Decentralized Peer-to-Peer Platforms – The Case For Implementationbr>
Remember that one time, after months of combing through record shops, antique stores and online marketplaces, you found the coveted “Sgt. Pepper’s Lonely Hearts Club Band” by The Beatles in pristine condition WITH the original album art? It didn’t matter that the eBay seller’s rating was low – that album needed to be yours! And it was… eventually. It only took half a year and a hundred emails to the seller and eBay customer care and to track down that shipment which was somehow en route to you for six months, and arrived bent, broken and as “Sonny & Cher’s Greatest Hits.”
This is a common scenario that plays out on existing, centralized peer-to-peer (P2P) platforms and marketplaces everyday. The process is seemingly straightforward: list it, sell it and ship it. However, transactions go wrong all the time, and you end up with things you never wanted. Fortunately, most marketplaces are attuned to this, and place emphasis on creating a safe space by establishing trust and a clear set of rules for participants. In the event a transaction goes awry, the platform or marketplace, itself, will often intercept to handle disputes and issues that result from bad actors on the platform, carrying a lot of the responsibility for the buyers and sellers.
Initially, a centralized marketplace makes sense. The process allows buyers and sellers to proceed with transactions at will, and then a central authority intervenes to handle any issues. But when you take a deeper dive into centralized marketplaces and platforms, they come with some high costs, including:
- High transaction fees that can range from 10 percent to 30 percent, in many cases
- Very rigid regulations and policies around items allowed to be bought and sold
- User data, reputation and transaction history owned by the platform
- Buyer-centric model, leaving majority of the risk to the seller
- No mechanism in place to transfer reputation
Despite these issues, users are still slow to adopt decentralized platforms, because they are typically difficult to navigate. Centralized platforms (like eBay for example) are very straightforward and easy to use, so users are willing to put up with the costs for the convenience. But users would be more inclined to adopt decentralized P2P commerce if they understood the many different benefits, for example:
- No fees. The most immediate and compelling argument is that true P2P commerce does not have any fees. Sellers keep more of their hard earned money, and buyers get lower prices across the board.
- Reputation. Users own their own reputation, transaction history and data. For example, Ink Protocol built a decentralized reputation system that allows users to build up a public, transferable reputation that can be used anywhere. The result is that sellers and buyers can switch platforms at any moment, without having to build up their reputation from scratch.
- No censorship. Buyers and sellers can transact directly, so there is no central authority that can interfere with transactions.
- Neutral third party mediators. Buyers and sellers will be able to choose the person or entity that helps resolve any potential disputes. These neutral parties will not be more buyer or seller friendly, as they do not have a secondary motive (like growing the marketplace).
The benefits of a decentralized platform are obvious, but the problem for developers becomes making the user experience easier. As it stands, until users are more familiar with smart contracts and blockchain, centralized platforms will continue to reign because they do all of the heavy lifting for the user.
Looking to the future, a viable solution in the near term may be a hybrid approach. Companies like Ink Protocol are leading the way with an established platform that has centralized features, but a decentralized system for all data. As the infrastructure and tools for usability catch up, platforms will gradually migrate to a fully decentralized system, while keeping all of the data that is being written during the hybrid phase, offering users the best of both worlds.
Gee Chuang is the co-founder and CEO of Ink Protocol, a platform for peer-to-peer (P2P) payments with public, decentralized reputation.