Move over eBay: Countdown to OpenBazaar and the decentralised marketplace revolution

This December decentralised market place OpenBazaar is set to go live. OpenBazaar is an open source protocol which anybody can use. By virtue of the fact that it's decentralised, OpenBazaar is not limited in any way. It means people can own their own data as well as pay in bitcoin instead of risking credit card fraud. It also allows traders to deal directly with customers, rather than being kept separate by an intermediary like eBay.

Instead of paying someone 10% fees to monitor and arbitrate, this task is done by reputable actors who moderate when called upon and can earn tips in bitcoin from doing so. The aim is to create a general working and earning ecosystem for all participants, upon which other businesses can be built.

Brian Hoffman, CEO of OpenBazaar's operating company OB1 and the protocol's lead developer, has pointed out that originally eBay was this vision of a perfect marketplace where people would balance prices between one another. But this notion became distorted when lots of investors piled in, the company went public and so on.

OpenBazaar also has investors – some pretty heavyweight ones. Back in June, it received a $1m funding round from Andreessen Horowitz and Union Square Ventures. They were joined by angel investor William Mougayar, who also sits on the board of OB1.

Hoffman said the last year has been spent building a new version of the software. He told IBTimes "Rewriting the software from scratch began in April of this year to accommodate all the dark market issues that we came up with over the last year. In December we plan to release the full version for everybody."

Hoffman must be tired of talking about the project's dark roots at a fabled hackathon in Toronto, particularly since he has entirely revamped the thing and given it a new name.

"They [the hackthon's winners] published what little code that they had developed and we forked it and started a new project on top of it without the old developers or anybody involved with that. And that became OpenBazaar.

"The guy who came up with the idea, Amir Taaki, was blunt about the fact that he was trying to create a Silk Road that couldn't be shut down – that was the idea behind the proof of concept, hence the name Dark Market."

OB1 board member and investor Mougayar said: "I was in that room in Toronto when Taaki and the guys from Airbitz created it. But then Brian within a month contacted him and took it in a very different direction.

"When people hear OpenBazaar they think Dark Market but it has nothing to do that. They rewrote most of the code. I was very interested in it because my background was e-commerce; I was already chronicling peer-to-peer technology in 2001.

"In OpenBazaar I saw the combination of e-commerce, peer to peer and the blockchain together. I see the potential and Brian sees the potential. The whole team is amazing they have been working on it for over a year."

Paul Puey, CEO of Airbitz, added: "Our involvement was in the initial genesis of OpenBazaar which was Dark Market. Two of the Airbitz co-founders, William Swanson and Damian Cutillo, were on the Toronto Hackathon team that worked on Dark Market and won first place. Dark Market was soon forked and became OpenBazaar. We were happy to see Brian take the project and move it forward."

Hoffman explained there are essentially three different types of people on the OpenBazaar network: buyers, merchants and moderators. A traditional eBay-type marketplace, by contrast, keeps buyers and sellers essentially blind to one another on either side.

OpenBazaar uses 2 of 3 multi-signature technology to sign off transactions, to ship goods and then release funds that are held in escrow. A third party moderator would be the holder of a private key but would only be called upon where necessary.

"For money to move out of an account it has to be agreed upon by at least two of the three people. If there is a problem between a buyer and seller, a moderator can step in, examine the situation and decide where the money should go.

"This differentiates OpenBazaar not only from eBay, which is the ultimate arbitrator in all cases, but also from the dark market place model, where money in escrow is ultimately controlled by the marketplace.

Hoffman namechecked Augur, the decentralised prediction market built on Ethereum, which uses reputation tokens. "We are doing it a little bit differently, where the reputation ratings are actually stored in the blockchain. You can query the blockchain and find the ratings and generate the reputation that way but it's not actually using coins to do that."

The decentralised escrow accounts at the heart of the protocol are based on the Ricardian contracts model first proposed by computer scientist Ian Grigg back in the 1990s. These digitally signed contracts have the advantage of being easily readable by people, like a paper contract, while also being readable by computers.

Hoffman said that once OpenBazaar has garnered a good base of users, OB1's revenue model might include "providing additional services to them, such as very professional moderation services, identity vetting, things that maybe more serious merchants would need in order to take OpenBazaar seriously. Those are the areas we are focusing on but we haven't even begun working on that yet."

In terms of censorship resistance, Hoffman pointed out that nefarious services are not confined to peer-to-peer environments or decentralised platforms. Craigslist is often used for drugs and prostitution, for instance.

Hoffman said: "Our thoughts on this are that we are not building a tool that explicitly supports one niche area like illegal goods. We hope that if that's what users are looking for they will go to those places that cater to them. The idea of the marketplace is just to be open and flexible and let the users decide how that happens.

"In terms of reputation, we have built pieces into the protocol that allow you to say whether your market place is not suitable and our client will have ways to filter out things and block lists and stuff.

"So I think users will be able to control their experience fairly well, but there is nothing at the core protocol level that says we are going to try and stop certain things from happening. It's an open and free network.

"That being said, we don't support anonymiser technology like Tor or I2P, at least at this point in time. From a security standpoint you would be pretty exposed I think if you did try to do something illegal. It wouldn't be too much of a challenge for somebody in law enforcement to track you down if you did do it.

"So it's certainly not something we are coming out of the gate and saying 'do whatever you want - you are safe'. That's not the case. It's an open and free network - you do that at your own risk," said Hoffman.

In addition to OpenBazaar, might we expect to see an increase in decentralised marketplaces using Ethereum and its smart contracts capabilities? Dr Aeron Buchanan, a researcher at Ethereum, noted in a blog post that one day credit card companies could interact with an Ethereum contract, as they do with eBay today.

Buchanan wrote: "We can start with simply having a signed instruction sent to the escrow contract from the seller when the goods are sent, and then by the buyer when they are received. This could be made more robust by having the postal service send a signed instruction that the goods have been delivered.

"When disputes do arise, a 'real-life' arbitration procedure does need to exist as a back-stop. Contracts can be programmed to response to signed instructions from pre-agreed arbitrators to resolve dead-locks.

"In fact, there is no reason why judicial bodies should not be added as the final decision-makers, so Ethereum contracts can be made to respond to court rulings in a much more direct way than the current process of issuing orders that others must then act upon."

Mougayar added: "There's nothing that would prevent OpenBazaar to have a linkage to Ethereum. There is going to be more and more interoperability between blockchains.

"Once the protocol is out there, it's going to be in the wild; unstoppable like Ethereum. I mean who owns the network now - everybody and nobody. The network is in the wild."

IBTimes reached out to eBay for its opinion on decentralised markets. A spokesman said this sounded rather far off in the future.