Decentralized Marketplaces: The Best Alternative to eBay & Amazon
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When eBay first launched in 1995 it heralded a revolution in shopping, allowing anybody who could access the internet to buy and sell with other individuals. Suddenly the costs of setting yourself up as a retailer crashed through the floor, whilst consumer choice skyrocketed. It was this peer-to-peer character of eBay which allowed it to flourish through the famous dot com bubble and out the other side.
But under the surface the likes of eBay are just digital versions of traditional business model, for example the auction house. Today, economies of scale have allowed sites like eBay and Amazon to utterly dominate online retail. Yet the peer-to-peer empowerment of the individual which has made them so popular does not extend below the surface. Underneath it all, these sites are little different from the giant retail conglomerate of old. Sellers are often forced to pay high fees which make earning a profit difficult, whilst risking giving away control of their brand – making it difficult for them to break free from the platform in the future. Meanwhile shoppers often do not realize that the products choices on offer are controlled and limited behind the scenes from corporate HQ.
Introducing the Best Alternative to eBay and Amazon
Now a new breed of services is coming to the fore, which enable a truly peer-to-peer shopping experience: decentralized marketplaces. These new decentralized marketplaces generally use digital currency for payments, and often operate using the same underlying technology which powers Bitcoin and other digital currencies. They offer a wide range of advantages to both sellers and shoppers:
The Advantages of Decentralized Marketplaces
In this article decentralized marketplaces are considered as alternatives to eBay and Amazon, so their advantages are given in comparison to these services. The entire experience for both buyers and sellers is considered.
- Low Fees, Cheap Prices: The cost of selling products in this way is drastically lower than the fees you would have to pay to sell through any of the major alternatives. Lower fees for sellers mean that savings can be passed on to buyers in the form of cheaper prices.
- No Limits on What You Can Buy & Sell: Traditional online marketplaces retain full control over what you are and are not allowed to sell. For example, the list of restricted items on eBay goes far beyond the illegal items that you would expect, to include things like alcohol (even if the buyer proves their age), animals, electronic cigarettes, sex toys, novelty bank notes, contact lenses, eyeglasses, lottery tickets, digital currency, prayer services, psychic readings, prison uniform costumes, and a whole lot more besides. That’s not something peculiar to one particular site either; all centralized marketplaces put restrictions on what you are allowed to buy and sell through their site – whereas decentralized services offer a truly free market for buyers and sellers to trade as they wish.
- No Chargeback Fraud: Chargeback fraud is when somebody buys an item using a credit card or Paypal. After the receive the item they contact their credit card company and order them to reverse the payment, fraudulently claiming that the item was never delivered. This is a massive problem for internet retailers because there is very little they can do to defend themselves against it. As a result this pushes up the price of products, as sellers must factor this extra cost into their pricing. By harnessing the power of digital currency, decentralized marketplaces are able to eliminate chargeback fraud.
- Flexible Terms: When you decide to sell an item through a central website, you must accept the terms and conditions laid out by them. These cover a wide range of areas including things like guarantees and customer refunds. Decentralized services allow each seller to specify their own terms, and buyers to shop around for the best all around deal and not just the cheapest.
- Users Retain Control of Their Personal Information, Sellers Control of Their Brand: When you join an online marketplace site you have to provide personal information to meet the requirements of that website. This personal information can be used to help track and spy on what you are doing online and has a commercial value which you are forced to give to the company for free (and which can be used against you, for example by putting up prices if they know you can afford it). In the alternative services you will find here you can choose how much or how little information to share. A related problem is that companies signing up for one of these sites give away control of their brand. There are many examples of retailers trying to leave these site but finding that the company still keeps their branded page online, meaning that potential customers searching for that retailer never find their new site but just keep ending up on eBay / Amazon instead.
- No Middlemen for Payments: Because these new services use digital currency, sellers do not need to trust somebody else to take payments on their behalf and then pass on the correct amount of money – payments can be made directly between the buyer and seller in a ‘trustless’ way with no middlemen.
- Easy Dropshipping: Some decentralized marketplaces offer an easy, accessible and free dropshipping option for both wholesalers and dropshippers. This means that sellers can allow other websites or apps to sell their products for them, whilst retailers can set up their own front-end to the service, choosing which of the many listed products they want to sell on to their customers.
Popular Decentralized Marketplaces
In this section an introduction to the most popular services is provided, along with a comparison of features and a consideration of their relative advantages compared to each other and as alternatives to eBay and Amazon.
Probably the most well-known and popular service available today, OpenBazaar is built on top of the BitMessage protocol and uses Bitcoin for payments. After receiving $1 million in seed funding from an angel investor, the service is undergoing rapid development and improvement.
The code which runs OpenBazaar is open source and available for anybody to check and review.
There are no fees charged by OpenBazaar, meaning that it is usually free to buy and sell anything using OpenBazaar. In order to ensure the safety of both buyers and sellers a moderator system is used. You select your own moderators and they only charge a fee if there is a dispute they need to resolve. At the moment there are even some moderators offering their services for free.
Learn more and get started from the OpenBazaar website or take a look at our new article on OpenBazaar for sellers.
Syscoin is an ‘altcoin’ or alternative digital currency, which has its own decentralized marketplace built directly into the coin’s blockchain.
Like OpenBazaar, this service includes escrow services and a reputation system to protect both buyers and sellers.
Because all offers are listed on a public blockchain, Syscoin can offer a number of features which are not available using OpenBazaar. One of the most interesting of these is the reseller option which is currently under development, and which is aimed at the extensive global dropshipping market. This will allow sellers to choose whether or not to allow other people to resell their products, to set a commission to pay these resellers, and even set whitelists of approved resellers.
Even before that however, anybody can set up their own front-end website and choose which of the products listed on the public blockchain that they would like to display to their customers. In the future this will also help the Syscoin market to overcome one of its greatest obstacles – the fact that all products must be bough and sold for Syscoin itself, a currency which is not as widely used as something like Bitcoin. Front-end website owners will be able to set up sites that take payment through other methods, whether that is Bitcoin or Paypal or credit cards, include their own-mark up to pay their costs and earn a profit, and then pay for the products via the blockchain using their own pool of Syscoin. They will also be able to filter out certain types of products, meaning that there can be an open marketplace where anything goes on the blockchain itself, but at the same time there can also be cleaner shopping websites which do not display illegal items.
Other features include price-pegging, so that sellers can list items for ‘$5 worth of Syscoin’, for example, rather than having to price their products in a volatile cryptocurrency, anonymous payments, and the ability to set listings which expire in a fixed period of time after which they are ‘pruned’ or deleted from the blockchain.
Learn more from the Syscoin website.
BitHalo & BlackHalo
BitHalo and BlackHalo are essentially the same piece of software – you even download and install the two together, but the first one uses Bitcoin whereas the second uses Blackcoin. The system is based around ‘double deposit smart contracts’, which actually have a wide range of uses beyond online shopping: from hiring freelancers to currency exchange.
Using these double deposit smart contracts both the buyer and seller put money into a contract program, which only pays out if they both agree that it should by signing a transaction. They are time limited, and if an agreement is not reached within the time limit the coins are lost. This ensures that neither party has anything to gain by trying to cheat the other one. If the seller doesn’t deliver, for example, they don’t get the payment and they also lose their own deposit.
The system also features its own encrypted email system, the ability to send and receive digital currency to an email address rather than a cumbersome public key which can be difficult to share, joint accounts with multi-signature functionality, barter and direct trade options, and more. It can take a bit longer to go through the initial learning curve to get started with BlackHalo compared to some of the alternatives, but its worth doing.
You can find more information about this on the BlackHalo website
The NXT marketplace is built onto the blockchain of the popular NXT altcoin. Like the Syscoin market it allows items to be listed directly onto a public blockchain, which means that various front-end websites have popped up displaying a selected range of products and providing an alternative interface through which customers can do their shopping.
Unlike Syscoin, however, the NXT market is only designed for buying and selling digital products. If you want to sell your music, ebooks, software and the like then this is well worth looking into as it is very easy to use and is based on one of the most popular digital currencies, but you cannot currently use it to sell physical products.
Learn More on the NXT Website
I don’t quite understand the advantage. If a transaction is complete, but the seller doesn’t ship the item, you have no arbitrator to resolve the issue, correct? Also, most manufacturers of products use Amazon for serving product information and advertisement, product descriptions, returns, and so many other features that the manufacturer doesn’t really want to implement themselves, so using something like a decentralized service, all manufacturers would have to facilitate all the benefits that a company like Amazon offers. Am I missing something?
Escrow protects the buyer – if the seller doesn’t ship the item then the buyer doesn’t release the funds and it is up to the escrow to decide who should get the money. Tbh I am not familiar with using Amazon to serve produce information and advertisement – you mean Amazon hosts this information for use in other places or do you just mean the information displayed on Amazon itself?