OpenBazaar – the decentralized marketplace
OpenBazaar is a new and intresting project about to get released to the Bitcoin public. As you can see in the video a non-restricted free to use marketplace environment is being worked on right now. We asked the Operations Lead for OpenBazaar Sam Patterson, a few questions about what can users expect from the project and what might lie in store for the future.
Which kind of new options will merchants and customers receive from the OpenBazaar compared to ebay or Amazon?
Using OpenBazaar, merchants will not need to pay the sellers fees and PayPal fees, and they don’t have to follow the rules of a particular marketplace for what items they can list. Both the merchants and the customers will also have the ability to choose their own arbitration. Right now, if you use an ecommerce platform and run into a problem, you may not get very personalized or quality dispute resolution. OpenBazaar will have a market for arbitration, so people will be able to choose who the third party is based on reputation and ratings.
What kind of products you imagine would be the first to hit on the virtual shelves of the OpenBazaar?
We think the first use case will be something like BitMit was, where the bitcoin community has a platform to buy and sell goods among themselves. Over time, once the platform has grown and proven itself, we expect that merchants using traditional ecommerce platforms will begin listing their products on OpenBazaar as well, due to the lack of seller fees and better arbitration.
Ultimately, we’re creating an open source platform that anyone can use, and we don’t know beforehand how people are going to use it to make their lives and their communities better. It’s exciting to consider how peer to peer commerce online could change the world.
Could explain a little about the benefits of Ricardian Contracts?
A Ricardian Contract is a way to represent goods or services digitally. In OpenBazaar, sellers create a new contract with the details of the product or service they are offering, then they sign the contract digitally. When a buyer wants to purchase a contract, they sign it as well, and then a third party verifies both parties signed and they sign themselves. All this signing means that there is an immutable record of the transaction, no party can pretend that they didn’t agree to the contract or that the terms were different than they were. This security in trade is one of the main benefits of Ricardian Contracts.
Another is their flexibility. As long as all parties agree to the contract details, you can create any type of transaction you want: fixed price goods, auctions, services, lending, crowdfunding, charity, and transactions we haven’t even considered yet.
How will the users of OpenBazaar send and receive their products they are buying/selling?
Just as they would with other platforms. Buyers and sellers communicate the details of how to finish their transaction. We’ve incorporated Bitmessage for people who want more security in their communication, but they can also use email or a simple messaging tool in the client.
What is the feature that has the team most excited?
I’m not sure there is one feature that has the team more excited than others. There are m
any features that we want to implement in the future that are exciting, such as using something like a magnet link to import contracts from existing ecommerce websites into the OpenBazaar client. Right now, we’re focused on getting a simple product into beta so we can get feedback from the community on what they need. We’ll be putting out new beta versions each month, until we are ready to launch a full release, which will be ready for businesses themselves to list products on.
Proof-of-burn is a term used to describe the intentional and provable destruction of bitcoin for a particular purpose. When engaging in a proof-of-burn, funds are intentionally sent to an address that is unspendable, meaning those coins are gone forever.
Why would someone destroy bitcoin on purpose? In the past, this has primarily been used to bootstrap one cryptocurrency from another. Distribution of a new cryptocurrency can be determined by people burning their coins in exchange for the new currency, thus showing they are invested. For an example of this, read through Counterparty’s explanation of their proof-of-burn.
OpenBazaar implements proof-of-burn in a different way. On the OpenBazaar network, users can choose to be pseudonymous, meaning you don’t know their true identity. As such, it can sometimes be difficult to determine if they are trustworthy or should be avoided. A reputation system is important to help inform the network of which participants have acted honestly in the past, and which haven’t. There are several facets to the OpenBazaar reputation system, which is still being built, and you can read about the overall system here.
One part of this system is Reputation Pledges. This means that a user has chosen to prove their commitment to their OpenBazaar identity by burning a certain amount of bitcoin. The act of burning coins shows the network that the user is committed to their identity because they’ve now expended resources on it, and if they incur a negative reputation then those resources will have gone to waste.
To help understand the importance of this, consider a similar example in the real world. Travelling salesmen were often treated with skepticism by the inhabitants of the towns they visited. Apart from the annoyance of their house calls, why would people be reluctant to purchase items from travelling salesmen? Two reasons. One, they cannot rely on reputation to determine if the salesman is selling quality merchandise or not; the other customers of this salesmen aren’t located nearby. Two, the salesman has nothing to lose if their products turn out to be poor quality – there is no reputation damage if they leave, and since there is no brick-and-mortar store they’ve invested in, they can simply peddle their wares elsewhere.
You can think of it similarly to OpenBazaar users. If there’s no cost to creating a new identity, or if there is no brick-and-mortar store to keep you in one place, you can simply abandon an identity once it has received negative feedback. Obviously online, you don’t have a physical store, but a Reputation Pledge is a similar concept: you’ve invested resources that create an incentive to keep a good reputation and impose a significant cost for abandoning that reputation.