Why Should You Consider Implementing Blockchain Technology in Your Marketplace?

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Since 1994, with the arrival of Amazon and eBay, the way people buy and sell has changed.

Early marketplaces had limitations, however, they opened up new opportunities for producers, sellers, and consumers. Online marketplaces changed brick-and-mortar stores, which urged every store owner to either completely shift online or at least have a presence there.

Today, we’re able to see a new cycle of marketplace development because of the emergence of blockchain technology. Disrupting nearly every industry, this new technology provides great opportunities for marketplaces to operate differently and provide consumers with more efficient ways to buy and sell products and services.

If your business offers a marketplace that changes its inventory daily then we recommend considering how this new type of technology will impact the way your business operates and how it will affect transactions. Our first question:

What’s the blockchain marketplace?

The blockchain is a technology that works by creating decentralized ledgers to track cryptocurrency transactions, contracts between parties, and other forms of transaction.

A decentralized marketplace enables buyers and sellers to connect directly without any intermediaries. Consumers, Producers, and other vendors are all part of the network.

Just like with traditional marketplaces, blockchain-based marketplaces have producers who provide information about their goods. Sellers also offer raw materials and consumers purchase them.

There's nothing revolutionary there. However, the blockchain has a few key differences that distinguish it from other technology-powered marketplaces.

What are the qualitative differences between blockchain-based and traditional marketplaces?

By using cryptography, blockchain technology makes Internet-powered transactions safer and more secure by giving each buyer a unique personal code that verifies their identity on the internet. In a marketplace backed by a blockchain solution, smart contracts can be made that would involve automatic transaction settlements, thus making all purchases and sales truly safe from fraud.

The world of retail has changed drastically thanks to the shift toward online shopping. Blockchain technology has taken eCommerce to the next level by providing an even more secure solution for consumers, suppliers, and retailers that makes it easier than ever before to buy or sell just about anything!

How does the blockchain model help resolve disputes?

There are no middle people on a blockchain marketplace. So how do sellers and consumers know they can trust each other?

Just as with traditional e-commerce, clients and vendors have to agree on certain terms before the point of sale. This is why smart contracts play such an important role in the new decentralized economy as they allow merchants and customers to clearly outline what both parties will receive at the time of purchase.

There are several ways for digital smart contracts to ensure consumer protection:

-With escrow services which hold funds during transactions

-Or via trusted third parties, like the customer’s bank, who verify one or more aspects of a transaction (e.g., because their reputation is on the line)

Escrow services work like this:

  1. Once the terms have been agreed upon, the cost of the product is paid for by the consumer.
  2. The money is held in escrow until they receive their product.
  3. Once they have received the transaction, they confirm whether or not everything was up to standard and if it was then the money held in escrow is paid to the seller.
  4. If there are any problems whatsoever, then the funds will be promptly refunded back to them.

However, our second party in this search for a refund is the seller who might feel it's unfair to have provided one. If so, they may take advantage of the blockchain marketplace's smart contract terms to dispute such claims and request their refund (unless such instances are specifically denied by such agreements). But fortunately, most blockchain marketplaces like ours accommodate such instances by implementing more particular solutions:

Resolving disputes with trusted third parties looks like this:

  1. When discussing terms of purchase, the consumer and seller agree on a mediator who may get involved if a dispute arises. Marketplace owners or any individual in their network can act as a mediator.
  2. After the smart contract is agreed upon and signed, the mediator receives keys to decrypt messages between the consumer and the seller.
  3. If a dispute arises, these trusted third party decrypts the contract and works with both parties to resolve the situation.

How the Blockchain Impacts Marketplaces

Blockchain technology continues to advance and several markets have started taking the initiative to use it in their business.

However, what does this mean for their industry? Let’s look at some innovative blockchain marketplaces that are finding success by utilizing the blockchain, but understand that there is much more to come with these new advancements.

Decentralized hosting

A blockchain-based marketplace is hosted by its users and supported by their computing power. The computers of the users are making space for the marketplace which means that it is always available.

Besides, removing centralized hosting can lead to more security, privacy, and transparency. There would be no hosting costs for producers, sellers or consumers because there's no need for it anymore.

One great example of decentralized hosting is Sia, which allows users to create marketplaces for storage on decentralized cloud technology. The technology that Sia uses ensures constant availability and the cost is at least 10 times less expensive than other cloud storage providers on the market today.

Flexible terms

Removing intermediaries living between you and your business partners means that you needn’t accept third-party terms and conditions.

Decentralized marketplaces allow each seller to specify their terms and offer more opportunities for consumers to shop around for the best deal.

Since they are unpoliced, producers and sellers can distribute their product details, prices, and all other content in the way that best suits their needs.

OpenBazaar is a peer-to-peer e-commerce platform that combines the best practices of traditional marketplaces, such as product search and letting brands and sellers set their conditions. This notion helps maintain a balance between redundancy, retrieval speed, and cost for producers and sellers while encouraging healthy competition between them to provide consumers with the best prices and customer experience.

Low fees, low prices

Selling products with the blockchain model costs a lot less than selling on a major traditional marketplace. Since blockchain marketplaces offer lower fees to producers and sellers, that means lower prices for consumers.

One benefit of using digital currency is that you don't have to trust anybody taking payments on your behalf since payments are transacted directly between the consumer and producer or seller.

BitBay offers Bitcoin payment method integration, low fees, and low prices for consumers.

Easy drop-shipping

Drop-Shipping through a decentralized platform gives producers a toolset to drive their sales, gives sellers a mechanism to earn more, and gives customers access to a broad choice of products from around the world.

When producers don’t want to present their brands directly, promoting products through sellers is a good idea. Amazon and eBay remain the most popular sellers using the traditional marketplace model. However, blockchain technology provides new ways for sellers and consumers to interact.

First, Products are free to post on the marketplace. Producers only pay when their products are sold. Sellers can set up any kind of shop they like or advertise their products any way that they want to, getting a commission with every sale. Finally, Customers looking for a deal can find one at a price that's most attractive to them.

The Harvest network is a very useful tool for brands and consumers alike. A blockchain-based marketplace platform, it features a reward system where fans can earn up to 60% back on every purchase, sellers can monetize their audience and producers can increase their sales through the former. It seems everyone wins here!

Secure environment

Blockchain marketplaces offer an immutable and time-stamped verification of every single transaction ever made. This approach makes transactions easily traceable and also prevents double charges, fraud, abuse, and any other type of manipulation.

Syscoin offers a marketplace solution focused on security for consumers. Marketplaces based on Syscoin ensure security through arbitrated escrow services and digital certificates for storing and transferring documents.

Product transparency

Feed transparency is fundamental to the blockchain's DNA. Supply chain marketplaces, therefore, aim to increase trust.

Blockchain supply chains tend to inspire producers and sellers of products and services to verify their businesses and prove the quality of their merchandise and brands to increase credibility.

Moreover, blockchain supply chains offer suppliers digital identities with which they can track the progress of goods throughout the supply chain and keep tabs on any defects or changes which may be harmful or tend to weaken customer confidence in a particular brand or service.

Provenance is one example of a decentralized marketplace that enables companies to increase trust in their products by providing information about where they were made over time. Its approach allows producers and sellers to share the same platform, thereby helping them improve the customer experience. For instance, a producer could have vineyards and make wine at their location, then ship the wine to another seller, who eventually sells it to a consumer on the Provenance marketplace.

Smart contracts

Smart contracts are important because they make third-party oversight obsolete. They allow parties to enter into agreements directly; the terms of the agreement are stored on the blockchain, and this is what makes it virtually impossible for anyone to go back on their word once set in stone.

Smart contracts shine when combined with or built upon the top of functionality that has already been developed.

For instance, Canya users can now enjoy the benefits of unbreakable smart contract-based relationships thanks to its transparent marketplace features that were developed alongside smart contract technology.

Blockchain: The Future of Marketplaces?

Some experts say there’s no question that the blockchain will change the game for online marketplaces. Others believe that, so far, traditional online marketplaces don't need to worry about this new technology.

However, there’s no point in denying that blockchain technology is gradually disrupting many industries, retail among them. Early blockchain marketplaces illustrate bit by bit how this will play out and how it seems as if traditional online marketplaces should watch their backs because blockchains could pose a serious challenger to their businesses in the long run.

We’re contributing to the industry's understanding of blockchain technology. We publish information about blockchain, its potential uses in the enterprise, and insights into how it could affect various industries. Check out our blog for more info!

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