The unprecedented growth of blockchain and impending ubiquity of decentralization has shaken up established business and traditional technology. At the forefront of this is the evolution of traditional P2P networks and marketplaces into decentralized marketplaces that eliminate a number of the intermediaries that make online marketplaces clunky and inefficient.
It’s become clear that P2P marketplaces cannot scale perfectly. However, with the creation of Ethereum-based smart contract technology and distributed ledger, tasks that once required an intermediary are now ably automated, and blockchain allows secured transactions without the necessary involvement of a third party. Decentralization has the power to make payment processors obsolete within P2P markets, enabling users to transact with one another without the need for an external party facilitating the transaction. And the best part? All of it will be instantaneous and much faster than the centralized P2P market setup.
Decentralization is changing everything, and we can expect to see decentralized marketplaces built upon the blockchain to gradually replace traditional P2P markets for several key reasons:
1. P2P Exchanges are Rife with Fraud, Decentralized Exchanges Are Not
P2P exchanges not built upon the blockchain cannot offer 100% assurance that fraud will not occur, and scams are fairly commonplace. P2P exchanges are vulnerable to malicious parties that routinely scam traditional payment processing methods in order to gain fraudulent profit. As a result, P2P markets often require identification information before facilitating a transaction, a clunky and costly practice that adds frictions into any marketplace that harm user experience and drive up the cost of transacting.
The beauty of a blockchain ledger is that there will be no disagreement with regard to whether a transaction occurred or not, since it’s all on a public encrypted ledger. For this reason, decentralized marketplaces are superior to P2P markets, since blockchain enables immutable transactional fidelity over the internet (something that has never been doable without an intermediary ensuring quality in transactions).
2. Decentralized Exchanges are Becoming More Intuitive and Usable
In the earliest days of decentralized exchanges, only the most tech savvy adopters were able to use them, since the downloading and installation of decentralized exchange software, the creation and storing of a wallet, and other setup steps requiring detailed tech-knowledge created a barrier to entry that prevented average, everyday users from adopting decentralized exchange technology. The key barrier for mass adoption for most decentralized exchange technologies is that the effort and knowledge required to set up access to a decentralized exchange is just too high for most users, who just don’t understand how to get started. Compare this to P2P exchanges, which are intuitively usable and users have become highly skilled in using them, because P2P exchanges have been around for 15 years and developers have learned a great deal about P2P usability because they’ve had 15 years of iteration.
However, blockchain developers are becoming more cognizant of the importance of usability and simplicity in UI/UX design. If nobody can figure out how to use your product, they likely won’t use it, because people hate putting in effort to learn how to use something. When it comes to adopting new products, people hate thinking. In the classic book Don’t Make Me Think: A Common Sense Approach to Web Usability, digital product design guru Steve Krug emphasizes the importance of making a design so intuitive and so simple that users don’t even require instructions (or effort, for that matter) to learn it…since they likely won’t even bother reading the instructions in setting up an account. As Steve Krug says in the book, “the fact that the people who build sites didn’t care enough to make things obvious — and easy — can erode our confidence in sites and the organizations behind them.” The goal of a blockchain developer is to build something that everyone uses, but make the UI/UX phenomenally easy to figure out. If this isn’t done, the blockchain site will lose a user before it even gains one, and this is unfortuante given the transformative potential of decentralized exchange technology. Blockchain product designers and engineers should focus not only on developing great technologies, but sticking to the principles of intuitive navigation and information design so their great technologies can be adopted by the masses.
This being said, it’s also true that blockchain companies are becoming increasingly aware of the importance of simplicity in design and function of a product. For instance, virtual goods exchange WAX has taken the highly-complicated decentralized virtual goods space — where it’s extremely time-consuming and difficult for a user to set up an exchange — and reduced it to a simple widget that gamers can install in gaming chats…so they don’t even need to click out of their gaming screen to exchange gaming skins in a decentralized fashion built upon the blockchain. Companies like WAX are highly aware of the importance of intuitive usability and simplicity, so they’ve made their products as brilliantly simple as possible.
3. Decentralized Exchanges Are Finally Creating New Revenue Streams for Users
With the advent of appcoins and other tokens, users can make tremendous sums of money speculating about what “the next token to skyrocket in value” might be. But, while this has been a lucrative investment class, there’s still risk capital involved, so there haven’t been many revenue streams in blockchain apart from speculation and investment. There are those who desire the security that blockchain technology enables without necessarily having the risk appetite for token speculation. But, decentralized exchanges are about to change this.
Decentralized exchanges introduce something not seen before in blockchain and cryptocurrency: a way to make money using blockchain technology that does not require risk capital and an income source that is not speculative. In the decentralized virtual goods marketplace, WAX Token allows users to monetize their gaming skins and other video game assets and trade them in a decentralized marketplace that does not require an intermediary that takes a cut. This is, of course, superior to traditional P2P networks that require a centralized body because the transactions in a decentralized marketplace are completely secure (since they are facilitated by smart contracts) and no costly payment processing fees are required. Because decentralized markets give blockchain users another avenue for making revenue, we can say that decentralization is the new P2P.
4. Decentralization Provides Speed and Reliability That P2P Can’t
With traditional centralized P2P networks, there are several key problems that cannot be solved without decentralization. First, different games have different trading methods, and without having a common utility token for exchanging virtual assets, there will be incomplete markets in virtual goods. A lack of liquidity is another key constraint, and certain assets are not immediately exchangable due to fragmentation between various virtual goods marketplaces. Gamers are unable to operate their own trading sites, and with fragmentation of virtual goods marketplaces, a lack of matching power for buyers and sellers results in users not being able to sell their virtual goods that might have potential buyers, or having pricing inefficiencies stemming from a lack of direct access to a scalable market.
Using blockchain technology, a decentralized marektplace like WAX facilitates speedy transactional settlement that centralized P2P marketplaces cannot compete with, and decentralized virtual asset exchanges enables price flexiblity to increase demand as needed, something that is not afforded by a centralized marketplace. Decentralized marketplaces are global rather than local, and are borderless, and since a user will transaction in a utility token instead of fiat currency, international payment processing — which takes time since it’s facilitated by a centralized intermediary — will suddenly become instantaneous and frictionless. Because blockchain provides speed and reliability that centralized P2P networks do not, decentralization is the new P2P.
Decentralized marketplaces are the “new and improved” versions of centralized P2P marketplaces, and with blockchain smart contracts enabling scalability of users transacting with one another without the necessity of an intermediary party ensuring trust within the transaction (because decentralization builds this in). In this sense, decentralization will change P2P marketplaces forever, and usher in a new age of marketplace efficiency online.
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