Online shopping has been growing and becoming more popular all over the world for the past few years. Amazon, eBay, Airbnb are just some of the vast number of online market places where buyers and sellers connect to each other. Though these markets are P2P (person to person) all of these are run by a centralized company. From this we get to know two things:
There isn’t actually any reason as to why P2P markets have to be decentralized.
The centralized entity means tax has to be paid on all the transactions.
This gives rise to the question of what sort of markets would be better as P2P markets without a centralized intermediary? There are actually quite a few numbers of markets that would actually benefit from being decentralized.
- OPEN FINANCE - Tools such as Augur, Ox, Dharma, and UMA help people create derivatives like Primotif which can then be accessed by anyone anywhere in the world. For example, if a person lives in Jharkhand in the middle class you cannot buy Apple stock because of your KYC and banking frictions that are involved. Through the use of Primotif, anyone anywhere in the world can buy S&P 500 exposure through ether. This would lead to a massive breakthrough in the efficiency of the capital market.
- GREY MARKETS - Grey Markets refer to an unofficial market in goods that have not been obtained from an official supplier. Through blockchain, the prediction market can greatly benefit and marketplaces for people where they can sell individual predictions.
- ONLINE GAMBLING - Online gambling is very popular and at the moment these online casinos use something known as an RNG which is using a random number generator. By blockchain the RNG can be checked by users and they can check the accuracy of the integrity.
- VIRTUAL REAL ESTATE - This would work great if an online game has a fixed amount of real estate. This would then become valuable to those players if they wanted to spend time in that world.
- SMART ASSETS WITH EMBEDDED LOGIC - Everyone hates the ticket scalping market especially those in the music and event businesses. Embedding transfer restrictions on tickets could take care of this problem.
- LABOR MARKETPLACES - There are many labor marketplaces that are not able to keep up with the supply-demand match because of not enough regulatory frameworks. These markets are perfect for decentralization.
- DISTRIBUTED WIFI AND SHARING MESH NETWORK - At the moment Wi-Fi is local. Through blockchain, it can be distributed on a large scale.
These are just some markets that would benefit hugely from blockchain and decentralization. Blockchain itself has many advantages that would work as a huge step up towards helping decentralized markets. Some of the merits of blockchain are:
- LOW TRANSACTION FEES - There is a very low fee that is required for transactions. Blockchain could easily reduce administrative costs for the financial system.
- ANONYMITY - This allows participation in an open network without having to worry about getting a KYC (Know Your Customer) of any form.
- FASTER TRANSACTION SETTLEMENTS - Most traditional banks take a number of days for transactions to completely settle. This is mainly because the number of protocols required in bank transferring not the mention financial institutions are only open during normal business hours and only 5 days a week. Blockchain technology is functional 24 hours a day, 7 days a week hence being much faster than any sort of financial institution.
- DECENTRALIZATION - Another reason as to why blockchain is so beneficial to markets is because it has no central data center. There is no need for a huge data center where transactions are verified. Instead, blockchain lets individual transactions have their own proof of validity and authorization. This ensures that in case any information fell into the wrong hands (e.g. a cyber-criminal); there would actually be a small amount of data that would be compromised instead of the entire network.
- ENHANCED SECURITY - There are many reasons why blockchain is way more secure than many other types of record-keeping transactions. In blockchain only after a transaction is agreed upon is it recorded, approved, encrypted, and then linked to the previous transaction. This also makes it much more difficult for hackers. Such blockchain would be very useful where sensitive data is very important like financial services and the government.
As these changes keep unfolding there will definitely be a number of unwelcoming results in industries like those of legal and mortgage. There is a huge chance that as the blockchain technologies mature the list of the markets will also increase as to where Bitcoin can be used. In 2014 no one had even thought of the idea of open finance. Since then a lot has changed and many millstones in the technological field have been crossed. At the moment the biggest technical challenges in crypto are scaling and privacy and once the usability and adoption of cryptocurrency improves, many more untapped markets will also understand how blockchain can help. New ways are coming up where open finance can be put together in different ways