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Decentralized Markets Kills E-commerce Stars: OpenBazaar

Op-ed - Decentralized Markets Kills E-commerce Stars: OpenBazaar

Last week I spoke with Mr. Knuckle, the developer of the decentralized market “NXT FreeMarket.” Now I’m pleased to interview Angel Leon and Brian Hoffman, developers of “OpenBazaar,” another disruptive decentralized market.

Ferdinand Reyes:First of all, can you explain to me which are the possibilities and how OpenBazaar works?

Angel Leon: It wasn’t until the birth of Bitcoin that electronic decentralized commerce was possible.

In July 2001 the fall of Napster gave birth to a revolution in peer to peer file sharing, the technology sector learned the dangers of censorship and several peer to peer file sharing protocols were born: Gnutella, Fast Track, eDonkey, Direct Connect and ultimately BitTorrent.

The peer to peer file sharing community always knew that peer to peer could do a lot more than just file sharing – it was always the dream, being able to let people trade digital goods in a distributed fashion just the way people were free to trade files – but this wasn’t possible until the Blockchain technology was created.

Now we have peer to peer cash, and a few years later Bitcoin evolved to support multisignature transactions, which can be used for different purposes, most importantly for escrow transactions.

All the pieces were now in place to put together the first decentralized market place in the world. For the first time in history, it will be possible for any two people in the planet to trade with one another without depending on any institution: all they will need is an app, and they will do the trading using electronic contracts which we call “Smart Contracts” that can allow the parties involved to enforce agreements electronically.

The most simple agreement there is is the purchase of goods, but this is just the beginning. New templates for more advanced contracts are being designed by the OpenBazaar team and it will be possible to do things like Insurance Policies, P2P Insurance (think now that instead of getting insurance from one provider, you could have thousands of underwriters distributing your risk in very small chunks), Crowdlending, Crowdfunding, P2P renting (decentralized Uber, decentralized AirBnb), Whole sellers trading directly with retailers across the world and being able to find each other and transact without incurring listing fees or currency exchange inneficiencies making global trade more efficient than ever, or simply being able to list and sell anything you’d want to sell to others just by using an app.

Never in the history of mankind has commerce been as convenient and direct. If we suceed, we’re not just transforming ecommerce, we’re transforming commerce as a whole.

FR:This year we’ve seen a lot of dark markets taken down by the police. What opinions do you have about these centralized markets under Tor network? What system does OpenBazaar use for maintaining anonymity on the net?

AL: Centralized systems are single points of failure, and anonymizing networks like Tor don’t seem to stop well funded police forces.

OpenBazaar’s goal is not to create a decentralized market for illegal activity. Being a p2p network it’s impossible to take the network down as a whole, but it’s certainly easier going after the individuals breaking the law.

We’re trying to transform commerce, not create illegal marketplaces. Users on OpenBazaar exchange information using encryption keys and their real world identities are not required, they use pseudonyms to trade, and if they chose to tie their pseudonyms to their real world identities that’s their option. Most will realize that in order to trade, having a good reputation is key; having a real world identity to go along with your store will give your buyers a great deal of trust to buy from you.

FR:What is your opinion about the possibility of drugs vendors in OpenBazaar?

AL: In my opinion if you plan to risk your freedom by selling drugs on a PEER to PEER network, using a PUBLIC LEDGER, you better think twice. This is particularly true after seeing that individuals running market places using state of the art anonymity/encryption tools did not escape from law enforcement.

FR:How I can be sure that OpenBazaar is secure?

AL: At this point you really can’t; the software is still at very early stages. What we can tell you is that the software is completely open and there’s a lot of very smart and talented folks from all walks of tech-life: many in the fields of computer security, encryption, cryptocoins, peer to peer, web development putting a lot of work into making this a world class product.

FR:What are Ricardian contracts?

Brian Hoffman: They are simply human understandable structured electronic documents that describe some kind of economic exchange or agreement (i.e. Contract). You can see more detailed info here (, but they basically are the cornerstone of making OpenBazaar so flexible while substantiating and defensible in a court or arbitration if a problem exists. Washington could provide more info if you like.

FR:What are the differences between NXTFreeMarket and OpenBazaar?

AL: I’m not very familiar with NXTFreeMarket except it uses the NXT blockchain; from what I see on their website there’s a few fundamental differences:

OpenBazaar works with Bitcoin/bitcoins, which is the most established, secure blockchain and widely accepted cryptocurrency in the world.
OpenBazaar is an open source project.

We have a transparent team of publicly identified developers. Their website just shows 3 pseudonyms representing their team. For me as a legitimate shopper/seller this doesn’t inspire much trust, not to mention that I have to use another coin with a mere $22 million dollars in marketcap with a daily trading volume that’s 0.23 of Bitcoin’s.

I wouldn’t put my store on that platform, I think I wouldn’t be selling much there, I wouldn’t know how secure it is, nor would I be able to try to fix it myself if I found an issue.

FR:Leaving aside the decentralization, why is OpenBazaar revolutionary compared to eBay and other traditional markets?

AL: OpenBazaar is free, you don’t need to pay a listing fee to list as many products as you have to sell, and when you sell your products your transaction costs are minimum compared to the ones you pay in those traditional markets, which have business models that either charge you a commission, or a monthly fee to have your store up and running. With OpenBazaar you list your product, and you transact directly with your customer; all you might have to pay is a minimum arbitration fee (which will be set by the marketplace and competition, not a centralized entity with power to dictate a non-negotiable price, and which also passes down their overly expensive merchant fees, aka, credit card fees) and the Bitcoin miner transaction fee which is just cents (no matter what amounts you transact, small or large)

The possible scale of OpenBazaar will bring ecommerce to countries that still have not experienced what these traditional marketplaces have brought to industrialized nations. Hundreds of millions of people in Latin America will be able to trade locally and internationally, the same for every other country, bringing in job creation and a more competitive and globalized market place. I’m a strong believer that commerce brings peace among nations. Now everyone on the street, on every city and every country will be a potential trading partner on the network. I think we’ll truly help make the world a better place.

FR:In OpenBazaar, can we only use BTC or is it open to other currencies?

AL: As of this moment it works only in BTC. If any other cryptocurrencies need to be added they will have to conform to similar protocols used to integrate Bitcoin support in the system (wallet addresses, multisignature transactions, blockchains), it will be up to the developers of those currencies or parties interested to submit system enhancements that enable OpenBazaar to transact in other currencies. As of this moment, we’re very focused on the number one cryptocurrency as we believe it’s the one most people will have to buy products, and the one most people will want to accept.

Cryptocurrencies are still in their infancies, and we want to focus first on having a full featured product to then think of ways to allow for such integrations in a painless manner (think WordPress and plugins)

FR:Do you think that all the Silk Road & dark market users will use decentralized markets in the near future? What about eBay users?

AL: We can’t really say if dark markets will make the shift. I think some people might be crazy enough to try and use OpenBazaar for such purposes and they’ll likely be caught. We’re building a product for legitimate trade with pseudonymity, privacy, trust and security in mind, we’re not building a 100 anonymous decentralized market place. eBay/Amazon users and sellers I believe won’t be able to resist OpenBazaar if we do a good job.

FR:How can I install OpenBazaar and start buying & selling products in this platform? Is the platform ready for commerce? Are there any fees?

AL: Check out and our github repository at

It is not ready for commerce although you can try at your own risk, there are some stores out there already selling products at their own risk. We’re still working on core functionalities and you will find the user interface rather raw at the time, we’re currently working on a much simpler, friendlier shopping/selling experience.
No fees for listing, or selling at the time, just miner fees.