As we have analyzed before, online marketplaces are being changed by blockchain’s peer-to-peer networks. The idea of individual interacting with one another without any middleman is gaining tracking day by day. In the previous article, we analyzed that smart contracts are making it possible to connect buyers and sellers in a peer-to-peer decentralized marketplace on the blockchain. In this post, we go a step further and evaluate how the decentralized apps are revolutionizing the online marketplaces on the blockchain.
What are decentralized apps?
Dapps are decentralized applications that are a better version of apps in that they are decentralized. This means that unlike the current apps such as Uber, Amazon, or even Gmail, decentralized apps do not require a centralized base for them to function. The main features that make decentralized applications are: open sourced, autonomous operations, data should be stored cryptographically on the blockchain and tokens are generated in order to prove value nodes.
Dapps connect users to other users directly through a peer-to-peer network thereby enabling the true decentralization of people exchanges. Furthermore, dapps are open source, unlike other apps, and therefore have no central point of failure or security breaches. With the current growth of dapps, it is possible that they will soon surpass other software-based corporations in terms of utility, networks, and user-base. This is because unlike software-based applications, dapps have a superior advantage in terms of incentive structure, flexibility, and transparency. Decentralized are natives of smart contracts and they enable the functioning of smart contracts. As we analyzed in the previous article on ‘use of smart contracts on blockchain marketplace’ smart contracts and dapps could completely change the way people interact with online marketplaces. These aspects could make decentralized apps more resilient and have wider applications. One of the main use cases is in blockchain based marketplaces.
Dapps are changing online marketplaces in different ways:
Therefore with dapps, there is an incentive structure of ensuring verification of transactions take place. For example, when Jane enters into a sale of goods contract with Mary, the verification process will be done by people within the network. In return, they earn a few coins for doing so. In doing this, the system is maintained without the need of having a central authority like a software programme. In such an arrangement, people within the community are incentivized to act for the benefit of the common good. There are more creativity, transparency, and goodwill within the community. In the currently centralized marketplaces, corporations reap billions by acting as middlemen in verifying transactions.
Improving identity recognition: one of the main aspects of any type of trade is the ability to identify and know your customers. Online marketplaces need a mechanism to be able to correctly identify and know their customers in order to reduce instances of fraudulent activities on the platform. For centralized marketplaces, this is done through identification mechanisms such as credit card information, driver’s license or passports. However, this is not the case with decentralized. Dapps have taken know your customer (KYC) to the next level. Dapps have improved KYC to make it easier and simpler to identify customers. Furthermore, with dapps, there is near real-time data exchange between users and this helps to improve the type of customer verification. Furthermore, as users interact with each other more and more, data between them is shared and used by others in order to know the level of customer trustworthiness. In addition, this mechanism of customer verification is simpler and less costly than existing KYC standards embraced by centralized marketplaces. Data is not used for marketing but for improving the platform. On the contrary, on centralized exchanges, data is used and sold to other third parties and it can be monetized even without having input from customers.
Based on current pace, it is evident that online marketplaces based on blockchain are going to happen sooner than most people expect. With decentralized, it is possible to stretch the usability of online marketplaces to make them more inclusive, community-based and more safe and secure than existing centralized marketplaces. Furthermore, the innovations behind decentralized apps keep on growing and improvements could be made on the platforms.
Other related articles on Blockchain: