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The Open Source Software that Could Take Down Amazon
It didn’t make big headlines, but a new open source software package called OpenBazaar was released on Monday. It allows for direct electronic transactions between buyer and seller, without middlemen that impose fees and restrictions.
OpenBazaar is an open source project to create a decentralized network for peer to peer commerce online—using Bitcoin—that has no fees and no restrictions. Right now, online commerce means using centralized services. eBay, Amazon, and other big companies have restrictive policies and charge fees for listing and selling goods. They only accept forms of payment that cost both buyers and sellers money, such as credit cards or PayPal. They require personal information, which can lead to it being stolen or even sold to others. Buyers and sellers aren’t always free to exchange goods and services with each other, as companies restrict entire categories of trade.
OpenBazaar is a different approach to online commerce. It puts the power back in the users’ hands. Instead of buyers and sellers going through a centralized service, OpenBazaar connects them directly. Because there is no one in the middle of your transactions there are no fees, no restrictions, no accounts to create, and you only reveal the personal information that you choose.
Bitcoin — currently, the only currency OpenBazaar uses — has two features that make such a system possible. First, electronic payment messages do not go through a central processor like Visa; rather, they are broadcast to the Bitcoin network and added to a distributed ledger file by a network of independent actors (you might have heard them called “bitcoin miners.”) Since there are no restrictions on sales, there is no possibility of a valid transaction message ever being blocked, denied, or reversed. One can see how a system with no chargebacks would appeal greatly to sellers.
Sounds nice, you might say, but shouldn’t some sort of escrow/dispute resolution mechanism is necessary for a system based on electronic payment? That’s where the second feature comes in. To achieve it, the Bitcoin protocol allows users to create a multi-signature account address that requires a given number of signatures before releasing the funds. So — if we have a setup where two of three signatures are necessary to release a payment — the buyer and seller can complete it on their own as two of the signees; if a dispute arises, however, a trusted third-signature moderator can step in to resolve the matter (imagine an entirely new market emerging for dispute moderation services).
If you’re having trouble picturing it, OpenBazaar has a nice graphic showing the different payment scenarios.
This might seem impractical or unnecessary now, but consider how strange automobiles, electricity, or the Internet looked when they first appeared. Lots of skepticism, doomsaying, and griping about a lack of available infrastructure… as well as an inability to see the possibilities of what those technologies could do.
Words like “open source” and “distributed” often get tossed around casually, but they have important significance in this context. There is no OpenBazaar server to shut down (it’s just software running on the computers of individual parties). There is no one the government can arrest to stop this system from operating (if you think sting operations on individual buyers/sellers will be effective, it has been futile stopping information piracy via BitTorrent).
And, of course, all the “know your customer” laws that giant payment processors must comply with don’t exist in this system by design. This means that OpenBazaar will inevitably be a magnet for illicit activity — drugs, prostitution, hitmen, etc. — but criminals are often the early adopters; and robbers were using getaway cars before police had cruisers.
Published in Culture
Ethereum appears to do the same job better.
https://en.wikipedia.org/wiki/Ethereum
https://www.ethereum.org/
Marketing!
It reminds me of this book swapping site I used years ago.
I do think the problem of verifying transactions is the Achilles heel of the system. Who moderates, how well do you trust them, and how easy are they to fool? And what do they get out of being a moderator?
I’ve played games where this was an issue, and I’m not eager to repeat the experience with cash dollaru.
A couple of quick thoughts:
The Bitcoin network already verifies that the digital signature of the payer is valid and the funds are available. That’s not what the moderator is for.
The moderator is for when you send a payment and the seller doesn’t hold up their end of the deal. Or if the seller sends an item and never gets paid for it.
As for what one gets out of being a moderator. They get paid for their time. Of course, they would compete with other moderators for price and reputation.
Hmm, perhaps some third-party could turn that into their business. They could host a platform where they act as a trusted intermediary making money by taking a small percentage of the sale price of each item that is sold through their website.
I would love to see a truly Libertarian-ish open trade platform that could kill Amazon, Ebay, and Paypal, etc. I’m sick and tired of being held hostage by politics in trade (Amazon and Ebay: “No more Confederate flags, children. You’ll just have to buy other things, shoo shoo along now”). Same with Pay Pal and their move to punish North Carolina today. I’m eager for a system that cuts the PC corporate middleman.
This was my first thought as well.
I find Bitcoin very intriguing, but I think some of its supporters forget that many of the current institutions surrounding our system of commerce exist to fulfill genuine needs.
Middlemen serve a number of important functions other than just escrow. I wouldn’t be surprised if moving away from traditional banks toward Bitcoin (or other stateless virtual currencies) would actually end up giving middlemen like Amazon more influence than they have now, since they would essentially become the only game in town if a customer or vendor has issues.
I think it’s telling that a great number of Bitcoin users are already flocking to middlemen such as Mt. Gok or Xapo. Don’t companies like those eliminate many of the advantages of Bitcoin?
One issue in particular that has always puzzled me is the openness of Bitcoin – even though my account is not directly traceable to me, anyone can view all of my purchases. Presumably, it wouldn’t take too much sleuthing to attach a specific account to a person, at which point my entire financial history is now public knowledge.
Another issue is credit. The entire consumer world thrives on credit, but nobody is going to loan money to an anonymous Bitcoin account. This would be another huge blow to anonymity.
The solution to both of the issues above are companies like Mt. Gok and Xapo which manage my Bitcoin account for me. But since Bitcoin has no state backers, in the end wouldn’t I be even more reliant on these ersatz banks in the Bitcoin universe than I currently am reliant on Visa and Amazon?
I like middlemen for all the reasons above.
I like Amazon specifically because of their shipping speed and ease of return.
more on the often vilified middleman:
I think we are underestimating how much of what middlemen do can be automated with open source computer code.
Order aggregation for example, could be easily programmed such that a purchaser doesn’t even notice they are buying items from multiple sellers.
And shippers would happily integrate with the software.
Hadn’t heard about this.
Except that if this is a big market, somebody somewhere will design a commercial version of the aggregation software. And since people tend to do higher quality work when the profit motive is involved, the for-profit platform will be less buggy, more secure, and more efficient, and the marginal cost of using the commercial platform will be worth its added benefits.
And once this commercial platform becomes established, it will force its suppliers to sign exclusivity contracts that they won’t distribute their goods on an open source platform.
Edited to add: I do think moving to a virtual stateless currency has the ability to introduce many new efficiencies into commerce, but I am very skeptical that it would reduce the influence of big corporations in the process.
In fact, I believe the opposite would happen – but since I trust big business marginally more than government, I view that change as a positive.
Pardon me for being a bit skeptical but I always knew I could find a bargain buying merchandise from the back of a Buick parked on a streetcorner but I might sacrifice returns, legal liability and source of goods.
Amazon has thrived because it created a shopping experience considered by many to be safe and informative. Their handling of returns is top of the line and their comment section is some of the best information you can find.
For this to compete with Amazon, it will have to fill in the components Amazon has taken years to build. In other words, it has to become Amazon in total or define specific niches it can become the standard.
Cool tech aint enough when it comes to parting the public from their money.
This isn’t a threat to Amazon. More like a warning shot across the bow of EBay.
As for Bitcoin and the future of apps like this: It al explodes in a cashless society. The dollar in your pocket is the ultimate in Liberty, untraceable and anonymous. When governments decide to go cashless and insist on credits on a reloadable card, stand back, Bitcoin will take off like a rocket.
This brings to mind some incidents in the realm of darknet drug markets. The original Silk Road marketplace quickly became a large player in this sphere due in part to the proprietor gaining a reputation for customer service and impartial arbitration of disputes.
When law enforcement eventually caught up with Ross Ulbricht and put an end to his illicit enterprise new players emerged in its place, the need for the middleman remained. But as you indicated, the shopping experience is critical and one cannot always simply swap one retailer for another and expect identical service.
One of the new big players was named Evolution which had a somewhat different business model than the Silk Road, their model was grow to be the largest Silk Road replacement and then when the moment was opportune seize all funds currently in escrow and vanish.
Until people get their paychecks in Bitcoin, I am not seeing it. But I may just be an old codger. I can see Bitcoin becoming much more popular with a limited segment of the populace, but not for the big numbers of folks.
the difference with Silk Road, is the government had something to shutdown
with OpenBazaar, that doesn’t exist
there is no OpenBazaar server to shutdown or CEO to arrest
it’s just code
You suffer from the problem that many people do in assuming that Amazon is a retail company. Amazon used to be a retail company, but they are now a data services company with a retail hobby.
Yup. Getting bitcoin is tough.
Getting it with a credit card is basically impossible because sellers fear fraud via chargeback. And I’m not ready to give my bank account to some random site on the internet when consumer protections on credit cards are so superior (e.g. longer period to report fraud, incentive of CC company to get money back vs. disinterest from bank on recovery or timely turnaround).
I guess I could get some kind of prepaid debit card, but I don’t really need bitcoin at this point so I’m not sure why I’d want to go through all that.
http://arstechnica.com/tech-policy/2016/04/paypal-withdraws-from-north-carolina-because-of-new-lgbt-discrimination-law/
I get that, and I get the sense you’re using moderator in. Try this on for size:
I purchase something expensive, then say I never got delivery on it. Instead I give half the cash to the moderator to vote my way.
You can say that the reputation system will fix that, but there are ways to game reputation systems.
It’s just code that’s useless without the Internet. And while governments can never completely block Internet traffic, if they really want to, they can be surprisingly effective at shutting down what they don’t like in their own borders. See: the Great Firewall of China.
Or threaten the to leave negative feedback about him that would ding his reputation. My understanding is that happens frequently enough on eBay.
What’s their business model? Free software?
I.e., the Mark of the Beast.
To be clear though, I think this is a good thing overall. I’d be perfectly happy to use it on transactions that are small enough for me to self insure. Competition is a good thing, and I’m especially happy to see channels out of the sight of the federal government.
But I don’t think it’s an unalloyed good.