The importance of decentralized marketplaces in cryptocurrency: An analysis of the value proposition, current problems and solutions.
- The following is a copy/paste (with minor edits for context) from the ethinsider altcoin thread but I think it's a worthy analysis of decentralized marketplaces in general so I've placed it here. Everything written here is stuff to keep in mind when considering the viability, pros & cons of decentralized marketplace platforms. If you have interests in DNT, SWT, SYS, PART, SAFEX or any of the other platforms this is worth a read:
The original thread is here: - - http://ift.tt/2fAMcxI - http://ift.tt/2xBeDm4
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The reason syscoin and openBazaar haven't taken off yet is due to lack of anonymity, lack of privacy, diminished/impaired network effects, lack of incentives and issues in execution as described:
Pseudoanonymity:
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OpenBazaar uses BTC.
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Syscoin: Can transact wth Zcash or BTC rather than public native sys token but uses human escrow (inefficient/trusted). Masternode incorporation introduces elements of centralization (although they aim to adopt RingCT in masternodes which could work well).
Native token status
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OpenBazaar has no native token so it cannot capitalize on the social and network effects of having a native token to speculate on.
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Syscoin's native token not essential to use which mitigates a lot of the speculative upside to the token by creating routes to bypass the buy pressure on it. If syscoin forced all tx to occur in sys I'd be more bullish on it as a speculator as it's intrinsic value would be easier to increase.
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Syscoin has an incredibly high coin supply; great if your aim is for liquidity on a globally adopted market but terrible if you're a speculator looking to profit from the trading of this coin as it potentially takes much larger daily trading volumes to move the spot price significantly. This is compounded by the sys token being non-native which means it suffers from a speculator viewpoint.
Smaller supply coins with steady inflation rates are better by design as they allow for scalability in speculation and acknowledge a certain nicheness to their audience.
Network effects:
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OpenBazaar has been around for years but hasn't gained traction as no native token for speculators to promote platform on (buying/selling and diversification of tokenised ownership creates network effect).
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Syscoin suffers from reduced network effects due to having a non-essential token with very large supply as described.
Audience:
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Most people don't know about Bitcoin; fewer about crypto.
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Bitcoin is accepted at an increasing number of stores; a dedicated decentralized marketplace doesn't add value to the average end user so the incentive to use this isn't there. To this end OpenBazaar adds nothing new to the end-user experience.
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Syscoin: As per OpenBazaar but audience needs to educate themselves on use of the sys token and distributed ledger technology in general. Currently not an anonymous/private network so no inherent advantage to trading compared to Amazon/eBay + disadvantages of needing to learn/understand technology to transact.
User Interface:
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Users have to learn/understand the technology of OB and Sys to transact without gaining any inherent advantages to purchasing via those systems.
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The OB GUI is terrible (has improved though).
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All platforms currently required dedicated client downloads to run.
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Privacy centric markets e.g. Particl (PART) are useful for:
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Privacy enthusiasts.
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People who wish to live independent of fiat.
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People who live in localities where crypto is not taxed or recognized as a legal unit of exchange (potentially legally bypassing local tax laws).
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Grey market purchases (nootropics, pharmaceuticals, tobacco, alcohol, luxury goods, knockoff's (including unbranded device clones or items which are essentially legal but copyright may be an issue).
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Embarrassing legal goods purchases or purchases you do not want appearing on a credit card statement (sex toys is an obvious one; I'm sure there are more)
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People in countries with unstable economies (Venuezela, Zimbabwe) where local currency hyperinflation means purchasing various goods in native currency is pointless/expensive/cumbersome but using alternative non-private currencies to transact (e.g. Bitcoin) may result in prosecution.
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Legal transaction of goods internationally but the need to keep location of buyer/sender publicly hidden due to local/regional restrictions or requirements for other bureaucracy if purchased in fiat
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Extremely sensitive research and development or manufacturing projects especially product manufacture where for whatever reason the design, parts and manufacturing process must be completely unknown or obscurable.
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Whole seller/boutique manufacturing and R&D is probably the biggest legal use case especially where patent's or highly sensitive data is concerned and for whole sellers and large scale manufacturers who wish to keep their trade secrets intact.
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Addition: Provide a safe, secure competitive edge when negociating with multiple contractors. MAD Escrow service serves as a nice deposit feature for lock on of contracts for large scale distributors where trust or quality concerns may be an issue.
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Sometimes the convenience associated with trading on a fully anonymous platform (where the client node locations are anon and the buyer/seller/amount are publicly anon) in terms of keeping paperwork and records but still trading goods for a fungible currency) outweighs the risks. Anyone who has ever had to do company accounts will understand what a pain in the ass these are to keep and produce.
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Any transaction where only the buyer and seller can know about the nature of the transaction. This relates back to R&D, sensitive information exchange but is facilitated by PARTICL having a trustless, automated non-human escrow (the MAD mutually assured destruction escrow) to ensure both buyer and seller are complicit in ensuring delivery of payment and delivery of goods in acceptable condition.
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I've discussed this with a friend who tinkers in making all kinds of legal useful gadgets (we're talking voice activated Iron Man suits with built in LCD screens, Thor Hammers and tonnes of custom cosplay stuff in amazing quality); he'd be reluctant to sell these on eBay due to litigation risks but he'd make a killing selling these anonymously online; these are definitely things people want and would enjoy. There's a tonne of stuff on alibaba which would be ideal to sell on the Particl network; true anonymity creates an incentive to justify many of the negatives I've outlined.
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Apologies if I'm cluttering but I do think the topic is highly relevant as I believe cryptocurrencies will flourish in the era of decentralized exchanges and marketplaces (espcially marketplaces that integrate DEX's) which will reinforce liquidity, bring non-speculative fiat into the ecosystem and strengthen it's independence from traditional fiat whilst being simultaneously bolstered by it.
Full disclosure: I am long ETH, PART, REP, ICN, FCT, OMG, TRST. Losses are your own responsibility; I am not responsible for your trades. Please do your own due diligence.
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