Why Bitcoin Will Hurt eBay More Than Amazon

January 27, 2014
Amazon’s distribution centers allow it to exist in a Bitcoin world.

The disruptive nature of the Bitcoin technology is going to wreak havoc on many different online industries, and one area of disruption that needs to be talked about is online marketplaces. eBay and Amazon, at least in the United States, are the kings of the Internet when it comes to connecting a buyer to a seller. Sellers like these platforms because they can sell their products on a centralized database of goods, while buyers enjoy the fact that the centralized marketplace also acts as an escrow agent. If something goes wrong, the buyer knows that eBay or Amazon will usually be willing to fix the problem. While eBay and Amazon are debating on whether or not to accept bitcoins as payment, other entrepreneurs are creating systems that would completely decentralize the online marketplace system. In the near future, buyers and sellers could meet anonymously on online bazaars without having to use eBay or Amazon as nothing more than a middleman.

Amazon’s Distribution Network

While systems such as Open Transactions could free buyers and sellers from the high fees and control of eBay and Amazon, it’s important to remember that Amazon has one huge advantage in this situation. In addition to allowing buyers and sellers to find each other on their website, Amazon also has a program called “Fulfillment by Amazon“. With this program, sellers can basically use Amazon’s impressive distribution network to make sure that their sales can be filled by Amazon and shipped out to buyers in a short period of time. Amazon Prime allows customers to get free two-day shipping on products from the various distribution centers, so many businesses see the obvious advantages of selling their goods through Amazon’s network of warehouses. Amazon can continue to use these warehouses to help sellers make sure their customers get their orders in a hurry, and they could also turn into the most popular pawn shop in a new, decentralized system. If you can’t find any buyers for your particular good and you need to sell it in a hurry, then it could make sense to sell to Amazon at a price lower than its actual value.

Bitcoin Crushes PayPal

Not only does eBay not have the distribution network of Amazon, but they also get a large percentage of their income through PayPal. There have recently been calls to split the two companies from each other, but it doesn’t seem like that is going to happen anytime soon. With no distribution network and PayPal becoming nearly useless in a Bitcoin world, where can eBay find its place in the new economy? From what I can see, their biggest hope is to accept bitcoin deposits on PayPal in the near future. There is still some value for PayPal to act as an escrow agent for certain transactions, but even that could be decentralized in the future. Once that happens, there’s really no reason for eBay to exist at all.

Last modified (UTC): January 27, 2014 08:09

Kyle Torpey @kyletorpey

Kyle is a freelance Bitcoin writer and the Marketing Director for Bitcloud. His work has been featured on Business Insider, VICE Motherboard, Let's Talk Bitcoin, and RT's Keiser Report . You can follow him on Twitter (@kyletorpey) or send him an email.