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by growing the corresponding network
of participants using the platform, in-
cluding sellers, buyers, developers, re-
sellers, intermediary service providers
(such as logistics providers), payment-
gateway services, and institutional in-
termediaries, including legal advisors.
Strategies deployed by electronic
marketplaces (e-marketplaces) to in-
crease network effects include person-
alization of service offerings on the
platform; recommendation systems
for goods and services, trust mecha-
nisms, and simplification of transac-
tions. Here, I describe an alternative
to the firm-controlled marketplace—a
decentralized marketplace based on
the blockchain.
The blockchain is a shared, distrib-
uted transaction ledger that records
all transactions and operates through
the Bitcoin protocol. 3, 14 Each transac-
tion is validated by a network of nodes,
each hosting the blockchain and corre-
sponding validation software. The vali-
dation algorithms confirm the trans-
action by preventing problems (such
as “double spend,” whereby a given
amount of coins is spent more than
once in the same transaction). Once
the transaction is confirmed, its details
are stored on a public ledger generated
through an algorithmic process called
“mining.” A network of nodes, each
with a local copy of the blockchain,
provides an alternative to a centralized
platform in which each node can main-
tain functions of the larger platform,
partly or fully.