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OpenBazaar Receives $1 Million in Funding from Top Investors to Launch Decentralized Marketplace

Op-ed - OpenBazaar Receives $1 Million in Funding from Top Investors to Launch Decentralized Marketplace

OpenBazaar announced that it received $1 million in seed funding from Union Square Ventures, Andreessen Horowitz, and angel investor William Mougayar to develop the OpenBazaar protocol and client.

OpenBazaar is an open-source project to create a decentralized network for peer-to-peer (P2P) commerce online – using bitcoin – that has no fees and cannot be censored. It can be seen as a distributed, decentralized version of eBay powered by P2P technologies such as BitTorrent and Bitcoin.

“OpenBazaar is a different approach to online commerce,” states the OpenBazaar website. “It puts the power back in the users’ hands. Instead of buyers and sellers going through a centralized service, OpenBazaar connects them directly. Because there is no one in the middle of the transactions, there are no fees, no one can censor transactions, and you only reveal the personal information that you choose.”

Decentralization – the absence of a central server that can be attacked, shut down or seized by hostile agents – is an important feature of OpenBazaar. While Napster, a pre-BitTorrent file-sharing Internet service popular between 1999 and 2002, had its servers seized by the authorities and shut down, the decentralized BitTorrent technology proved much more resilient because it didn’t rely on central servers. Similarly, the history of Silk Road shows that online marketplaces can become resilient only by abandoning central servers in favor of decentralized protocols.

Another stated goal of the OpenBazaar team and its new investors is to build the first business on top of the OpenBazaar network. The business, dubbed OB1, will offer services to OpenBazaar users, and aims to bootstrap adoption of decentralized commerce by offering services such as dispute resolution, store hosting, and more. The OpenBazaar protocol and client will continue to be open source, MIT licensed, distributed and free.

“OpenBazaar is intriguing,” notesThe Wall Street Journal. “It’s using two key technologies, file-sharing software and bitcoin, to produce a sort of decentralized eBay, where buyers and sellers will interact directly and private data will be kept private. The platform works using BitTorrent file-sharing software and bitcoin to create a decentralized network of buyers and sellers. There is no middle-man, and no user fees. It is completely open.”

Amir Taaki and other developers created the first OpenBazaar prototype, known as DarkMarket, in April 2014 at a Toronto Bitcoin Hackathon, as a proof of concept in response to the seizure of Silk Road in October 2013. Taaki compared DarkMarket’s improvements on Silk Road to BitTorrent’s improvements on Napster. Indeed, BitTorrent, the father of modern approaches to a decentralized Internet, proved to be a fast and fully operational replacement for Napster without the critical weakness of depending on a central server.

Soon after DarkMarket was revealed at the Hackathon, developer Brian Hoffman forked the project and renamed it OpenBazaar. While the project is aimed at decentralizing general-purpose marketplaces like eBay, it seems likely that it will be used for illegal operations as well, which the decentralized nature of the platform will make very hard to shut down.

But OpenBazaar itself is just software, it’s “agnostic,” Hoffman says. The users themselves will determine what gets sold there.“It’s what comes with the territory," Hoffman said. "Bitcoin has the same problem.”