Decentralised marketplaces will disrupt the disruptors – just not yet

Online marketplaces allow us to buy and sell services like never before, but we pay a lot for the pleasure. That's where decentralised marketplaces come in

If you’re old enough to remember when the internet was little more than a global billboard for large corporations, you’ve seen many years of progression. We’ve moved from one-way broadcast communication to interaction, social media, online shopping, and marketplaces. But problems exist in each area, from data usage to commission fees, that decentralised marketplaces could fix.

Kudos to marketplaces for making people’s lives better

Online marketplaces like Airbnb, Upwork, and TaskRabbit have changed the way many people live. It wasn’t so long ago that your average Joe was restricted to working in an office. Making passive income from renting out a spare room or taking someone to the airport didn’t even enter their thought space.

Now, more than 2 million people in the UK alone work freelance, and that number is on the rise. So, kudos to these companies for facilitating flexible working hours and additional income for people around the globe.

However, their rise to popularity has also meant that they’ve done extremely well off the people they serve. Sometimes the commissions on even the smallest transactions render the exchange worthless.

The problems with online marketplaces

It’s a rather curious irony that Airbnb, Upwork, Uber, and the like are credited with creating the sharing economy, often referred to as “peer-to-peer”. But there’s nothing peer-to-peer about paying commissions to an intermediary.

Blockchain technology is creeping up behind the incumbent cash cows to show them the real meaning of peer-to-peer. Decentralised marketplaces will remove these misaligned interests by creating a true sharing economy and allowing for one-to-one transactions.

The greatest issue when it comes to online marketplaces is trust. After all, when you’re doing business with a complete stranger, how do you know they will follow through with the payment? Where is your assurance that the accommodation you rented isn’t some ramshackle hut five miles from the beach, or that it even exists in the first place?

We still need the centralised authority in the middle to act as a medium of trust. And the main way they do this is through a rating system.

Employers can see how well a freelancer performs through their success rate, for example. Holidaymakers can read reviews from others who’ve stayed in the property they want to rent.

Moreover, most major online marketplaces have requirements and stipulations that pretty much remove our doubts when entering into an agreement with another party.

But we pay a huge amount for that trust.

That’s where decentralised marketplaces come in

Blockchain technology can cut out the middleman and create instant trust through decentralised marketplaces that allow people to realise the entire value of the transaction. They no longer have to pay 20% in fees to an entity in the middle.

Thanks to its smart contracts and an immutable ledger, we won’t have to worry about skipped payments or fake ratings. And we get a fair price for our services or products.

Most decentralised marketplaces are being built on the Ethereum blockchain as it is still the most robust dApp platform with smart contracts and the largest developer community.

But Ethereum also has a scaling issue that won’t allow for mass adoption just yet. While the user base for these decentralised marketplaces remains small, so does the choice, scale, and scope.

Like so many things blockchain, decentralised marketplaces simply aren’t there yet – but they will be.

Decentralised marketplaces that you can use right now

There are already several decentralised marketplaces that you can use now. One of the most popular for e-commerce is OpenBazaar.

OpenBazaar doesn’t use Ethereum but relies on Ricardian contracts for data authenticity and Escrow for settling payment disputes.

The Escrow system makes both buyers and sellers select a trusted third party before entering the exchange.

The buyer sends their preferred cryptocurrency, but it’s only released when two out of the three parties agree that the transaction has taken place successfully. This removes the need for a centralised third party.

OpenBazaar allows you to buy and sell products, rent out properties, and find rare items in more than 30 countries currently.

Let’s be honest, it’s no rival to eBay or Amazon just yet. But it’s already gaining traction, adding a customer support section and reaching more users.

Freelancers who are tired of paying hefty commissions also have a few options. A ConsenSys project called Bounties Network, for example, is fairly easy to use. You download MetaMask to get started and then look for a job (or bounty) you can do – or post one yourself.

Some of the tasks on Bounties include content writing, programming, design, and translation. All users are paid in ETH, which is preloaded into a smart contract.

The freelancer has the reassurance that the payment is there and will be released when the conditions of the contract are met.

There are also decentralised marketplaces growing in the area of social media and content creation. These sites usually reward users for content views, leaving ratings, or interacting with the community. Some examples of these include Steemit and SocialX.

Final thoughts on decentralised marketplaces

Taking into account the popularity of the sharing economy and existing marketplaces, it seems logical that blockchain will be the next step. Decentralised marketplaces still have a long way to go until they’re ready for mass adoption. But with technology enabling trustless transactions and removing commission fees and doubts, it’s only a question of time.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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