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In the past decade, the peer-to-peer (P2P) model has become extremely popular for consumers. We’ve seen the meteoric rise of tech giants like Uber, Airbnb and LendingClub, all which have reached unicorn status.
P2P marketplaces for buying and selling of goods has been a successful model for much longer; the pioneer was eBay who its IPO in back in 1998.
Overall, the (P2P) marketplace model is so successful due to its ability to create a ‘micromarket’ environment which can benefit both buyer and sellers. This is because sellers can determine their own price point positioning and margins to maximize their profitability. Similarly, Buyers benefit from the ability to choose between the vast number of individual sellers to pick the best product at the most affordable price. All of which ensures a stable, healthy and competitive ecosystem.
Having said this, the current models, while extremely successful are not perfect. Today consumers still experience many issues, such as:
- Security,
- Privacy,
- High fees,
- Trust, and fraud.
A decade after the anonymous Satoshi Nakamoto published his vision for Bitcoin: a peer-to-peer electronic cash system, we are still understanding and experimenting with how to best utilize the technology he gave to the world. Distributed Ledger Technology (DLT) can solve many of the current issues and create a safer, fair and equitable system; while also providing more opportunity for value creation.
For the first time in human history, we have the ability to transact value with each other, without the need for a trusted third party; all we need is a connection to the internet. Don Tapscott explains the disruptive power of DLT, through the way it changes our virtual capabilities. He illustrates how for the past 40 years we have benefitted tremendously from the ‘internet of information’; it has radically changed the speed, flow, and access to data between individuals and organizations. However, overall it as done little to fundamentally change the way we conduct business.
Now, DLT has the unique ability to create a new paradigm; the ‘internet of value’ in which we are able to transact value with one another with no intermediaries involved in the process. The future will only include more decentralization as we shift away from the top-down centralized economic models of the industrial age. Instead, we will build increasingly decentralized economic models in which participants have more access to value than ever before. Below are some of the reason why DLT can be the facilitator of positive change for the peer-to-peer alternative economy.
Smart Contracts
Smart contracts are self-executing contracts. These contracts are only executed once all the conditions of the contract have been met. The terms of the agreement are written into lines of code, so, the application of smart contracts to marketplace platforms is extremely beneficial for both the buyer and seller; because they facilitate transactions/purchases with an added layer of security. Additionally, smart contracts authorize transactions without any need for an external enforcement mechanism such as a central authority or legal entity. In this way, transactions facilitated by smart contracts are immutable, traceable and transparent.
Lower fees and lower costs
No third parties involved in the transaction process which means lower fees for both the buyer and the seller. Sellers can position themselves more competitively within the marketplace because their bottom line is not affected by high payment processing transaction fees. This means that sellers can benefit from higher profit margins on each sale. Buyers can bene t from a market which is more competitively priced overall, allowing them to purchase the best products at the best price.
Providing more decentralization and value creation
DLT increases decentralization and connectivity between participants. The more people who can be directly connected means an increase in the opportunity to share value. As such, connectivity is the key to increasing significant access to value creation. DLT maximizes the number of participants in the sharing economy because it makes transacting with others more direct and simple, all at a lower cost. Currently, there are about 1.7 billion people around the world who have been excluded from the modern financial system. DLT has the unique ability to include the huge number of people who do not have access to banks or credit cards and therefore cannot currently participate in the modern financial system.
Increasing levels of trust
DLT has often been referred to as the ’Trust Protocol’. This is because the technology provides a more efficient, quicker and secure way to establish trust and verify data/information. In a peer-to-peer marketplace, it means that participants can verify a user is who they say they are and verify proof of ownership of goods/products. This can help mitigate fraud and increase trust between users within the network.
Improved security
Due to the decentralized nature of DTL, it means that there is no central point of attack for hackers or malicious network actors. A copy of the ledger is distributed across each node within the network which means that in order to hack the network over 51% of the nodes need to be hacked at the same time, which is virtually impossible. Similarly, the complex cryptographic hash functions mean that the odds of guessing someone’s private key in order to steal funds is the same as winning the Powerball (lottery) 9 times in a row. Finally, DLT encrypts users data so that their sensitive information is not compromised.
Instant Transactions/Settlement
DLT allows any anyone with an internet connection to transact directly and instantaneously. Settlement time using traditional at can take days and even weeks for a transaction to be processed and cleared. DLT allows the seller to receives the true value of the sale right away.
Hugh Flood CPO & Co-Founder
Cartam : Free marketplace for cryptocurrency users
