A new decentralised marketplace called Bitmarkets has launched, with privacy-preserving features, a novel escrow system and a requirement for vendors and customers to transact in bitcoin.
Bitmarkets is designed to operate over anonymity-preserving network Tor from the start. This is unlike the much talked about decentralised market, OpenBazaar, that launched without native Tor support.
"We don't like the possibility of a world where every transaction you make over your entire lifetime will be tracked," said Steve Dekorte, the lead developer on the project. "We feel this is a basic human rights issue."
OpenBazaar has gained traction among developers and users. There are no official statistics kept on the number of its merchants or customers, but a crawler written by a user called Bizarre Co Browse shows that the marketplace currently hosts 164 stores selling 289 products.
Bitmarkets has a lot of catching up to do. It was first made available for public download for Mac OS X in November, and it only has a handful of listings.
Lean escrow system
Bitmarkets' escrow system could make it more attractive to users, however. OpenBazaar's is different in that it works with three parties consisting of the buyer, seller and a trusted third-party. Funds can only be released if two of those three parties sign off on a multi-signature account.
Bit markets cuts all the fat out of a transaction, relying solely on the buyer and seller. Sellers have to 'lock' in funds equal to the price of the item being sold. Buyers do the same, but lock double the amount. The locked funds are held in escrow in their Bitmarkets wallets. When a transaction is completed smoothly, the locked amounts are released and the seller is paid.
"Two-party escrow ensures that both parties have an economic incentive to complete the transaction without the need for a trusted third party," he said.
One drawback of Bitmarket's structure is that the price tag for any individual item can't be too high, or the deposit requirements will be too heavy for a buyer. Bitmarket's lack of a reputation system also means that it's not suited for real-world transactions – like, say, an on-demand car service – because either party could coerce the other into releasing the locked funds.
As a result of those limitations, Dekorte recommends that Bitmarket be used only for transactions up to the equivalent of $500.
Decentralised markets could grow
Sam Patterson, who leads quality assurance at OpenBazaar, said the two-party system could work well with experienced bitcoin users who are zealous about cutting out middle-men in their transactions. He warned, however, that some users wanted transactions with someone they could appeal to should something go wrong.
"The public at large also wants to feel secure in their trade," he said. "[With a three-party system] if there's a problem, they have someone to turn to for help. The two-party escrow system doesn't have anyone to turn to if something goes wrong."
Bitmarkets was developed as a part-time project over nine months. Much of the application relies on pulling together the capabilities of existing systems, such as Tor and BitMessage, a peer-to-peer messaging system. Bitcoin, of course, is used to settle transactions.
Four people developed Bitmarkets, including Dekorte; Chris Robinson, who designed the minimalistic, white-on-black user interface; Rich Collins, who integrated bitcoin payments; and Adam Thorson, who worked on building on top of BitMessage and Tor.
Whether Bitmarkets or OpenBazaar succeed in fulfilling the potential for decentralised markets remains to be seen. But more attention is being focused on the area, and for OpenBazaar's Patterson, it's only a matter of time before a decentralised solution trumps existing marketplaces.
"Once a market offers a simple way to control your own trade online, people will begin using it because it's a better product. Much like bitcoin, it won't be an overnight process, but it will happen eventually," he said.
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