OpenBazaar Co-Founder Explains Why Web 3’s Answer to eBay Folded Its Tents

The P2P marketplace was backed by powerhouse VCs Andreessen Horowitz and Union Square Ventures. Brian Hoffman candidly reflects on where it went wrong.

AccessTimeIconJul 15, 2021 at 5:15 p.m. UTC
Updated May 9, 2023 at 3:21 a.m. UTC

For those who believe in the power of cryptocurrency to create Web 3.0, the demise of OpenBazaar this year came as a disappointment.

On Jan. 4, the project’s leadership announced that OB1, the for-profit company that developed the OpenBazaar open-source software, would cease supporting the marketplace’s wallets, APIs, search engine and website. Since September, the project had been relying on community donations for funding, having almost exhausted the $9.25 million OB1 had raised from venture capitalists since 2015.

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  • Not any old VCs: Andreessen Horowitz and Union Square Ventures, which had backed nearly every important internet company of the last two decades, were in OB1’s cap table (as was Digital Currency Group, the parent company of CoinDesk).

    OpenBazaar sought to do for e-commerce what Bitcoin had done for electronic payments: make it open to all comers by replacing centralized gatekeepers with a peer-to-peer network, like Napster instead of eBay. Users had to download special software to participate in the market rather than browsing listings on a web page. 

    Founded in 2014, the project was an offshoot of DarkMarket, which, as the name implied, aimed to create a version of the notorious Silk Road contraband marketplace that couldn’t be shut down. The OpenBazaar team discouraged such use cases, blocking illegal items from the built-in search engine. Still, by design, the team couldn’t prevent illicit trade from happening on the network.

    I recently caught up with Brian Hoffman, the former CEO of OB1 and co-founder and project lead for OpenBazaar, who now works at the crypto exchange Kraken. He candidly reflected on OpenBazaar’s accomplishments and missteps and gave advice to anyone looking to take up the mantle. A lightly edited transcript of the conversation is below. 

    If you’re wondering why anyone would want to create an uncensorable marketplace for anything other than criminal activities, especially after this one fizzled, I’ve got a post coming on Friday. For now, I’ll stay out of the way and let Hoffman tell his story.

    CoinDesk: Why didn’t OpenBazaar take off? 

    Brian Hoffman: OpenBazaar was pretty impactful in many ways. We were one of the first truly decentralized applications (dapps) for crypto before there was even a name for it. The software was installed over 250,000 times and our Haven app, which brought OpenBazaar to mobile, had more than 100,000 downloads on its own. 

    As to why OpenBazaar didn’t take off for mainstream usage, there are countless possible reasons. The biggest one I can point to is that crypto, particularly bitcoin, evolved from a cheap, cash alternative into a store of value – a digital gold – that didn’t make it conducive to daily Amazon-type e-commerce purchases. When Ethereum came along and took the dapp thunder from Bitcoin, we were hesitant to get on board. I’m not certain if that would have necessarily helped as there haven't yet been any Ethereum-based alternatives to OpenBazaar that have gained much traction. Most have pivoted to digital-only goods or [non-fungible token] sales, which are far better suited for the instantaneous nature of cryptocurrency.

    Looking back, what would you have done differently? 

    There are many things we could have done differently. First, we should have spent much more time on some kind of web version, or focused solely on mobile. We spent too much time building a complicated, high-maintenance desktop application. It was always clunky and unreliable and never really encapsulated the experience I had envisioned. 

    We should have also figured out a way to add stablecoin support for the marketplace. That would have created price stability and mitigated the volatility that inhibited people using the e-commerce platform. From a business perspective, we never charged users a fee for using the platform, which limited our revenue options and made it hard to operate at a profit or raise additional venture capital. That hurt us in the long run. 

    In which ways did the emphasis on decentralization serve OpenBazaar well, and in which ways didn't it?

    Building software that relied on a stable and secure peer-to-peer network, with private Tor-based communications and private key protection, which could also interact with cryptocurrency software, was extremely difficult. A lot of today’s dapps are just Javascript code that talks to [the Ethereum wallet] MetaMask and has a few smart contracts they deploy. In contrast, we had our own custom Bitcoin wallet code, a homegrown peer-to-peer network, a complex data contract language and more. 

    Ultimately, OpenBazaar enabled everyone to sell anything to anyone anywhere in the world for free. We never had to remove users from the platform or reverse transactions. I don’t know of any instances where someone was prevented from selling something on OpenBazaar. 

    Yet, the OB1 search engine blocked illicit items for sale. Why was that?

    Anyone could run a search engine and choose to filter or not filter listings. OB1 being a U.S. company, we followed all local rules and regulations for filtering illegal listings from our indexes. We originally had a fully decentralized search engine built into OpenBazaar but it was very slow and not optimized for real-world usage. We subsequently moved to a federated model similar to BitTorrent.

    The code is still out there and anyone could pick up where you left off. What advice would you give someone trying to build a decentralized P2P goods marketplace now? 

    It was incredibly important for us that the code for OpenBazaar remained open source. We started as an open-source project and wanted to make sure all our hard work could be used as the foundation or reference point for future work. 

    Still, I think anyone interested in building a new decentralized P2P marketplace needs to think hard about who their end customers are. There’s a massive difference between a customer trying to send hard-to-find medicine across the world undetected to a loved one versus someone wanting to buy an inflatable pool for their kids. We didn’t make that distinction and fell into the trap of trying to out-engineer our problems. Sometimes listening to what your users need is what matters most. 

    Tell us about your new role at Kraken.

    Winding down the company and stepping away from active OpenBazaar development was quite depressing for a while, as I think it probably is for any founder who doesn’t succeed. I was lucky enough, however, to already be connected with Kraken where I now serve as the crypto platform product lead. I’m responsible for managing the rollout of new token listings on the exchange, overseeing our new Parachain Auction platform and much more. I’ve found my role extremely rewarding. Kraken has a lot of new and exciting products and services coming down the pipe and I look forward to being able to share more as soon as we can. 

    Oh, and I’m also now the host of the Parachain Auctions Podcast, which has given me a chance to talk with a ton of project teams who are working on decentralized software in the Polkadot and Kusama ecosystems. It truly is an exciting time to be in the crypto space!


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