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Decentralized Blockchain-Based Electronic Marketplaces

By Hemang Subramanian
Communications of the ACM, January 2018, Vol. 61 No. 1, Pages 78-84
10.1145/3158333
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Decentralized Blockchain- Based Electronic Marketplaces, illustration — Credit: Spooky Pooka / Debut Art

E-commerce marketplaces—whether business-to-consumer (B2C) or business-to-business (B2B)—are examples of a two-sided market.^6,19 Each side involves networks of participants. Network effects—the incremental value added by each new participant—play the dominating technological role in such markets. Over time, network effects inevitably yield a monopoly in which a single e-commerce firm manages the entire marketplace.²⁴

Key Insights

In line with the "theory of the firm"—or a set of economic theories that explains and predicts the nature of the firm, company, or corporation, including its existence, behavior, and structure—most e-commerce firms today aim to maximize profit for shareholders by growing the corresponding network of participants using the platform, including sellers, buyers, developers, resellers, intermediary service providers (such as logistics providers), payment-gateway services, and institutional intermediaries, including legal advisors.

Comments

Manoj Nambiar

December 28, 2017 10:15

Getting more than 1000 transactions per second is a big challenge given the current consensus protocols. See this paper - https://arxiv.org/abs/1703.04057

This paper evaluates a "centralized" deployment which is the most optimistic. In a decentralized deployment latency will not let the system deliver anywhere near 1000 transactions per second.

Don't you think this will limit the adoption of Blockchain?

Hemang Subramanian

December 28, 2017 10:40

While there is no generic solution for scaling greater than 1000 transactions per second, many solutions (both on-chain and off-chain) are being worked out. For example, the lightning network solution proposes an off-chain mechanism to scale to millions and billions of transactions per second.
The ethereum foundation is working on many parallel solutions namely sharding - an on-chain solution- wherein the main chain is split into shards (or smaller data stores) that are distributed and are responsible for a subset of transactions. Similarly, the Ethereum foundation is working on Raiden which is an offchain solution similar to the lightning network. Lastly, the Ethereum foundation is working on another mixed solution (sidechains - combination of an on-chain as well as an off-chain solution) called Plasma, that is supposed to scale the network's capacity to as much as that of modern Credit card processing networks if not more.

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