Breaking Boundaries: How Decentralized Marketplaces are Changing the Game
A decentralized market is a network that doesn't depend on any intermediary. Since these marketplaces are built on Blockchain technology instead of intermediaries, transactions are done through smart contracts. Smart contracts are also responsible for managing the rules and regulations of the decentralized marketplace.
You will have access to a decentralized marketplace basically from everywhere on the web: your mobile phone, computer, or tablet. Look through our table of content to dive deep into decentralized marketplaces.
DLT/blockchain enables the establishment of trust among all parties involved with the operator of a platform. The security of blockchain transactions depends on their irreversible nature, which prevents modifications or deletions by the platform admin. Disregarding the preferences of the operator or the state of their systems, the person in question will automatically receive timely information about their operations, which they may employ to defend their legitimate claims.
The high degree of transparency
Customers generally rely on reviews and ratings when choosing what to purchase. The employment of blockchain software eliminates the possibility of hiding information, giving buyers truthful and clear insights into product origins and providers.
Simplification of the trading process
These digital agreements can serve as an economical solution for streamlining transactions during online commerce. This is especially true for cross-border transactions: A smart contract governs the execution of agreements according to predetermined benchmarks (such as the delivery of merchandise to the buyer or the computation of penalties for delays), while also providing a means of settling disagreements and evaluating parties involved in business dealings.
Savings on transaction costs
This mechanism enables the use of tokens to purchase items utilizing digital currencies, as well as to document and net transaction costs to minimize payment amounts and only settle balances for a given time frame. Safeguarding settlements by reserving either digital or physical assets is vital. Employing the marketplace allows the platform owner to shoulder these charges unassisted.
What are Decentralized Marketplaces?
Decentralized Marketplaces enable transactions between parties operating on their own accord, independent of external oversight. Without intermediary involvement, houses, hot sauces, and t-shirts can be traded between individuals.
At its heart, it establishes a direct connection between consumers and suppliers. A smart contract or program takes charge of critical tasks, including trade execution and funds release, rather than a human.
When both sides comply with the agreement, the program will complete the transaction without human intervention. These platforms are impervious to censorship and rely on trustless interactions. By using cryptocurrency, these individuals profit from a comprehensive and non-stop payment network.
A Short History
Early internet marketplaces have managed to endure and remain popular even two decades after their launch.
The Silk Road was launched in 2011, and it is not a truly decentralized marketplace, but many users pay using Bitcoin.
One of the oldest and most esteemed decentralized marketplaces, OpenBazaar, has its roots in a hackathon project from April 2014 in Toronto, known as "Dark Market," which later evolved into the current OpenBazaar platform.
Syscoin is a decentralized platform that spotlights the development of marketplace applications, with its inception occurring in April 2014.
Centralization separates marketplaces based on whether they require intermediates. When bypassing middlemen, fees become redundant in certain instances. The marketplace's regulations are openly conveyed, and changes must have users' consent.
By incorporating review systems, reputation tracking, and dispute mediation, decentralized platforms become more akin to traditional marketplaces while boasting higher transparency and reduced charges.
One of the prominent marketplace blockchains is Syscoin. It is a blockchain network that utilizes a built-in platform for e-commerce and marketplaces. Clients can benefit from Syscoin’s blockchain applications.
It has high transaction speed as well as security because it is combined with Bitcoin. Furthermore, Syscoin is compatible with other blockchains utilizing the Syscoin Bridge.
OpenBazaar acts as a peer-to-peer application or directly connects application users who want to trade. It has many of the advantages of blockchain.
For example, not relying on a central authority, a central database, or intermediaries, but it is only for e-commerce and transacting trade, so there is no need for complex consensus algorithms or miners.
OpenBazaar also has no fees or restrictions on use. Anybody can download the software and begin trading. OpenBazaar operates cryptocurrencies such as Bitcoin, Bitcoin Cash, Zcash, and Litecoin.
Decentralized marketplaces exist through a platform or protocol, so developers can create tools allowing other people to build their peer-to-peer marketplaces.
Origin Protocol and the Origami Network are based on the Ethereum blockchain, utilizing this approach. By building smart contracts and a system of standards, these platforms allow anyone to develop their decentralized marketplaces.
Origin Protocol and the Origami Network allow users a simple way to manage listings, reviews, escrow, buyers and sellers, and ratings.
Most decentralized marketplaces have tokens to facilitate how the marketplace works. Syscoin users can create tokens on top of the Syscoin Platform - Syscoin Platform Tokens (SPT).
Origin Tokens are used for governance decisions. Origin token holders are able to involve platform decisions. The token also rewards marketplace operators, users, and developers.
Origami has an ERC20 token called ORI. ORI is utilized for solutions on a blockchain which allows lower transaction fees.
Why Use a Decentralized Online Marketplace?
A marketplace with blockchain architecture outshines its centralized brethren in terms of benefits.
A centralized company owns the platform, for example, eBay takes a fee from sales;
A singular focus on the center exposes the network to potential breaches.
The marketplace operator holds the power to alter the conditions of commerce without restriction.
It is essential to utilize external financial resources and transaction platforms.
The central authority responsible for your sensitive data may release it to trustworthy entities.
Blockchain innovation confers a distinct advantage to decentralized marketplaces. These advantages include:
A distributed database, blockchain relies on coordinated efforts from many nodes to ensure accuracy. Each has a full record of the database.
A single, singular server does not exist for hackers to compromise.
P2P networking enables sellers and buyers to connect and conduct business without any middlemen involvement.
The rules are etched into invincible smart contracts, thereby providing transparency;
The payment process uses crypto, so eliminating payment providers;
These security measures ensure that the system is protected by cryptography.
Mandatory Features in a Decentralized Marketplace
Decentralized Architecture – Decentralized architecture is the backbone of a decentralized marketplace, ensuring that there is no central point of control or even failure.
Support for multiple cryptocurrencies – To maximize accessibility and adoption, support for multiple cryptocurrencies is essential for payment.
Smart Contracts – they are critical elements for establishing automation in a decentralized marketplace
Decentralized Storage Solutions – A decentralized storage solution ensures that user data is kept private and secure.
Token-based economy - The implementation of a token-based economy can attract the attention of users to participate in the market.
User-Friendly Interface – A user-friendly interface is always critical to the success of a digital platform, so it is highly recommended.
Dispute Management – A decentralized market must have programmed dispute management. It will ensure that the handling of disputes is fair.
Analysis – It is important to monitor market performance and identify threats to focus on. Analytics and reporting functions must be implemented into the marketplace.
Review – A rating and review feature is a must in any type of marketplace app to offer feedback on a product or even the seller. So, a decentralized marketplace should have an integrated evaluation and review function.
Multiple Payment Options – convenient usage for clients is a must-have feature in a decentralized marketplace.
Key Functions of a Decentralized Marketplace
When planning the functionality of decentralized marketplaces, Agilie takes the following capabilities as a basis and adapts the plan to individual project requirements.
User-friendly interfaces designed for sellers and buyers should streamline their respective journeys through the platform.
Adding and editing product listings.
Product inventory management.
Order and return management.
Secure communication channel designed for vendor-customer interactions.
Faceted catalog browsing.
Providing a unified cart solution for various sellers.
Marketplace Transactions Verification
Marketplace smart contracts. They define user behavior depending on the input data. At the core, they manage the processes of listing, choosing, and purchasing products.
Escrow smart contracts. As payment transactions are conducted directly between sellers and buyers, without a payment provider in between, escrow smart contracts provide guarantees for the parties. Holders of the tokens should wait until the purchase is completed before they are released to the seller.
Proprietary cryptocurrency. Marketplaces can have a settlement currency developed utilizing privacy-preserving protocols, so users’ personal information won't be collected during transactions on any device.
Integration of crypto payments. You may involve other cryptocurrencies in the marketplace. With its extensive user base, Bitcoin stands out as the most adopted cryptocurrency. The unique cryptographic hash embedded within every blockchain record fortifies the security of the data.
Proof-of-individuality framework. It enables user verification to prevent fake and duplicate user accounts and the manipulation of sellers’ reputations.
Product reviews. Reviews are controlled by smart contracts, so they authorize reviews from buyers of a specific product only.
Best Use Cases of Decentralized Markets
E-commerce – Decentralized marketplaces can enable P2P buying and selling of goods and services, which will help reduce the costs and hurdles associated with traditional e-commerce platforms.
Real Estate – Decentralized marketplaces can help property buyers and sellers connect and transact directly without the involvement of a third party or agent.
Games – Decentralized marketplaces can allow players to buy, sell, or even trade in-game items directly with other players in a more secure manner and, most importantly, without any middlemen.
Supply Chain Management – Blockchain marketplaces can track goods moving through the supply chain efficiently and more transparently.
Decentralized Market Development Process
Requirements Identification and Planning – This step is to flag the problem the market will solve as well as identify the requirements for the platform.
Prototype development – A prototype market should be built to test and validate the planned solution.
Development of smart contracts – Smart contracts, self-executing contracts in which the terms are written in code, must be developed to manage transactions and interactions on the platform.
Blockchain integration – After the development of smart contracts, the market should be integrated with the blockchain, enabling decentralized transactions and optimizing the security and immutability of the platform's data.
Testing and Launching – Rigorous testing is recommended to ensure that the marketplace functions as intended. Once validated, the marketplace must be deployed on the blockchain network and made available to users.
Support – Regular market monitoring is required to identify issues and bugs to be resolved with the next update.