The Influence of Blockchain Technology on Online Marketplaces. What's the Future?

The coming of online marketplaces has changed the way people trade forever. Here, by trading, we mean not only selling and buying goods. There are peer-to-peer platforms both for goods and services where you can find virtually anything. Online marketplaces brought trade to a global level reducing time and distance to nothing.

Now, trade is facing another disruption, and this time it is caused by the blockchain technology. It has found its way into many industries, trade is no exception. And it seems we are witnessing another great revolution in the commerce industry that is going to move traditional e-commerce platforms aside.

What Is a Blockchain Marketplace?

The main point of a blockchain marketplace, as of anything with the attribute "blockchain", is its decentralized structure. In short, a blockchain e-commerce platform, or decentralized marketplace, has no middleman. It is run and maintained by its users with no central platform.

blockchain-technology-online-marketplace-bitcoin

The advantages of decentralization are quite numerous:

  • Distributed database instead of a common database. Any platform should have a database storing all information related to the platform operation and to all transactions performed on its basis. A common database requires constant maintenance and adoption of strict security measures. Naturally, this leads to higher costs that are eventually covered by higher participation fees.
  • Transparency. Given the lack of the central entity owning and maintaining the platform, there is no need for rules and policies specific for this particular marketplace. At the same time, since blockchain is an open-source technology, there are lots of users monitoring the data, so it is extremely difficult to tamper with it. This increases the security of the whole system, as users ensure it themselves.
  • Lower transaction costs. This advantage is directly related to the absence of the middleman in blockchain networks and to their distributed database requiring significantly less maintenance.
  • Faster transactions. Since all transactions are made within the network, there is no need to verify them with third-party institutions which may have regular working hours. Blockchain works 24/7 and is available from any part of the world and any time zone. 

How Blockchain Marketplace Works

In blockchain marketplaces, a seller directly connects to the buyer, and their transaction is performed without any third-party acting as middlemen. It may seem that sellers and buyers interact in the same way on both traditional and blockchain platforms – sellers publish their goods and buyers make the purchase. However, there are some major differences that make these marketplaces attractive to both buyers and sellers:

  • In blockchain marketplaces, all payments are made directly from the buyer to the seller with no third-party institutions in-between. The result is that payments are processed instantly.
  • No payment system is involved. Instead, all transactions are effected in cryptocurrency. This way, blockchain networks can charge very low transaction fees or, sometimes, no fee at all. Traditional peer-to-peer marketplaces can charge as much as 15% of the transaction amount (Amazon).
  • Terms of sale and marketplace usage are determined by the users rather than third parties.
  • Blockchain platforms require no personal data. Compared to traditional ecommerce platforms, such approach can be regarded as more secure. With no individual data stored in the system it cannot be compromised in case of a breach.
  • Sales terms are stated and regulated by smart contracts. Smart contract terms can be hardly amended ensuring greater trust and reliability. At the same time, in traditional marketplaces, trade terms are established by third parties owning the platform and can be changed from time to time.

Thus, basically, a blockchain marketplace is an open-source commerce platform that is owned and controlled by no-one. It supports direct peer-to-peer transactions with no third-party involvement. In blockchain, all users control and monitor their own data.

There are quite a number of blockchain peer-to-peer platforms focused on various groups of goods or services. OpenBazaar is a platform for selling and buying all sorts of items and services, from clothing pieces to apartment rentals, while Moneo is the place where freelancers find jobs directly with their prospective customers.

blockchain-technology-online-marketplace-p2p

Image credit: Openbazaar

How to Develop a Marketplace on Blockchain

Making your own peer-to-peer marketplace with blockchain can be a rather challenging task involving a number of components specific for this technology. Let’s look at the main points that need to be addressed while building a marketplace on blockchain.

Smart Contracts

Smart contracts are digital protocols that are used to establish the terms of transaction between a buyer and seller. They are stored in the format of computer code and are replicated within the system with each transaction.

Smart contracts are self-executing, thus they automatically verify the fulfillment of the specified condition and then trigger transfer of the item from the seller to the buyer. If the sale condition is not validated, then buyer receives a full refund.

Such digital contracts increase the level of trust between the transaction participants, as they prevent fraud verifying the conditions before releasing goods and money to the parties. Neither party can alter the contract which is monitored by all other users in the system. The time and costs needed to make a smart contract are greatly reduced due to the absence of middlemen, while all processing is done through programming.

blockchain-technology-online-marketplace-guidance-insight

Cryptocurrency Development

Creation of a private decentralized marketplace can involve the development of your own cryptocurrency. Although many blockchain marketplaces operate in Bitcoin, there are also hundreds of other custom cryptocurrencies, or altcoins, introduced for the purposes of a particular blockchain service. Usage of different cryptocurrencies helps to further decentralize the network. Besides, implementing a custom cryptocurrency can be a way to add certain features that Bitcoin lacks. For the cryptocurrency market, the existence of different altcoins creates competition stimulating the cryptocurrency issuers to constantly monitor and improve their coin performance.

The OpenBazaar platform that we’ve mentioned before supports transactions in more than 50 different cryptocurrencies while sellers receive payment for their goods in Bitcoin.

The Syscoin marketplace, in its turn, operates in own cryptocurrency, Syscoin, that is generally based on Bitcoin but is a different trading instrument.

blockchain-technology-online-marketplace-platform

Image credit: Syscoin

Cryptocurrency Wallet Development

In a blockchain marketplace, integrity is one of the key issues. Secure cryptocurrency management is achieved through the so-called blockchain-based wallets used for sending and receiving cryptocurrencies.

The cryptocurrency wallet development should take into account the following features ensuring the maximum security of the customer’s assets:

  • Support of both major mobile platforms (iOS and Android)
  • Implementation of cryptography mechanisms
  • Management of public and private keys enabling end users to control their wallets
  • Support of multiple cryptocurrencies to ensure flexibility of the marketplace transactions
Cryptocurrency Exchange Platform Development

If a commerce platform supports multiple cryptocurrencies, there must be a way to exchange them between users. The cryptocurrency exchange should ensure fast and risk-free currency transactions between sellers and buyers.

A cryptocurrency exchange platform may also become one of the components of a cryptocurrency marketplace trading different coins.

blockchain-technology-online-marketplace-cryptocurrency

Private Blockchain Development

A private blockchain is different from a public one in the fact that access is not open to all users but is granted upon the network starter’s permission. Private ones are usually created as enterprise solutions and they can be fully customized according to the business needs of the network owner.

A private blockchain ensures higher security due to its unavailability to external users. Also, it can greatly reduce the enterprise’s costs while guaranteeing fast and reliable transactions.

Final Thoughts

It seems that blockchain marketplaces are increasingly attracting users due to their cost-effectiveness, security, and transparency. We are witnessing blockchain platforms being created, ICOs running, new cryptocurrencies emerging. At the same time, a certain share of blockchain projects does not survive the competition and are shut down.

However, the advantages of blockchain p2p marketplaces are clear, and their future seems to be rather promising. In addition to the advantages we discussed above, blockchain platforms increase trust between buyers and sellers, as their transactions are verified by other members of the network. Another aspect is the immutability of the stored records that gives its users a sense of confidence.

Thus, if you have decided to use blockchain for your online marketplace, you are about to enter a truly mainstream market. Many companies and whole industries are embracing blockchain as a secure and effective way of doing business. So, it looks like the future of online commerce platforms is going to be distributed, decentralized and truly global.

↑ Go up

Similar post