Voyage of the DeFi universe: decentralized marketplaces
If you look at the DeFi ecosystem through a wider lens, you can see that decentralized finance projects are working and developing in roughly twelve directions. Attempting to shift to a decentralized form of almost everything related to the traditional financial system also means trying to move as quickly as possible to new types of interactions with financial instruments and decentralization of these interactions.
This is the first article in a series, looking at promising projects in each of these areas, talking about the advantages and disadvantages of these projects, and reflecting on their prospects and opportunities.
In today’s article, we will talk about the direction of decentralized finance development in the context of decentralized trading platforms (DeFi Marketplaces), where participants can conclude transactions directly through p2p networks.
According to a recent study by The Block, the DeFi ecosystem involves more than 160 start-ups and protocols working in all areas of decentralized finance. On the Ethereum platform in the Marketplaces segment, four solutions have been built and are currently running: Rare Bits, District0x, Origin, and OpenSea. Out of the total number of DeFi projects on Ethereum, marketplaces have only a 1.8% market share.
Since there are more such projects outside Ethereum (according to defiprime.com, there are seven promising protocols and marketplace projects on the market), we will not limit ourselves to a single platform. We will touch upon independent solutions for p2p trading and decentralized markets.
The absence of intermediaries and, as a result, relatively low prices make p2p markets attractive and more popular day by day. An ecosystem free of control from centralized structures is what the world of blockchain and smart contracts can offer. Despite the fact that the decentralized markets are still too young, the potential that lies within them is enormous.
OpenBazaar is one of the oldest decentralized online trading platforms, which was launched in April 2016, long before DeFi became popular. This platform is a free and open-source, decentralized social marketplace. The project gained its popularity thanks to the ability to pay for goods with cryptocurrencies.
The developers have made a thoughtful and convenient interface, slightly reminiscent of eBay and Aliexpress. Trading on the platform is not regulated in any way; there are no commissions and restrictions on categories of goods. The trust between users is based on the classic mechanism depending on the reputation, which is calculated depending on the results of evaluations for completed transactions, carried out by various parameters.
When making a purchase, depending on the goods, three payment options are offered: direct, moderated without dispute, moderated with the dispute. This approach expands the possibilities of rendering services, for example, when it is impossible to make payment directly due to personal funds’ security reasons.
We could describe the platform’s possibilities, but it makes no sense because it is quite simple to try it out for yourself if you have an Internet connection and at least a few satoshis. Cryptocurrencies are valuable because they can be spent on goods and services, and the more common the trade is, the higher their value.
District0x is a decentralized marketplace operating on Ethereum, Aragon, and IPFS platforms. The platform provides the opportunity to create personal decentralized markets using Ethereum smart contracts.
Trading platforms and communities are decentralized autonomous organizations (DAO) in the District0x network. In 2017, a decentralized labor exchange — Ethlance — was launched, which connects merchants and customers to provide various services paid with ETH.
Currently, developers are working on two new projects: a p2p platform for the exchange of registered names through ENS (Ethereum Name Service) — ENS Bazaar, and a platform for creation, release, and exchange of rare digital collectibles on Ethereum blockchain — Meme Factory.
In the area of decentralized labor markets, the GitCoin platform is also being developed and expanded as a market where freelance developers can interact with each other and with clients for remote open source projects.
OpenSea is the largest marketplace for digital goods such as collectibles, game items, domain names, digital art, and other assets called NFT tokens — goods or assets only in digital form, where each such token is unique.
The platform has a special interface that allows you to create smart contracts and showcase the OpenSea store without programming knowledge. For example, a Parisian artist Pascal Boyart creates digital collectible items based on his street art murals, which are original creations, one of which was sold for 25 ETH.
A similar project in the direction of creation, exchange, and sale of NFT tokens is the Rare Bits platform, which in 2018 attracted $6 million to support the market of collection items and unique digital tokens.
The Origin platform and two internal applications based on this platform, Marketplace, and Dshop, provide a decentralized p2p platform for trading. One of this platform’s main features is the ability to pay for goods and services with USDC Circle and DAI MakerDAO, and any ERC-20 token when talking about the contract development level.
OGN internal token is already integrated with other large DeFi platforms. Liquidity pools such as ETH/OGN are already available on KyberSwap, Uniswap, and Balancer. A few weeks ago, Dshop partnered with Uphold to open the Uphold Store based on Dshop, and the latter, in turn, was added to Uphold’s application directory for use by 1.7 million members of the network, which operates in more than 184 countries and accepts over 30 types of assets.
In September 2020, Origin developers launched their own OUSD stablecoin, pegged to the USDT, USDC, and DAI basket. Origin manages stablecoins’ farming in the Compound protocol among the others, and the resulting profit is distributed proportionally among all OUSD holders.
Since 2017, LocalCryptos has been the platform for p2p Ethereum trading — LocalEthereum, but after rebranding in 2019, the buying/selling and exchange of BTC, ETH, LTC, and other cryptocurrencies in more than 130 countries became available on the platform. LocalCryptos’ decentralized marketplace is LocalBitcoins’ direct and closest competitor while remaining free from regulatory agencies.
Transactions on the platform are carried out directly through smart contracts and escrow, and entry and exit fees are paid only to miners. If there are any controversial situations regarding the transaction, the smart contract can be accessed by a third party arbitrator, who will decide on the outcome of the transaction. It should be noted that private keys to a wallet belong to users, which also makes this site more attractive and censorship-resistant.
The future of decentralized markets
Decentralized markets eliminate the need for a third party to carry out the transaction, which in turn leads to minimum commissions or their absence. Another factor that affects the interest in such platforms is the lack of data provision and the possibility of anonymous payments with the cryptocurrencies.
Despite the low acceptance level, decentralized markets are gaining popularity both among users and investors in such projects. Blockchains and decentralization can help build truly censorship resistant markets and platforms where transactions can be made with cryptocurrencies or any other digital asset.