{"id":5468,"date":"2017-04-12T10:59:06","date_gmt":"2017-04-12T14:59:06","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/openbazaar-using-the-power-of-blockchain-crowds-to-disintermediate-amazon\/"},"modified":"2017-04-12T10:59:06","modified_gmt":"2017-04-12T14:59:06","slug":"openbazaar-using-the-power-of-blockchain-crowds-to-disintermediate-amazon","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/openbazaar-using-the-power-of-blockchain-crowds-to-disintermediate-amazon\/","title":{"rendered":"OpenBazaar: Using the power of blockchain crowds to disintermediate Amazon"},"content":{"rendered":"

Open-source projects — like the decentralized marketplace OpenBazaar — use crowds and\u00a0the blockchain to create trusted peer-to-peer relationships for commercial transactions. The OpenBazaar\u00a0marketplace removes the centralized, data-hoarding, fee-charging middlemen\u00a0(e.g. Amazon, Visa etc.) from the transaction and instead, buyer and seller interact with each other directly. OpenBazaar merely mediates. “No fees, no restrictions, no accounts to create and you only reveal the personal information that you choose.”<\/p>\n

Today, most e-commerce is conducted on centralized, siloed platforms (e.g. Amazon, eBay). If you want to interact with the platform as a buyer or a seller, you have to play by the platform’s\u00a0policies,\u00a0relinquish your personal information and pay fees to the platform.<\/p>\n

Don’t like it? OpenBazaar provides\u00a0another way.<\/p>\n

How does OpenBazaar\u00a0work?<\/strong><\/p>\n

 <\/p>\n

\"\"<\/a><\/p>\n

 <\/p>\n

At risk of oversimplifying…<\/p>\n

OpenBazaar connects and disinterestedly mediates the relationship\u00a0between buyer and\u00a0seller. For example, let’s say I wanted to sell my car.\u00a0I list it on OpenBazaar and the listing\u00a0is sent out to the peer-to-peer network of OpenBazaar users searching for a car like mine. Once we agree on price, OpenBazaar creates a digital contract, using a\u00a0bitcoin escrow account\u00a0and\u00a0third party moderator that we both trust (i.e. another objective user in the network\/crowd.)<\/p>\n

The\u00a0buyer sends the\u00a0funds\u00a0in bitcoin to the\u00a0escrow and I’m notified the funds have been sent. Then\u00a0I ship the car to the buyer and once the buyer confirms receiving the car\u00a0in proper condition, the escrow\u00a0releases the funds to me.<\/p>\n

The underlying digital contract requires agreement between\u00a0two of the three parties (buyer, seller, moderator) in order for the funds to be released. So, in the case of a dispute where buyer and seller disagree on how the funds should be released,\u00a0the moderator decides which party to side with and either completes or\u00a0cancels the transaction, releasing the funds\u00a0to buyer or seller accordingly.<\/p>\n

 <\/p>\n

Incentivizing and managing the crowd<\/strong><\/p>\n

The users on the OpenBazaar network are incentivized to participate because they have greater freedom than they would on other e-commerce platforms: the policies for are less restrictive, they don’t have to give up personal information that could be stolen from or sold by the platform, and they don’t have to pay any fees to the platform. However, given its nascent state,\u00a0OpenBazaar has\u00a0a lower volume and variety of items and users in the crowd, so buyers and sellers may be forced to use the incumbent platforms.<\/p>\n

With respect to managing the crowd, the escrow plus\u00a0moderator system elegantly resolves disputes between peers in the network. \u00a0The blockchain provides for anonymity and trust, and makes such a “platform-free” e-commerce marketplace possible.<\/p>\n

 <\/p>\n

Value creation, value capture and growth potential<\/strong><\/p>\n

The value creation is obvious, as OpenBazaar improves on Amazon in the areas of\u00a0policies, personal information and fees. Users have more freedom, are more secure, and pay less.<\/p>\n

Value capture is limited to the buyer and seller, who benefit from the value created and save time and money. As a project, OpenBazaar does not appear to capture any value, except in brand equity as a trusted place\u00a0for\u00a0peer-to-peer e-commerce. That said, because there is no centralized intermediary operator, there is potential for the value created to\u00a0be more equitably distributed across those who contribute to the value creation (e.g. those contributing to the project and maintaining the OpenBazaar network.)<\/p>\n

Right now, with such\u00a0clear value creation, the growth potential is high but not without its challenges…<\/p>\n

 <\/p>\n

Challenges<\/strong><\/p>\n

The primary challenge OpenBazaar faces is user adoption and reaching a critical mass of items for sale. Right now, the audience is primarily developers and early technology adopters. The majority of internet\u00a0users are\u00a0skeptical and distrustful of bitcoin for many reasons, including that it is difficult to explain and understand, it has a slew\u00a0past high profile heists<\/a>\u00a0and it has\u00a0dramatic price volatility<\/a>. Subsequently, the low consumer trust and slow adoption of bitcoin extends to the underlying\u00a0blockchain technology. The perception of high technical barriers to entry is enough to send curious technology adopters back to the familiar Amazons and eBays to conduct their e-commerce.<\/p>\n

However, it does seem only a matter of time until these communication, usability and trust issues are resolved and blockchain pervades our everyday lives. At that point, perhaps we may\u00a0see widespread disintermdiation of seemingly untouchable platforms like Amazon. \u00a0When, and to\u00a0what extent\u00a0will Amazon get disintermediated? Time will tell.<\/p>\n

 <\/p>\n

https:\/\/blog.openbazaar.org\/what-is-openbazaar\/#.WO2aM1PyvEZ<\/p>\n

http:\/\/gizmodo.com\/the-6-biggest-bitcoin-heists-in-history-1531881137<\/p>\n

https:\/\/hbr.org\/2017\/03\/what-blockchain-means-for-the-sharing-economy<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

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