• by William Mougayar
    Venture advisor, 4x entrepreneur, marketer & strategist. I live in Toronto, curate a lot, blog a bit, and help startups.

Decentralized Peer-to-Peer Marketplaces

We’re at the cusp of seeing a lot of new peer to peer (P2P) marketplaces with decentralized operations.

Recent advances in blockchain technology based on decentralized consensus are making it possible to create totally decentralized marketplaces whose usage will be easily met by the critical mass of Internet users.

Existing P2P marketplaces have some characteristics of traditional marketplaces, but there is more to it.

Among the existing factors for marketplaces success, liquidity is important. Onboarding difficulty is also a factor. Other barriers could be psychological, legal, technological, or business model related. We need to preserve these characteristics, but go beyond them.

A decentralized P2P marketplace has a lot less friction at the center than traditional marketplaces. There is a lot more power and benefits at the edges than there are at the center.

In a previous blog post, The Race to Decentralize Everything and Give Power to the Edge of the Networks, I mentioned that marketplaces are one of the areas being affected.

Let’s review the progression of the various types of marketplaces:

1) Vertical marketplaces: Top-down controls. That’s where most e-commerce sites are. They sell, you buy. Examples: Bonobos, Birchbox, Frank & Oak, etc.

2) Semi-central marketplaces: They facilitate selling and buying laterally, and outside of a top-down model. Amazon, eBay, Etsy are the grand daddies. A few sell, many buy.

3) Decentralized peer-to-peer marketplaces: Anyone sells. Everyone buys. As many sellers as buyers. The central controls less. Trust, rules, identity, payments are embedded at the peer level. Participants arrive already trusted, and decentrally acknowledged. Examples of marketplaces and services to support them are being concocted by startups, such as Lazooz for transportation, OpenBazaar for p2p trading, or Openname as the identity protocol.

I’m particularly excited that we are going to see increased innovation around the creation of decentralized peer-to-peer marketplaces. I think the required plumbing infrastructure & middleware services to enable their operations are becoming more and more available.

What do these P2P marketplaces typically do?

1) Sharing. This includes temporary renting, using or leasing from someone else on the network. E.g Sidecar.

2) Selling and buying. Peers selling and buying from each other. Eg VarageSale, Kiinzel.

3) Providing a service. Each peer can provide a service, or find a service. E.g. Vayable.

What are the requirements for participation into these marketplaces?

Users will arrive with these services already “baked in”, prior to their participation:

  • Identity
  • Rules
  • Trust
  • Payment method
  • Terms
  • (ps: others?)

And they will offer open and neutral access of specific functions, such as:

  • Arbitration
  • Match-making
  • Inventory management
  • Notifications
  • Bid/ask
  • Aggregation
  • Information organization
  • (ps: others?)

Maybe one day, launching a decentralized peer-to-peer marketplace will be as easy as running a website.

What do you think?

  • http://www.Dabble.co is an example of a P2P marketplace. Anyone can be a teacher, anyone can be a student.

    • But i think they would fall under semi-centralized.

      I’m not sure that we have seen pure P2P decentralized marketplaces where users arrive already via a decentralized authentication, trust, identity, etc.

      • The only curation that happens is when a class goes up that is totally inappropriate-for example teaching someone to be a neo-nazi. I guess the students and teachers could all register under One Name or something like that. But, it’s a decentralized platform.

    • Lossame

      P2P is a semi-centralized market place where anyone can be whatever. either the buyer or seller. http://xrockergamingchairz.com

  • Julian Sarokin

    Very much agree.

    I wrote a whitepaper a few weeks ago discussing one potential solution for executing essentially the vision you outline above.

    http://bounty.exchange – I think trust is one core aspect of decentralized marketplaces that needs to be solved better than the current implementation. There’s a huge amount of counterparty risk associated with online transactions, and still no good solution. Bad actors can just fake it.

    • Great paper. Thanks for sharing. Are there implementations that are emerging?

      • Julian Sarokin

        Looking at the ecosystem today — it may actually be possible to execute a similar system on Bitcoin itself using the new (or upcoming?) nLockTime feature.

        I don’t know the specifics of how / when that will be implemented, but I have a feeling it could be used as a solution to lock funds in the future, and then build a decentralized exchange on-top where ‘funds locked into the future’ are used as a method of trust, and breaking that trust means losing those funds.

        That said, I haven’t seen any implementations that use a timelock collateral system yet.

  • JLM

    .
    The big promise of the Internet has always been the ability to eliminate the middleman. Not because the middleman is always inherently bad or flawed but simply because he is no longer necessary to conduct business between the suppliers and the consumers.

    A good analogy is the air traffic control system which is used by commercial and private aircraft to get from point A to point B.

    If you own an airplane, you can go on your own schedule and by yourself.

    You can still use commercial airplanes to travel though perhaps under wildly different circumstances.

    Peer to peer networks are similar. They may not necessarily eliminate the legacy middle man but they do provide the promise of direct contact.

    They will evolve and be used when appropriate for the individual participants.

    JLM
    http://www.themusingsofthebigredcar.com

    • Yes!! You’re explained it well!
      So, now you see the potential of the blockchain which is just to be an invisible technology that can make this happen by binding trust, payments, identity, etc. directly to users.

  • bien

    The first method uses an encrypted messaging protocol for posting public listings and completing communications and a separate cryptocurrency payment system. The best example of this is OpenBazzar, which is built on top of the BitMessage protocol and Bitcoin for payments.
    http://xrockergamingchairhq.com/

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