Justin Banon, CEO and Founder of Boson Protocol, discusses the immense potential blockchain technology can bring to consumer markets, revolutionizing the way we engage in buying and selling The concept of commerce is as old as humankind; however, e-commerce first arose as an idea in the 1980s. In its relatively short lifespan, the concept of buying and selling goods or services online has met significant milestones; from the first e-commerce payment in 1994 to the advent of Amazon and eBay in 1995, to the all-pervasive nature of e-commerce as we know it today.
And it’s not slowing down, either; a recent study by IBM found that the Covid-19 pandemic has accelerated the adoption of e-commerce across the globe by five years. With additional lockdowns and restrictive measures being enforced across many countries globally, this rise is likely to continue as shops stay shut.
That being said, e-commerce is not without its problems. In incidents of dispute following any given online transaction, costly intermediaries often extract profit margins from producers, while pilfering the time and patience of the customer. Many e-commerce platforms have grown exponentially in recent years, allowing for the creation of monopolistic super-sellers that engage in anti-competitive behavior, siphoning business from individual industries all while harnessing the data of the customers.
Will this continue into the future or is there a different, better way of doing business? One solution to these problems lies in blockchain — the nascent technology with the potential to fundamentally change the world of commerce for the better.When there is a dispute involving two or more parties engaged in a trade that functions through e-commerce, intermediaries are required to mediate and settle the dispute. For centralized market intermediaries, the cost of this mediation for both the buyer and seller can negate the effort made, or profit derived, from ever engaging in the transaction in the first place. The management of dispute mediation and reversal is a primary function of market intermediaries.
For decentralized market intermediaries, dispute mediation is typically performed by arbitrators and represents a visible and material additional cost. Blockchain has the capacity to allow for the automation of transactions while removing the requirement of human intervention. Due to its peer-to-peer capabilities and it’s highly transparent nature, all parties engaged in a transaction facilitated through blockchain can reach a consensus on any given transaction without requiring a trusted third party, where arbitration is required only in exceptional circumstances.
Blockchain allows this to take place through the creation of NFTs, or non-fungible tokens. If a customer has a $10 bill, it’s the same as any other $10 bill. If a customer and supplier swap bills, there is no difference; this is what we refer to as fungible. With other items, this is not the case. For example, if a customer was to swap their Picasso painting with another customer’s Picasso painting, it is completely different as they are two unique pieces of valuable art. An NFT is a blockchain version of this.
If I have possession of this NFT, I have possession of something that is one-of-a-kind. As the world becomes increasingly digitalized, NFTs have the potential to become a viable solution for tokenizing everything from real estate and cars to intellectual property, gaming, art, and loyalty programs.
This means that if a customer purchases an asset on a decentralized or centralized marketplace, their transaction is guaranteed by pairing it with the verifiable NFT; blockchain allows for the payment and receipt of goods to occur at the same time or not at all, so that buyers can trust that they either receive the goods purchased or their money back, and sellers can trust that they will be paid for the goods they have supplied.
The exponential growth of certain centralized e-commerce systems has resulted in monopolistic activity becoming a dominant force in the e-commerce industry. This allows price-setting monopolies to crush competition while eliminating the necessity to specialize. Meanwhile, these monopolies have grown so powerful that they have the ability to abuse customer trust by extracting highly excessive profits and hoarding exponential amounts of customer data. By placing the value of data in the customer’s hands, blockchain allows for data to be pooled and monetized, but in a secure, privacy-preserving, and self-sovereign way. This incentivizes the voluntary sharing of data by allowing for the equitable distribution of the value it creates.