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P2P E-Commerce Network: OpenBazaar CEO Gives Talk To Packed House In San Diego

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SanDiegoMeetUpIn North Park, a hip and central bedroom community of San Diego, local businesses Airbitz and CoinStructive hosted an evening of craft beer and Bitcoin discussion at Union Cowork last week. Founder of OpenBazaar, Brian Hoffman, who comes from San Diego but lives in Washington D.C., held an hour-long speech about the state of his company.

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Founded by CEO Hoffman – who previously worked as a cyber-security and IT consultant at Booz Allen Hamilton where Edward Snowden contracted – open-source project OpenBazaar (OB) strives to create a decentralized network for peer-to-peer e-commerce devoid of fees and censorship. As OpenBazaar states, “…it’s the baby of eBay and BitTorrent.”

The OpenBazaar client (a downloadable application) allows you to create a product listing like Etsy and eBay – such as model trains or old laptops – on your computer. Once the listing is published, anyone searching on OB’s distributed p2p network for model trains or laptops can find it. They can either pay the price you’re asking or make a counter-offer. Once the terms are agreed upon, the OpenBazaar client creates a contract with the users’ digital signatures. Hoffman hopes to carry on the original spirit of the Internet.

When the Internet was created it wasn’t created as a photo sharing platform. It was created to network computers around the world for time sharing purposes so that researchers and scientists could pull their resources together and create this massive global network, and it seems to have succeeded. It makes life much more efficient and shows the power of networks.

OpenBazaar, which strives to be an alternative to centralized services like eBay, Amazon, and Etsy, has the goal of putting power back into the hands of its users by connecting them directly, without third parties. To a degree, for Hoffman, it’s a personal issue.

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“I really hate eBay and love to piss on them whenever I can, based on personal experience. eBay wasn’t originally created to be this asshole-ish. Pierre Omidyar,the founder of eBay, wanted to create this network, this site, that would create a perfect market where bidding would create this balance between all the different people participating on the network,” Hoffman told the audience in San Diego. “Everything would be priced exactly where it should be priced because people would be bidding against each other and only pay what they should have paid.”

“Unfortunately, as time goes on, you see they get investment, they go public, all these things happen, it distorts that original vision,” Hoffman added.

Where OpenBazaar differs from Etsy and eBay most notably is in arbitration.

Whereas eBay and Etsy handle all arbitration within customer service departments, OpenBazaar approaches the problem differently.

OpenBazaarSanDiego

“We have this concept of moderators, which are this third party part of the transaction process. They aren’t selling goods and services, they aren’t buying goods and services, they’re providing value to the users of the network,” Hoffman said. “For that they can receive tips and they can receive fees based on how much value they provide the users.”

“On eBay you’re paying 10% and that covers those services, and its mandatory,” he continued. “In this case, if you want those services, you can bring the moderators in. We think that’s a pretty different approach to doing this.” This idea landed OpenBazaar $1 million in funding.

“We got in front of Union Square Ventures and Andreessen Horowitz and they asked, ‘How the hell are you guys gonna make money, why should we give you money?’ And we said, ‘We have no clue,’ and they said, ‘Well, this sounds really fucking crazy, and we like that and we’ll put the money in,’” Hoffman recalls.

I can’t explain why somewhere along the line they felt like it was a great idea. Chris Dixon, our partner at Andreessen, worked at eBay for awhile, and sold his company to eBay, and so is very familiar with the challenges of those kinds of market places.

But in what exactly did Andreessen Horowitz invest since OpenBazaar is an open-source protocol? They invested in the first business on top of OpenBazaar. As Hoffman explains:

“A lot of the news articles said OB gets funding,” Hoffman said. “Not really true – OB is just an open project. They invested their money in OB1, which is supposed to be the first business on top of Open Bazaar.” With the interest in the project and the funding, OpenBazaar expanded upon its original vision, which has caused a delay in the release of the application.

“I skyped in June 30 last year, I think, and told everyone it’d be ready in something like August of last year, so we didn’t meet our [goal],” Hoffman admitted. “But I think the project gained a lot of visibility, and the scope kind of broadened, which has been one of the challenges we’ve had.”  As for the team built up around OpenBazaar:

“It is a six person company, three founders and three employees. We have [people in] Greece, Australia, Chicago, New Hampshire and two in Virginia,” Hoffman said. “We are basically working full-time to finish OB and drive the community forward, and hopefully once that is done we will be able to build a value-added business on top of the platform just like anyone else.” Things have picked up recently for the OB team.

“The last few months have been quite a ride,” Hoffman said in the most serious tone of the night. “We’ve been trying to get our funding, and put together a full-time team, which kind of slowed us down a bit.”

“Right now our road map shows that we are aiming for a full release sometime around Thanksgiving this year, which means that everybody should be able to download our core app and start doing all the stuff they want to do on OpenBazaar,” he said. Many have questioned the project’s relationship to Tor. Hoffman addressed these concerns.

There have been some misconceptions about our support of Tor. Our investors would like us to say we don’t support Tor and don’t plan to support Tor because it makes it easier for them. [However], our stance is that Tor is very important.

Hoffman also revealed that, in order to make its platform more available to the users of Etsy and eBay, OB is considering incorporating USD transactions. After the speech, a brief Q&A session took place, and more local craft beers – like Ballast Point – were consumed before some of the attendees headed around the corner to City Tacos – a Bitcoin accepting Mexican food place – for dinner.

Images from Hacked, featured image from Shutterstock.

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4 Comments

4 Comments

  1. Tony

    July 21, 2015 at 2:49 pm

    OpenBazaar is such an exciting project. Looking forward to it!

  2. Burnt Eloi

    July 22, 2015 at 11:14 am

    Why only BTC though? The system should be modular enough to accept any crypto. And now they are thinking USD? How are they going to implement that?

  3. Philosopher Rex

    July 29, 2015 at 7:46 am

    I hope they look into porting OB for the SafeNet (aka MAIDSAFE).

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Blockchain Asset Manager Ambisafe Talks About Institutional Guarantees, Parity Debacle

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Ethereum platform Ambisafe has quickly emerged as one of the blockchain’s most promising asset managers. Hacked recently spoke with representatives from the company on their product, institutional bottlenecks and other contemporary issues facing the cryptocurrency market.

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Ambisafe Asset Platform

In the world of blockchain, Ambisafe is well established. The company has been involved in the cryptocurrency space as far back as 2010, and is today one of the blockchain’s leading asset issuance and management firms. The company provides many go-to-market offerings, including ICO services, asset issuance and custom Ethereum development solutions.

Ambisafe operates several other companies, including Orderbook, an Ethereum token exchange. Orderbook has 25,000 active users and is averaging about two ICO launches per week, according to a company spokesperson. Combined, ICOs launched via Orderbook have generated more than $35 million in funding.

Orderbook claims to provide full transparency and immutability by recording all transactions on the blockchain. In this sense, it is entirely trustless and stores all assets “on-chain.”

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The companies (both Orderbook and Ambisafe) areled by Andrey Zamovskyi, who has been coding since the age of nine. He has his fingerprints all over first of their kind blockchain projects, such as wallets, merchant services, exchanges and trading platforms.

A Lack of Institutional Guarantee

Ambisafe told Hacked that one of the biggest challenges facing the crypto-sphere isn’t payment processing, but a lack of institutional guarantees. This could make it difficult to attract new investors as the market eventually stabilizes and cools from its recent streak of record-setting gains.

In explaining this issue, Ambisafe drew our attention to account guarantees in the United States. In the U.S., all savings accounts held at banks are backed by a guarantee of $250,000 from the federal government. This is essentially a guarantee that your funds will be protected for that amount if the bank fails.

Moreover, if your credit card is stolen, U.S. law limits personal liability drastically so that you are not left on the hook for a massive bill payment.

These same guarantees are not present in the cryptocurrency space. Quite the contrary, as a matter of fact.

For example, if my Trezor is stolen or Coinbase is hacked, I simply lose everything. Large-scale trusted and insured institutions need to back vaults with extensively audited multi-sig wallets before we’ll see widespread displacement of credit/checking accounts.

Parity Wallet

Ambisafe also chimed in on the recent controversy surrounding Parity Technologies, whose account holders were locked out of $190 million worth of ether tokens. When asked about how the accounts could be unlocked, Ambisafe referred to the fact that there are some Ethereum Improvement Protocols (EIPs) on how to recover the funds. However, the discussions appear to be ongoing with no immediate solution in sight.

“In our solutions, we make sure to have a test coverage,” Ambisafe said. “Also, we don’t publish our code out in the wild just for the hell of it. We share the code by request though.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

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Does ‘CryptoRuble’ Threaten the Point of Cryptocurrencies? Jean-Yves Sireau Weighs In

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Last month, Russia said it would move to regulate cryptocurrency by bringing mining and exchange under the purview of the central government. Investors rejoiced in the decision, as it signaled that another major economy would not ban cryptocurrency. However, as one prominent blockchain expert notes, the advent of a government-controlled cryptocurrency – i.e., CryptoRuble – would threaten the point of cryptocurrencies all together.

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Binary.com Founder and CEO Jean-Yves Sireau (JYS) was recently in contact with Hacked.com, where he answered some of our most pressing questions. Below are excerpts from our most recent email exchange.

JYS Weighs In

According to the Binary.com founder, Russia’s plan to centralize the mining process is probably feasible, but will likely hamper the CryptoRuble’s popularity. That’s because this arrangement practically ignores one of the key selling points of cryptocurrency – that is, the potential for a universal token.

“​Indeed, the attraction of cryptocurrencies is that they are like cash: easily transferrable, essentially anonymous and open to everyone,” JYS says. “​A currency that doesn’t have these features is going to be at a competitive disadvantage. There are already hundreds of competing cryptocurrencies, hence creating one that has limitations is not likely to be a success story.”

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As many of our readers know, Russia isn’t the only country looking to create a state-run cryptocurrency. Kazakhstan and Estonia are in the process of creating a state-run digital currency, with several others considering the idea. There has even been talk of China – a country that recently banned cryptocurrency trading – implementing its own state-run digital currency.

In Sireau’s view, there’s no guarantee that these currencies will be popular. As he rightly notes, “there are hundreds of cryptocurrencies with a very limited following.”

ICO Regulation

Russia has given mixed signals about how it plans to regulate ICOs. According to Sireau, this reflects broader confusion about how to secure a market that so few know about. Apparently, JYS doesn’t think too highly of ICOs, either.

“In my opinion most ICOs are worthless or scams, and investors will lose 98% of their money. Even if regulators do come up with regulations, it will be too little too late. In 1-2 years’ time there is going to be a flurry of lawsuits surrounding ICOs, especially in the US where law firms can organize class-action lawsuits. I think these lawsuits are what are going to tame the market, not regulatory action.”

On whether any jurisdiction approaching cryptocurrency regulation the right way, Sireau said flat-out no. That’s because “the core issue is that regulators are typically lawyers or compliance people who don’t understand the details of the technology. It’s like trying to create grammatical rules for Greek without having any knowledge of the language.”

The future of cryptocurrency looks promising, but will be marked by volatility and many failed projects. In Sireau’s view, this is especially the case with ICOs, which could “implode in a flurry of lawsuits, especially in the form of class-action lawsuits, in the U.S.”

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Minerva’s OWL Token Fights Inflation and Offers Merchants Unique Revenue Stream

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Luxembourg-based Ethereum startup Minerva has developed a platform that will reward merchants for using its tokens. Through a system of “reverse transaction fees,” Minerva will supply merchants with its newly minted OWL tokens when they agree to offer discounts on goods and services that can be paid for in the cryptocurrency.

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In other words, merchants who accept the OWL as a form of payment will receive more tokens simply by propagating its use.

The Decentralized Central Reserve

Observers and participants of the cryptocurrency market are no doubt aware of the volatile nature of this new asset class. Just last week, the global crypto market shed $65 billion – some 40% of its value – after China launched an attack on the blockchain community by banning ICOs and bitcoin exchanges.

Minerva’s platform aims to do much more than just incentivize the use of digital tokens; it seeks to tame volatility once and for all. This can be accomplished through the Minerva Volatility Protocol (MVP), which in some way functions like a “decentralized central reserve.”

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MVP works by smoothing out price movements in the OWL token. When the price of OWL increases, Minerva’s algorithm mints new coins for approved merchants during transaction. This is the “reverse transaction fee” everyone is talking about. When OWL’s price drops, the platform incentivizes users to temporarily take coins out of circulation with smart contracts that resemble bonds.

Targeting Inflation

OWL is essentially modelled from basic economic theory, which states that a currency – be it crypto- or fiat-based – is determined by the law of supply and demand. The price of a currency rises when its demand outstrips supply, and falls when its supply exceeds its perceived utility.

The smart contracts implementing OWL work to ensure that the basic law of supply/demand is maintained by targeting currency fluctuation. The algorithm does this by targeting the supply of OWL under present conditions to achieve zero or near-zero inflation.

When the inflation rate is smaller than targeted, additional OWL tokens are created; these OWL tokens are delivered to approved merchants, with a portion “taxed” and placed into a reserve vault. When the inflation rate exceeds the target, additional MVP contracts are made available for purchase at a calculated incentive rate, which is paid at a future time from the reserve vault. No MVP contract is offered for sale unless there is sufficient OWL reserved to pay the incentives.

Key Challenges Facing Adoption

OWL’s impeccable delivery method isn’t without its challenges. While cryptocurrency is the biggest thing since sliced bread, the market is still in its formative stage. This means ease-of-use and broader mainstream appeal remain limited for now.

“Our biggest hurdle is what we look forward to solving the most: achieving the mainstream adoption of cryptocurrency through ease-of-use and utility incentivization” Minerva co-founder Kevin McSheehan told Hacked.com.

Although many in the industry have told McSheehan that integration with merchant processing ISOs is a non-starter, Minerva appears to be ahead of the curve. The company has a long and established working relationship with some of the world’s biggest merchant processors. We’ll just have to wait a little while longer to find out who they are.

Regulatory uncertainty and volatility surrounding the crypto-sphere more generally are also key challenges companies like Minerva are facing. These issues have spawned another community pushing SAFTs as the next major breakthrough in the debate over regulation.

To combat these and other challenges, Minerva has put together an impressive team of advisers, tech gurus and legal counsel. There’s even an economist on board. The ensemble of powerful minds clearly shows there’s still a lot to think through in this uncharted industry.

Minerva is planning to launch its ICO in the near future. According to the website, 60% will be allocated to presale and final public ICO.

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