The developers of OpenBazaar, the open-source decentralized marketplace protocol, have received $1m in seed funding.
The project received backing from venture firms Andreessen Horowitz and Union Square Ventures, and angel investor and board member William Mougayar.
aims to enable broader peer-to-peer e-commerce, free from the privacy and economic concerns attributed to more centralized models, using bitcoin as a medium of exchange.
The announcement comes more than a year after DarkMarket, the proof-of-concept decentralized market on which OpenBazaar is based, won the hackathon at the Bitcoin Expo Toronto in April 2014. OpenBazaar, later forked from DarkMarket, has since released several beta versions, with the most recent, dubbed 'Portobello', launched in late April.
The funding will be used to support several full-time developers, as well as enable the creation of OB1, a new company that will develop services for future OpenBazaar users.
Union Square Ventures managing partner Brad Burnham told CoinDesk his firm became involved with the project in a bid to support continued innovation that utilizes the blockchain, which he said is key to "opening up markets again".
Burnham said he sees OpenBazaar serving a critical role in the development of a new kind of shared public data layer that will reduce the commercial barriers that exist between companies and their customers, explaining:
Both Mougayar and Burnham said the development of OpenBazaar and its underlying concept of decentralized commerce is deeply intertwined with the growth of bitcoin and the blockchain itself.
Mougayar, who advises technology startups and is also an investor in ChangeTip, said he has been following the project since DarkMarket won the hackathon in Toronto last year.
"Open, peer-to-peer commerce is as much about an ideology as it is about a creative implementation of the bitcoin blockchain technology using multi-sigs and Ricardian contracts as the basis," he said.
Those backing the project say they don't support the utilization of the technology for illegal trade, a use case cited by some who see OpenBazaar as a way for dark web markets to flourish without any centralized points of failure. Sellers could use the peer-to-peer nature of OpenBazaar to trade directly instead of through a centrally controlled marketplace, thereby avoiding the kinds of operational weaknesses that ultimately led to the downfall of Silk Road.
Burnham acknowledged that the protocol could be used by dark market operators, but stressed the OpenBazaar developers have no interest in supporting such use cases.
"They certainly won’t be in the business of providing enhanced services to marketplaces that are selling illegal goods," he noted.
Burnham pointed to the creation of protocols like HTTP and SMTP as evidence that legitimate use cases can quickly outpace any potentially illegitimate purposes that may arise during the early stage of development.
"[Protocols are] neither good or bad – they can be used for both. But those particular protocols have proven to be incredibly valuable to society," he concluded.
Dollars image via Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.