Educational Byte: What is a Decentralized Marketplace?

We all have bought something online, at least once. To do this, you probably used an online marketplace, instead of dealing directly with the other party. That assured you a certain level of trust because those websites are usually handled by companies that can act as neutral middlemen. And charge some fees for it, of course. In a decentralized marketplace, they wouldn’t be necessary.

A decentralized marketplace, often referred to as a peer-to-peer (P2P) marketplace, operates on a distributed ledger like Obyte. Unlike traditional marketplaces that rely on a central authority to govern transactions, this kind of platform facilitates direct and secure interactions between buyers and sellers.

Security is given by smart contracts: self-executing agreements that automatically enforce the agreed-upon terms and conditions between parties. Smart contracts guarantee transparency (anyone can consult them if the ledger is public) and ensure that both parties fulfill their obligations. So, instead of companies, we have code as a neutral “third party”.

A great example of this kind of platform was the pioneer OpenBazaar. Buyers and sellers could connect directly there, and protect their payments through smart contracts. They closed in 2021 due to lack of funding. The factors that contributed to their failure could be a small selection of goods offered for sale on OpenBazaar, an unfamiliar user experience that users would have to learn with little chance of reusing it, and Bitcoin not being widely accepted or even suitable for daily payments due to its high transaction fees. However, they’re now planning to come back with a new version.

This peer-to-peer approach eliminates the need for intermediaries, such as corporations or banks, thus enhancing security, costs, and efficiency. Besides, decentralized marketplaces use some sort of cryptocurrency to make payments. This offers quicker and cost-effective operations, available 24/7 from any part of the world, and without complex requirements for the users.

Potential Impact on Diverse Industries

As digital platforms, decentralized marketplaces offer a lot of possibilities, and they could bring a huge impact depending on their specific use. For example, in the realm of international trade, decentralized marketplaces streamline the process by eliminating the need for multiple intermediaries and complex banking procedures.

With peer-to-peer transactions facilitated by smart contracts and digital assets, exporters and importers can directly engage in cross-border trade, reducing costs and time delays. The transparency of these systems enhances trust and mitigates fraud risks by providing tamper-proof records of transactions. In other words, you could buy and sell securely worldwide, wherever it’s most convenient.

Decentralized marketplaces could also bring transformation to international remittances. Avoiding traditional intermediaries, these platforms enable faster and cheaper cross-border transactions, benefiting individuals and businesses engaged in international money transfers.

The elimination of unnecessary fees and delays improves the efficiency of financial transactions.

Beyond this, they could redefine the gig economy by allowing freelancers and clients to interact directly. Smart contracts automate payment releases upon project completion, ensuring fair compensation and eliminating payment delays. This could attract global talent and facilitate hiring freelancers from different parts of the world.

Trade with the ArbStore

Selling and buying goods internationally isn't always easy or cheaper for the parties, especially if we want to use cryptocurrencies. Luckily, the ArbStore could help us to build a new kind of hybrid marketplace where the parties would rely on smart contracts and, just in case of disputes, on humans too.

This live platform offers independent human arbiters to help you solve contract disputes, but it still uses smart contracts for every payment and dispute resolution. Arbiters are professionals registered on the platform with their real names, available to solve certain types of disputes in exchange for a fee (typically between 2% and 5%). They’re only involved if there’s a dispute to solve, though, and it’ll always be through their own wallets and smart contracts.

To use the ArbStore, the first thing you and your buyer/seller would need is an Obyte wallet. Then, one of the parties offers a contract with arbitration to the other (through the same wallet). That’s just a matter of filling a few fields (no coding involved). We can sum it up in three steps:

1. Party A and Party B discuss their contract terms externally or in the built-in encrypted chat in the wallet. For a contract with arbitration, they need to select an expert and reliable arbiter from the ArbStore and introduce their wallet address from the beginning.

   
   

2. One of the parties (A or B) offers a contract with arbitration through the chat, by clicking on the other party’s address. If the other party accepts it, the involved funds (in stablecoins or other chosen tokens) will be locked in a smart contract until the terms of the contract are met.

   
   

3. If one of the parties fails to fulfill their obligations, the other party can open a dispute and call an arbiter to resolve the issue. The arbiter ultimately decides who gets the funds, locked in the smart contract until the final decision. However, they can also be reported to the ArbStore moderators if they misbehave.

   
   

It’s this easy to use a decentralized marketplace, in the end. As the ArbStore put it, they were built for you to trust strangers, because you’re protected.