A decentralized marketplace provides a way for its users to trade directly with each other using a peer-to-peer network. There is no central website or other retail location. Instead, there is a distributed public network run by its users, over which listings and offers are broadcast and trades are completed. Anybody can view and access this network using an appropriate piece of software, or perhaps even create their own software!

Purchases are usually completed using a digital currency such as Bitcoin, which is also peer-to-peer and decentralized.

Please take a look at Decentralized Marketplaces: The Best Alternative to eBay and Amazon for a more information about the advantages of using this kind of system for selling your products or doing your shopping.

How Decentralized Marketplaces Work

There are two quite different methods which are used to create decentralized marketplace software.

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.

The second method is to build markeplace tools directly into the blockchain of a digital currency. Examples of this include Syscoin and Sling Road.

Users of decentralized marketplaces are usually able to remain pseudonymous – meaning that they do not need to supply identity information or even their real name. Because there is no central authority, nobody can control listings to decide what can be sold and what cannot be sold, or remove listings which they do not like. Because of this decentralized marketplaces are often seen as possible successors to the ‘black markets’ of the deep web, sometimes known as ‘dark markets’.

The main problem which developers of these services needed to overcome was the issue of trust. If you send money to some random stranger over the internet who hasn’t even supplied his real name, how can you trust that they will actually send you the product in return? Two methods are commonly used to protect buyers.

Escrow services involve a third party who must sign a multi-signature transaction in order for payment to be released. If the buyer and seller both agree that everything is fine this is not needed, but if there is a disagreement then the escrow agent’s vote will decide whether the merchant gets paid or the buyer gets refunded. Essentially this is how centralized sites like eBay and Amazon work – they act as an arbitrator between buyer and seller. The only difference is that in this new model, the buyer and seller can choose between different escrow agents according to who they trust and on what terms they want decisions to be made.

The second method used to protect consumers is a reputation system. Sellers do not need to supply their real name in order for there to be consequences to mistreating customers. A solid reputation system places a high value on keeping your customers happy, because trusted sellers get more business and may even be able to charge more.

Check out these links to learn more:

Decentralized Marketplace List

Here is a list of known software, both complete and under development. I cannot guarantee that this list is complete and comprehensive:

OpenBazaar (Beta)

Syscoin (Beta)

NXT Marketplace (Digital Goods Only)

Slingcoin’s ‘Sling Road’ (Beta)

Shadowmarket (Under Development)

Cloakcoin’s ‘One Market’ (Under Development)

 

« Back to Glossary Index