Why Decentralized Trade on the Blockchain is the Future

financedude85's picture

Thanks to the buzz surrounding Bitcoin and blockchain, decentralization as an approach to services is now also being brought to mainstream discussions.

Bitcoin was built as a decentralized currency in the aftermath of the great recession. It was a reaction to the control centralized authorities such as banks have over people’s financial activities. When banks failed, so did the people who entrusted these institutions with their money. Today, Bitcoin continues to reach all-time highs in price. Its value is determined largely by the market and not by some central bank.


If bitcoin can disrupt the current model of currencies, then decentralization should also be applicable to other financial activities such as trade. In the context of trade, marketplaces and exchanges are also mainly controlled by centralized authorities. These companies act as intermediaries connecting buyers and sellers. Parties are allowed to exchange money and goods as long as they follow these companies’ terms and conditions. Critics of centralization point out that these companies aren’t essential to the process. These companies supposedly only assert relevance in order to profit from the fees they charge for facilitating transactions. Trade can simply happen among peers. There’s also the problem of security where a failure or breach of the centralized authority could mean the collapse of the whole system. Users could lose their properties and money.


Blockchain companies already seek to challenge centralized approaches and introduce decentralization to trading platforms and marketplaces. For example, Decentrex offers a fully decentralized crypto exchange for trading ether and ERC20 tokens. OpenBazaar takes a shot at the likes of eBay and Shopify by enabling merchants to create online stores and accept bitcoin for payments. Europe-based fintech group Naga is even envisioning a blockchain-based ecosystem that allows for decentralized means to trade financial products, virtual items, and cryptocurrencies. The emergence and growing acceptance of these decentralized services can truly change the way property and other items of value can be exchanged.


No More Middlemen

 

If one dissects what centralized services offer, they basically just serve functions such listing, escrowing, payments processing, or shipment booking. While these services provide convenience to users, these companies will often take a cut or a fee for each action they take. In payments, processors often require various fees to enable merchants to accept various payment methods. This stack of fees usually takes into consideration that the payments system relies on other intermediaries such as banks and clearing houses to work. Each of these intermediaries add to the fees. Trading platforms and exchanges also work similarly. Commissions and fees are charged for every transaction.


This continued involvement of various middlemen is an issue blockchain services seek to address. Merchant services like OpenBazaar allow merchants to accept bitcoin payments. Since crypto payments are transferred directly from the buyer’s wallet to the merchant’s, the process can be done without the need for other intermediaries. As an exchange, Decentrex uses Ethereum smart contracts to facilitate cryptocurrency trading. By letting the blockchain platform handle transactions, fees are often cheaper compared to those charged by centralized exchanges. Some transactions in decentralized exchanges even only get charged what the blockchain requires to process requests.


Convenience through Consolidation

A trend for many companies today is to consolidate related services within ecosystems. Facebook, for instance, has been investing heavily in its Messenger platform. Using chatbots, users are able to perform actions such as booking rides or ordering food within Messenger. The goal is for Facebook to become the definitive portal for both social interaction and transactions.

Decentralized services are also set to offer similar ecosystems that would help make transactions more convenient for customers. Naga aims to consolidate several of its own services by putting cryptocurrency at the core of its ecosystem. Naga’s existing services include SwipeStox – a trading app for stocks, foreign exchange, and indices – and Switex – a marketplace for trading virtual items.


To consolidate these services, Naga is set to have its token sale for its Naga Token. The Token will serve as the currency for the ecosystem and would allow users to make secure payments to any of Naga’s services. As an incentive, Naga provides discounts to those who will use the tokens for transactions over those who will use fiat currencies. Payment recipients would also be able to access funds quicker without having to wait for lengthy clearing periods common to traditional means.

 

Blockchain is Gaining Wider Acceptance

It may have taken a while but more organizations and users are finding value in blockchain’s capabilities. In business, it’s not only startups and ventures that are aggressively adopting the technology. Even traditional institutions have embraced blockchain for their own use. Bitcoin and cryptocurrencies have also drawn the attention of even the average investor to diversify into crypto assets.

This increasing exposure of the average consumer to blockchain is crucial for the successful adoption of decentralized services. Most people take time to become comfortable with innovation especially those that do not follow the popular models of established businesses. If consumers see that blockchain services and crypto activities aren’t as complicated, then they will find transitioning to truly peer-to-peer transactions e

easier.


Trust in Transactions

Blockchain is designed to be transparent, and immutable record-keeping system. As such, transactions done on blockchain can be reviewed, audited, and tracked by anyone in the chain.This can help ease the problem of disputes common in many trading and marketplace platforms since the blockchain records can show the true status of each transaction. This also helps thwart fraudsters who typically game centralized systems.

Chargebacks fraud is now a major problem for merchants where fraudsters use stolen credit cards to purchase goods. Card owners can perform chargebacks in order to recover the fraudulent charges made to their cards. Merchants, however, are often left shouldering cost of the goods if ever they successfully fulfill the order. Crypto payments do not allow chargebacks and mechanisms such as blockchain identity and smart contracts could help authenticate transacting parties.

Security breaches and cyber attacks have also become quite common these days. Many centralized services have been successfully targeted and victimized resulting in stolen customer data. Decentralized services run on distributed peer-to-peer infrastructure making it difficult for attackers to pick a single point of failure to exploit.


Fair Means to Trade

What decentralized services ultimately offer are means for people to trade in faster, fair, and less restrictive ways. By circumventing the need for intermediaries, buyers and sellers are free to price their items and conduct their transactions more flexibly. Users can also place trust on the mechanisms provided by the technology rather than be compelled to put faith in third-parties. As decentralized services also morph into ecosystems, users and consumers are bound to enjoy better usability and convenience.

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cristo's picture

Nerd money or gateway to gold

 

any_mouse's picture

No mention about transaction throughput.

Dragon HAwk's picture

In God we Trust... All Others ( Including Block Chain ), not so Much

geno-econ's picture

Can Bitcoin miners extend loans, like Banks ?

HRClinton's picture

Yes. Private banking. 

Been around a lot longer than banks. 

snblitz's picture

regarding bitcoin:


It is not immutable. Changes have been made in the past.

It is not decentralized. Whomever has the most power is in charge.

It takes 10 minutes to several hours to confirm a transaction. Useful for buying a cup a coffee...not.

There are middle men everywhere.

libertyanyday's picture

someone is off their meds.............why do i want a trace ledger?

freedogger's picture

Imagine something like this replacing amazon and the code that was written omitted transaction taxes. How would the regulators force an "upgrade"? Fun times ahead.

dark fiber's picture

There is nothing decentralized on the block chain.  If anyone from anywhere can make a transaction using the block chain, then you can bet yous ass government can see everything you have done there.  The block chain is the ultimate tool of government control.

HRClinton's picture

95% of ZHers do not lack opinions on Block chain and CCs. Alas, they lack genuine knowledge on the subject. 

Until they do, debates will be as productive as a debate with a Mormon or Jehovah's Witness at your door.

Quinvarius's picture

The price is rising.  Everything else is koolaid.  Absolutely no one would be entering this retarded product if it wasn't for simple price movement.  Bitcoin cannot handle the transaction volume required to be money.  That is just the final verdict on why it doesn't work.  Blockchain's worst application is as a currency.

Two-bits's picture

In the simplest of terms, the block chain is a spreadsheet, and mining is the repetitive checking of new transactions against the chain to verify that they are true. As these verification are completed, new blocks come into existence. To make a transaction, some of the token itself is used to fund its processing. 

Is putting money into crypto risky, I'd say yes. Getting some for free, though, costs only time and some clicking.

Click Here to get some to start, then do some research and see what opportunities the tech offers to support the value of the coin.

It's not $7k a week, but mining fractions today yield dividends in the future. 

libertyanyday's picture

capitalism and free markets.............nothing goes untried.

herbivore's picture

Isn't Bitcoin a type of fiat? Yes, it does require special computers and lots of electricity to "mine" it into existence, but it comes into existence out of thin air, as it were, much like dollars do. I recognize there are differences, and it's nice that Bitcoin is limited to 21,000,000- but there are lots of cryptocurrencies, not just Bitcoin, so there is essentially no limit to the number of cryptocurrencies that can be produced. Also, it has no intrinsic value, similar to dollars. Sorry, I think it's a bubble and I'll stick to gold. 

libertyanyday's picture

If man can in any way create, alter, control, legalize something it is NOT money..............phys gold IS THE ONLY  money.

HRClinton's picture

Stop being an unthinking religious nutjob and put on your thinking cap. Listen up, Bubba...

ALL money -- regardless of "backing" -- is based on FAITH. Even gold.

Even gold. Peeps bought it at $1800, because they forking BELIEVED it was worth it and would continue to rise in terms of the USD. How did that FAITH work out for them? 

 

null's picture

So, magically, when trading as “peers” everyone becomes honest and no longer needs government’s monopoly in dispute resolution?

Sounds like the Promoters are failing to articulate a competitive advantage beyond that of “its not the government”. And based on the, um, stakeholders of some of these outfits, that may even be wishful thinking.

koan's picture

Blockchain for president 2020.

Clint Liquor's picture

The Achilles Heel of Crypto is Capital Gains Taxes due on every transaction where the ‘coin’ has appreciated in value since purchase.

HRClinton's picture

Nice try, Bernanke. Sell BS and FUD elsewhere.

At first, I was gonna leave it at this. But now I've decided to call you out into the Fight Club ring, Benny Boy. Riddle me this, sunshine...

1. I bought my BTC years ago. From a Chinese miner. Paid in cash.

2. My BTC is resting in an offline Cold Wallet (cw), and have not sold one Bit of it.

3. It's enough to retire in style, anywhere in the world. 

4. When I do decide to convert a large chunk of my coins into fiat, such a transaction and I will not be in US tax jurisdiction. We will be in a... "Friendly Tax Jurisdiction" -- the kind that millionaires and large corporations enjoy offshore.

5. I will De-Dollarize: I will not convert into USD, but into other currencies. CNY, JPY, HKD, CHF, RBL.

Now explain to me and our ZH friends, just HOW the IRS -- an enforcement arm of the Fed -- is going to "tax" people like me, where they lack Jurisdiction and have no case.

(Tick, tock)

libertyanyday's picture

that is the problem, btc has no value, 6 mos ago people paid a nickel for it, today 6k...................its tulips, have fun.

any_mouse's picture

Gold has industrial uses. Has been valued for thousands of years by different civilizations.

Bitcoin has no intrinsic value. Value comes from popularity and artificial scarcity.

If Bitcoin were to be regularly used as currency, instead of hoarded as a store of value, the value would drop as circulation would increase availability.

Bitcoin is caught in a feedback loop. As value increases, hoarding increases. Less useful as a currency for regular transactions. Lower adoption rate.

Lower velocity. Scarce. Increased perceived value.

Higher velocity. Available. Decreased perceived value.