On January 5, 2021, while the world was subjugated by the insane Bitcoin bullrun, the decentralized e-commerce platform OpenBazaar ended its operations amidst general indifference. A sadly ironic end, as institutions and small investors finally came together to propel cryptocurrencies beyond their all-time highs, the closure of OpenBazaar raised the question : are cryptocurrencies actually used as currencies ?
As soon as September 2020, I was informed that the OpenBazaar teams were experiencing serious difficulties in meeting the very high maintenance costs of their network infrastructures. Without an influx of funds and a rapid increase in the number of users, OpenBazaar had to prepare for its demise. On January 15, 2021, OpenBazaar’s servers officially ceased to function.
Pure speculation without utility
I clearly remember my reaction when I heard the news in late September. We were at the beginning of the recent bullrun and I could hear the old buzzwords of 2017 resurfacing everywhere. We were no longer in the era of ICOs but of DeFI, yield farming, lending and staking. Understand me well. I have a lot of interest in DeFi as a Haven shillboy, but just like back in 2017-18, I was (and still am) under the vague impression that pure speculation once again took precedence over utility. Decidedly, cryptocurrencies would never be actual currencies, but only mere speculative assets. Digital assets, in short. Commodities. Not proper currencies. And Bitcoin was nothing more than a so-called « store of value », as per the common narrative of the usual shills.
Despite my love for the cryptospace, my conclusion, as of today, is the same as in 2017. Bitcoin, inherently, has no value other than what the afordsaid narrative attribute it, based on its popularity and mechanical scarcity.
Yet, the truth is that Bitcoin is clearly not a currency. At least, Bitcoin is no longer a currency today as it once was. Nowadays, bitcoin is not the « digital cash for the unbanked » longed by Satoshi Nakamoto back in the days. As a transactional currency (i.e. in actual commerce), Bitcoin becomes more and more impractical as time goes on, especially during bullrun times when transaction fees are skyrocketing. Its costs and transaction times are still high, not to mention its environmental impact. This problem has been stubbornly denied for years by the bitcoin maxis and only the members of the XRP community, as well as a few media, dared to address this problem back in 2018. Earlier, in May 2021, the crypto community tackled Elon Musk after the latter (kinda) helped dumping the price of Bitcoin by making mention of this obvious environmental problem in a devastative tweet. But really, despite his own agenda, Elon only raised the obvious.
In my opinion, Ethereum and Litecoin are much more efficient and useful blockchains, and therefore much more valuable than Bitcoin. Admittedly, Ethereum also has its problems with transaction fees, but its core function as a smart contracts platform gives it at least objective value and utility. Likewise, Litecoin truly deserves the title of cryptocurrency much more, as its delays and transaction fees are much more suited for e-commerce. However, Bitcoin does not have any of these qualities as of today. And I think this also explains the failure of OpenBazaar.
Assessing the failure of OpenBazaar
Let us quickly recall the origins of OpenBazaar. Following the closure of Silkroad in 2013, a group of programmers created a decentralized marketplace prototype under the name “Darkmarket”. This project was later taken over by another team of developers, who renamed this platform « OpenBazaar ». The first operational version of OpenBazaar was released in 2016.
OpenBazaar is an open-source protocol allowing users to perform peer-to-peer transactions in a fully decentralized marketplace. Theoretically, OpenBazaar should have met with immense success. It should have met with the support of the whole community and should have become a standard adopted by the masses all over the world. In short, OpenBazaar should have become a major alternative to Amazon, Ebay, and PayPal. However, this was not the case.
Yet the company responsible for the development and maintenance of the platform, OB1, received funds from venture capitalists such as Union Square Ventures and Andressen Horowitz from its inception. In retrospect, the amount of these funds seems absolutely paltry compared to what some shitcoin pseudo-DeFi projects have been able to raise in recent months. That speaks volumes about the current mindset in the cryptospace. Pure speculation, without the slightest concern for utility, as if the two things were contradictory. Of course, this does not apply to all projects. But you know very well where I’m going here.
Technically speaking, OpenBazaar is a great protocol and a great platform. Nothing wrong here. The problem, in my opinion, is that up until 2017, OB1 has persisted in imposing Bitcoin as the only trading currency on the platform. In my opinion, this was a serious mistake, possibly motivated by inappropriate ideologism. I mean: It wasn’t hard to understand, even in 2017, that Bitcoin was very unsuitable as a transactional currency, for all of the reasons stated above. Only later on, OpenBazaar allowed transactions to be made in Bitcoin Cash, Litecoin and ZCash, which was indeed the right move to do.
However, OpenBazaar should have also allowed transactions in Monero, XRP, stablecoins and even in fiat. Or even better, the platform should have given users the choice to accept the cryptocurrency of their choice. Indeed, in spite of the narrative of the maxis and the usual shills, Bitcoin is not suited to « unbanked » of the lower parts of the society. Quite the contrary, it is now mostly suitable for the world of high finance or for speculators, large or small. Most people don’t buy bitcoin to transact, but to speculate. In itself, this is not a problem. I trade bitcoin myself. But I wouldn’t think of transacting in Bitcoin on a regular basis on the internet or in the real world. Nor would it occur to me to present bitcoin as a « store of value for the unbanked ». All of this is straight up bullshit. The reality is that there is little demand for Bitcoin as an actual transactional currency amongst the masses, not only because of its huge delays and transaction fees, but also because of the constant and fairly important fluctuation of its price.
In reality, bitcoin is used as a transactional currency primarily on the darknet. And even there, Bitcoin is becoming increasingly unsuitable, especially compared to Monero which has the advantage of being way less expensive in terms of fees and above all effectively anonymous.
Of course, Bitcoin is also sometimes used as a currency in the legal world and on the clearnet. In recent months, we have seen more and more companies, large and small, integrating Bitcoin as an accepted currency. Even PayPal announced that Bitcoin could be exchanged on its network. But isn’t it just a fad? Let’s be real : exception made for a few OG’s from the very early days (i.e. people who have so many bitcoins they don’t even care about paying a 10$ fee to buy a Martini), who actually pays in Bitcoin at the restaurant? Who pays for their online purchases in Bitcoin? Very few people indeed. On my online shop, only one of my many customers made a point of paying me in Bitcoin. This is the only case I have encountered personally.
In an attempt to popularize the Openbazaar protocol, the OB1 teams developed the « Haven » application in 2018. It was basically a mobile version of OpenBazaar. I was one of its first users. Unfortunately, despite the great quality of this application, it did not find much enthusiasm and the website has been closed altogether for several months.
Finally, another problem with Openbazaar was its business model. During the span of its existence, the marketplace managed to process no less than $44 millions in transactions, which might seem pale in comparison with Amazon or even with the $10-15 millions traded on the darkweb on a daily basis, but it’s still an pretty impressive amount. However, in spite of the good intentions beneath, the fact that OpenBazaar did not imposed even tiny transaction of listing fees was pretty risky on the long term. The project was consequently mostly relying on donations, which is cool, but a tad problematic when the maintenance costs for the team and the platform were pretty high.
Since then, others have tried to do what OpenBazaar failed. The latest example is the PARTICL platform, but the latter may face the same failures.
How future marketplaces can succeed with the Haven Protocol and its stable assets
However, I am truly convinced that there is an enormous potential for e-commerce platforms accepting cryptocurrencies. In my opinion, digital assets, i.e. unstable cryptocurrencies, will never be perceived by the masses as a relevant and daily mean of commercial transaction, precisely because of their instability (not to mention other issues relative to fees, processing times, etc).
In my opinion, a platform based on the OpenBazaar model could be successful under the following conditions:
This platform must be able to offer various means of payment: non-stable cryptocurrencies, stable cryptocurrencies (stablecoins), but also the possibility of paying by credit card as can be done on mainstream platform such as Amazon or Ebay. If the idea is to actually compete with these tech giants, then we have to offer what they do not offer, namely great ergonomics in terms of payment methods.
Some say that the failure of OpenBazaar is due to its lack of competitive advantages both vis-à-vis the darknet and the platforms like Amazon or Ebay. I believe this argument to be valid.
One of the advantages of OpenBazaar was its decentralized aspect and the ability for buyers and sellers to trade freely, autonomously, without third parties, and to some extent in a relatively anonymous, yet secure manner, while excluding the sale of outright illegal/immoral products and services (drugs, counterfeits, porn, CP, fraud material, etc.). From this point of view, there is certainly a demand in the general public for this type of platform. But choice must be given to the users:
Some users, like me, are very concerned about their online privacy and their ability to do business freely, without having to worry whether paypal, ebay or Stripe will freeze my hard-earned money under such and such guise or charging me usurious transaction or listing fees. I actually experienced such displeasing events last year on my Ebay shop, after PayPal decided to block my funds for 6 months without any explanation, nor any ways for me to actually get my money back until they unilaterally decided to allow it.
And I know for a fact that I was far from being the only e-merchant in this situation. This is why I presume that quite a large amount of online merchants would be delighted to be able to escape the monopolistic ways of these platforms, however, under certain practical conditions OpenBazaar never implanted. Once again, these is no point in doing business on a platform that only offers Bitcoin and Ethereum as a means of transaction. What is needed are more options and more efficacious and stable cryptocurrencies.
This is why I think there is definitely a future for e-commerce with cryptocurrencies. In my opinion, one of the blockchains best suited to such a platform is the Haven Protocol, which not only offers a native asset, the Haven (XHV), but also several stablecoins: xUSD, xEUR, xCHF, xGBP, etc. And this is its main competitive advantage.
Come to think of it, this is the ideal type of blockchain for such a platform: transactions processed in all kinds of Haven Protocol assets are not only completely and actually anonymous, but they are also very fast and require very little cost in terms of fees.
For a cryptocurrency to be accepted by the masses as a common means of payment, it must offer stability and ergonomics. Bitcoin maximalists have often claimed that a Bitcoin wallet is like a bank account without the bank attached to it. This assertion is false. No bank account lets the whole world having access to your transaction history, and no bank imposes transaction fees as high as Bitcoin does.
Conversely, a Haven wallet can effectively be compared to a bank account. Or more precisely, to a cutting-edge, autonomous, offshore account actually accessible to the common people around the world:
– No one other than you can see your transaction history
– No one can seize your funds
– Processing delays and fees are comparable, if not lower than those offered by credit card processors such as VISA or Mastercard
– You can exchange your assets in XHV, x-dollars, x-euros, x-Swiss francs, x-pounds, x-yuan and x-bitcoins directly on your wallet (on-chain), without being forced to go to some exchange
– Your transactions are anonymous, not only pseudonymous: if you send 5 XHV or 50 xUSD of 50 xEUR to your good friend Robert, nobody can go snooping around on the blockchain explorer and determine that it was you who initiated this transaction, and that it is your friend Robert who received it
For all these reasons, the Haven Protocol is probably the ideal blockchain to run a decentralized and genuinely popular marketplace. Add it a good credit card payment processor such as Viva Wallet, and you probably have the recipe to succeed where OB1 failed.
That being said, the stakes are high. Despite its exceptional capabilities, the Haven Protocol is still relatively unknown in comparison with Bitcoin or Monero. There’s still many rivers to cross in this regard.
Want it or not, it is a fact that the « Bitcoin » brand has become a generic reference for the general public. This often has been an obstacle for other blockchains or other more relevant and useful, but less popular projects. Having said that, I don’t think that’s necessarily a problem. If I were to launch a platform like OpenBazaar tomorrow, I would make sure Bitcoin is available. But I would merely make it a payment option among many others: altcoins, stablecoins and credit card processors.