How bitcoin can disrupt marketplaces like eBay and Etsy
The artisanal online marketplace Etsy took devotees by surprise last week when it announced that in July it will jack up the fee it charges sellers for a transaction, from 3.5% to 5%.
If you ask Brian Hoffman, founder of the decentralized online marketplace OpenBazaar where users pay in cryptocurrency, the Etsy move is a reminder of the power that centralized companies hold over users.
“That is something that centralized services can do,” Hoffman said on stage last week at Yahoo Finance’s All Markets Summit: Crypto in San Francisco. “They go public, they need to demonstrate profits, they start adding new rules and restrictions. A marketplace like OpenBazaar can never do that overnight. The protocol is completely free, you don’t pay for any part of it except for the transaction fees associated with cryptocurrency. And you have a choice of cryptocurrencies, so if fees go up on bitcoin, you can switch over and accept something else.”
OpenBazaar is more software protocol than company. It launched in 2014 at a hackathon in Toronto and was originally called DarkMarket. Hoffman forked the project code on GitHub and renamed it OpenBazaar. It has since raised more than $4 million in venture funding from big names like Digital Currency Group and Andreessen Horowitz.
On OpenBazaar, sellers are offering all manner of goods, from vintage comic books, to bitcoin-themed clothing, to digital cameras and handheld video game consoles, to handmade jewelry and pottery. Buyers can pay in a number of different cryptocurrencies, but not in fiat currency—”out of principle,” Hoffman says.
So, why would a seller of hand-crafted goods list their items on OpenBazaar instead of, say, Etsy or eBay? Hoffman says it’s an intimate and easy entry for the crypto-curious. “The people that are using it are trying to figure out, What’s a way that I can offer a service or something I have for sale in order to get into crypto? It’s a more organic way, rather than just going to Coinbase and buying it directly,” he says. “There’s a garage-sale feel to it… I think the same type of people that use Etsy are willing to try a new platform, and if they have something very unique to offer, that people are willing to part with their cryptocurrency for, that’s the target audience.”
Etsy, eBay, and any other online marketplace with centralized power will get disrupted by decentralized platforms that operate using blockchain, Hoffman predicts. “What’s important about cryptocurrencies that I think starts to gets watered down as we get more mainstream is that we’re trying to disintermediate the existing infrastructure, the huge players like Facebook, and Google, all these big players that are dominating their space.”
Watch Yahoo Finance’s All Markets Summit: Crypto here.
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Daniel Roberts covers bitcoin and blockchain at Yahoo Finance. Follow him on Twitter at @readDanwrite.
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