar to Shopify from a merchant's (or vendor in OB slang) perspective.

So I get that makes it simpler to use for products that are not simple to get otherwise (e.g. drugs), because of censorship and outdated governing (I know you can in theory buy and sell anything, but I just downloaded it and searched around and most products were either tests products, or drugs and sex-related), but I don't see what other benefits there are.

I mean most people who want to sell stuff over the internet struggle with the fact that nobody wants to actually buy their stuff - the fees or monthly costs don't seem to be the reason for the failure of these shops. Furthermore I would guess most people go to a central place like Amazon, because they have some kind of reputation (although expectations are getting lower) and their support ("where's my package") is quite OK (from a customer's perspective) - although the customers could go to small indie shops and buy stuff there.

Outside of products and services that are illegal to sell or buy because of jurisdictions (if these jurisdictions make sense is an orthogonal question I would say) what is the additional benefit for buyers and sellers?

nora45• 9 years ago

The logic is usually that decentralized system allow greater innovation, faster development, third-party integration. By taking no centralized control, allowing everyone be partly owner of the network, they will have much greater network effect than the centralized counterparts. The analogy is usually the free internet vs proprietary CompuServe, AOL, Prodigy systems.

Decentralized Blockchain-Based Electronic Marketplaces

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