Communications of the ACM

pseudo-anonymity of transactions, direct payment for goods and services via Bitcoin, and search that is unal-tered by the marketplace. The marketplace’s quality of service is assured by independent third-party brokerage services. Likewise, reputation brokers maintain user reputations throughout the network. 13

Multilayered platform. Figure 1
outlines the architecture of a decen-
tralized e-marketplace architecture
in which Layer 1 is the network infra-
structure consisting of hardware nodes
and client software. The client software
provides listings of goods in which
each node runs a local copy of the net-
work’s blockchain that also includes
its own product listings. Layer 2 is the
mining software used to create new
blocks of data consisting of network
transactions; newer tokens of value are
issued into the network based on min-
ing algorithms. Layer 3 is the software
responsible for validating transactions
on the network and for storing vali-
dated transaction records. In layer 4,
distributed applications might include
a peer-to-peer marketplace or a seller-
logistics marketplace (such as the elec-
tronic data interchange interface and
reputation models). And Layer 5, or
the quality-of-services layer, is where a
marketplace’s customer relationship
management functionality is imple-
mented. Reputation models, designed
to increase trust between buyers and
sellers, are implemented through user
feedback, ratings, and reviews. Like-
wise, dispute resolution is facilitated
through third-party brokers. Search
is also facilitated in this layer by third
parties or directly by the platform. Fig-
ure 2 outlines transactions in a decen-
tralized marketplace.

Advantages of a Decentralized Marketplace

In a decentralized marketplace, the firm responsible for ensuring the marketplace functions properly by matching buyers and sellers, facilitating transactions, and/or enabling institutional infrastructure is replaced by a network of nodes, each independently and concurrently accomplishing the same functionality as that of a centralized marketplace. As in Figure 1, blockchain-based programs validate each transaction transparently and securely. 14, 25 Decentralized platforms ensure privacy and security for transactions while facilitating trust among platform participants.

Matching buyers and sellers. De-
centralized marketplaces can provide
unmodified “access” to information
(such as listings) as desired by the sell-
er, since each node is able to list prices,
goods, and reviews pertaining to goods.
The individual sellers are themselves
responsible for creating the product
listings that are then redundantly dis-
tributed throughout the network. Infor-
mation transfers are completed much
more reliably when search results per-
taining to goods listed by the seller are
unchanged. Likewise, listing errors are
minimized by design, since price-alter-
ing and preference-altering algorithms
can be disabled or managed by indi-
vidual sellers. And matching function-
ality through search engines can exist
independent of the marketplace; for
transaction rules are agreed upon
by a participating buyer and seller,
those rules can be programmed into
a contract to then reside on the block-
chain. Nodes on the network are in-
centivized by “ether” rewards for vali-
dating and securing transactions on
the blockchain. Such incentives have
spawned e-marketplaces for contract-
specific transactions (such as predic-
tion markets and initial coin offers
like the “decentralized autonomous
organization”).

The Lazooz distributed ride-shar-ing network is another example of a decentralized marketplace in which customers sharing rides use a mobile application to order the ride. On the Lazooz network, individual participants produce a “Zooz” token used to compensate drivers. Each transaction, or ride, is recorded on the blockchain’s network of nodes. 16

OpenBazaar is a decentralized marketplace in which software is installed on each seller’s node where listings are created. The marketplace accepts Bitcoin as its mode of payment and helps users trade with one another by reducing transaction costs compared to a conventional marketplace. The main advantage is that it offers participants