Today my new book “Black Market Cryptocurrencies” became the first documented product to ever be sold on a decentralized online marketplace. The buyer, who became the first documented person to ever purchase a product on a decentralized online marketplace, wanted to be identified only as “Michael.”
What is a decentralized marketplace? Today all online marketplaces (Amazon, eBay, iTunes, etc.) are centralized. Corporations own and operate them and all transactions occur through a centralized middleman. Decentralized marketplaces, on the other hand, have no middle man. There is no central authority that operates a central server, so there is no centralized point of failure. It is nearly impossible to shut down a decentralized online marketplace. Transactions occur on a peer-to-peer basis, so there is no centralized authority that can halt the transactions. Imagine if eBay was run on the computers of each user instead of being run from a centralized server. Imagine if there were no central authority restricting what people could and could not sell on eBay. That is what a decentralized online marketplace is all about.
Why do we need a decentralized online marketplace? With the current system of centralized marketplaces, corporations can decide what can and can’t be sold. For example, eBay bans the sale of the original “If I Did It” book by OJ Simpson under its “offensive materials” policy. Why is eBay trying to prevent me from reading a book by OJ Simpson about how he would have “hypothetically” murdered those two people? Obviously this is a silly example, but it sets a far more sinister precedent: when we are only able to purchase books online through corporations and those corporations decide what does and does not count as “free speech,” we lose our 1st amendment rights.
So far there are a number of groups developing decentralized marketplaces. OpenBazaar (formerly DarkMarket), plans to release their software in Q4 of 2014. OpenBazaar made a nice promotional video explaining the benefits of a decentralized online marketplace:
Blackcoin’s BlackHalo system is another very interesting decentralized marketplace. It is currently up-and-running but right now it relies on external centralized systems for product listings and currently has no items for sale besides other currencies:
BlackHalo has a nice video explaining how to use their software here:
BitXBay is another decentralized marketplace that is currently operating and has products for sale. As far as I can tell, this makes it the first fully-functioning decentralized marketplace. BitXBay was formally announced on April 29th, 2014. As the developer explains, while other programs have claimed to be decentralized, they still required a centralized server and administrators. BitXBay has no administrator; it is truly decentralized. When I first opened BitXBay I saw only a few products for sale and I couldn’t find any confirmation that anyone had sold anything yet. So I decided to list my book for sale and document the process.
Here is how it worked for me, step-by-step:
First, I downloaded the current version of BitXBay. The program has yet to go through an open source code audit, meaning it’s currently “untrusted” – so it’s wise to only open the program in an environment where the damage would be limited if it does something bad (on VMware, on a spare windows computer, etc.) Once you open it, you will need to wait for the bitcoin wallet to sync up with the network. This took me 4 days.
Second, once the wallet is synced up you can send it bitcoins from another wallet. I sent about $10 worth (in case the software decided to steal it from me).
Third, I went to the “decentralized trade” tab and clicked “Sell.” On the “sell” screen I entered a category (“books”) and put in the description of my product:
I set the price of my book at 0.007 bitcoins (about $4.50) and set the ratings payment at 0.001 bitcoins (about 65 cents). The ratings payment is used to rank your product listing – the more you pay the better position you get. This should theoretically limit the amount of spam that the system gets in the future. As far as I can tell, this payment goes directly to the developer, which seems fair to me. In my bitcoin wallet, there were three transactions: one withdrawal for 0.0005 btc, one for 0.0006 btc and one for 0.0001 btc which said “Payment to yourself.”
Here’s what the product looked like once it was submitted to the marketplace (it was only the 6th listing and only the 3rd listing for a real product):
Fourth, someone decided to purchase my book and I got this message:
Fifth, I clicked “Accept” on the deal message. I was then told to wait for the buyer insurance payment:
Inside my bitcoin wallet there was a withdrawal for 0.00045 btc. After the buyer sent the insurance payment I received this message:
Sixth, I uploaded my book to Mega. Then I messaged the buyer through BitXPay with the download link for the book and waited for them to release the escrow. Once the buyer released the escrow I received 0.007 btc into my bitcoin wallet. Once the deal was complete my screen looked like this:
After all the steps were complete, my bitcoin wallet had an additional 0.0057 bitcoins in it. The book price was 0.007 btc and the listing fee was 0.001 btc, so the total transaction fee was 0.0003 btc (about 20 cents).
A transaction cost of $0.20 is incredibly low. While it is free to list your book on Amazon, every time I sell a book I pay $1.50 in fees. If I sold my book on eBay I would pay $0.50 in fees every time it sold. Decentralized online marketplaces, with their low fees and the freedom to sell anything you want, could grow tremendously in the future. In the distant future we might even see a decentralized marketplace overtake eBay or Craigslist.
Thanks to Michael for buying my book!