Bitmarkets, a Decentralized Marketplace Powered by Tor, Bitcoin and Bitmessage

Posted in: Archive
December 10, 2014 6:57 PM UTC

Bitmarkets is s a free and open source protocol and example client for a decentralized marketplace which operates over the Tor network and uses Bitcoin as its currency and Bitmessage as its communications network. Mutual security deposits between buyer and seller on individual transactions are used to ensure incentives are aligned for completing the transaction without the need for either reputation systems or trusted 3rd parties.

The urgent importance of distributed and decentralized marketplaces, without central servers that can be shut down by the authorities, has been emphasized as a way forward after the Silk Road 2.0 crackdown saga. Regardless of the fate of other centralized drug markets on the dark net (which may well be honeypots at this time), it seems likely that sellers and buyers will stop trusting centralized services.

According to the Bitmarkets team, an ideal system for a decentralized marketplace would be one of secure private transactions directly between buyer and seller without middle men collecting data or adding fees. Such systems are now feasible by combining anonymous decentralized payments (Bitcoin) and messaging systems (Bitmessage).

OpenBazaar, formerly known as DarkMarket, is an open source decentralized online marketplace designed for e-commerce, using the cryptocurrency Bitcoin. Amir Taaki and a team of other developers created the first prototype in April 2014 at a Toronto Bitcoin Hackathon. Soon after DarkMarket was revealed at the Hackathon, developer Brian Hoffman forked the project and renamed it “OpenBazaar,” and the third beta version of the software, “Tabriz,” has been released last month.

Simplified Escrow System With Only Buyer and Seller

The main difference between OpenBazaar and Bitmarkets is in the escrow system. OpenBazaar relies on a trusted third-party. Funds can only be released by multi-signature of two of those three parties. Bitmarkets instead cuts the escrow middleman out and requires only the agreement of buyer and seller. As explained on the Bitmarkets website:

The main difference is how escrow is handled. OpenBazaar uses a trusted-3rd-party escrow system which can be difficult in pseudonymous reputation systems because they are prone to gaming by parties creating positive reviews for themselves or negative reviews for competitors.

Bitmarkets instead uses two party escrow directly between buyer and seller with no third party. In our system the buyer locks 2x the price of the item and seller locks 1x the price of the item into a transaction and both have to agree how to unlock for payment or refund. This ensures both parties have an economic incentive to complete the transaction without the need for a trusted 3rd party.

In order to complete a transaction, both buyer and seller must have sufficient funds in their wallets for escrow and payment. The client contains a Bitcoin wallet in which these funds can be deposited and withdrawn.

The four Bitmarkets developers proudly answer the question “What’s the monetization model?” with:

“There is none. It’s a marketplace with no middle men, including us.”

A Bitmarkets whitepaper provides a non-technical overview of how the Bitmarkets client and protocol work. For more technical details, see the Bitmarkets protocol specification.

A first beta release for OSX can be downloaded from the Bitmarkets website, and the adventurous can download the source code from Github. The beta release doesn’t have all the bells and whistles that one can expect in an operational release, and the fact that the packaged software only runs on OSX is an important limitation. However, this is a project to watch, and one that could fill an important role.

What do you think of Bitmarkets and decentralized marketplaces? Comment below!

Images from Sarunyu L and Shutterstock.

Last modified: June 10, 2020 3:33 PM UTC

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Giulio Prisco @giulioprisco

Writer specialized in futurism, science, technology business.