What is OpenBazaar?

E-commerce offers tremendous advantages to traditional brick and mortar stores, it allows businesses to expand their reach exponentially and reach a much larger market. However, with such a convenience of course comes a fee, this fee goes to the third party which essentially acts as the insurance in mediating the payment. Common centralized e-commerce platforms include Ebay, Amazon, Ali Baba, and much more. The problem with these e-commerce sites is that they charge outrageous fees. Furthermore, it could take weeks or even months to get your money back when a dispute arises because the dispute process is painfully slow.

Also Read: OpenBazaar Receives $1M in Funding from Prominent Investors

Wouldn’t it be nice if we could eliminate the third party and conduct good old peer to peer trade? OpenBazaar offers just that, a decentralized e-commerce platform allowing users to list items for cryptocurrencies such as Bitcoin.

What is OpenBazaar?

OpenBazaar is an open source project which aims to create a decentralized network for online peer to peer trade. It takes away the mediator, connecting buyers and sellers directly through the OpenBazaar client. Since OpenBazaar is open source and free to use there are no fees attached.

How does it work?

OpenBazaar is not a mediator platform for buyers and sellers which charges them fees, It simply provides them a client. Sellers create a listing for their product on this client, and other people using OpenBazaar can view this listing. If a buyer and seller agree on a price they are connected to each other to finalize the deal.

Payments are made only via Bitcoin, for Bitcoin is similar to OpenBazaar; an open source decentralized service that charges minimal fees, does not have a central authority running it, and allows instantaneous transfer of value.

The first thought that might come to one’s mind is the security aspect of this platform. Is this absolutely safe? How are buyers and sellers protected against fraud? Well, there is a mediator for each transaction. This mediator is another user who is known for both parties and acts as their supervising agent to settle any disputes, should they arise.

The mediator creates a multi-signature Bitcoin wallet when the buyer and seller agree on a price. This wallet requires a two of three signature in order to release the funds. First the buyer deposits the agreed amount of Bitcoins into the wallet, then the seller ships the parcel, finally the buyer receives the package and funds are released to the seller.

When something goes wrong, like the shipment of wrong items or damaged product the buyer would report this and the mediator would settle the dispute. Since the multi-signature account requires signing by at least two people, if the buyer refuses to sign with his key despite product being delivered the mediator can contribute his signature and release the funds to the seller. On the other hand, if the seller never shipped the item, the mediator can side with the buyer and sign a transaction authorizing the release of Bitcoins back to the buyer.

Conclusion

OpenBazaar is quite an innovative idea for e-commerce which would change the very concept of it. Currently, it is in Beta and is anticipated to go live later this year. Since the project is open source you can currently download and setup a store and start browsing listings but you can only do so with testnet bitcoins, the team wants to make sure the network is as secure and as bug free as possible before officially releasing the live version.

Images credit 1

If you liked this article follow us on Twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin and altcoin price analysis and the latest cryptocurrency news.

Leave a Reply