Decentralized E-Commerce

Author: Andrew Zhang

The BRB Bottomline: This short read delves into an issue in online shopping that nearly all regular consumers have experienced. Offering a fresh perspective towards marketplace transactions, this article explores the use of blockchain to minimize fraud. 

Shopping online has never been easier…or perhaps deceiving. Review your product, click to buy, and the next day, receive the item at your doorstep, only to find out that the product is nothing like described: a pretty frustrating revelation. This unfortunate trend is unsurprising. According to a report published by DHS, seizures of infringing goods by the Customs and Border Protection reached 33,810 per year in 2018, while the value of seized merchandise rose from $94 million in 2003 to $1.4 billion in 2018. An even more daunting fact is that despite the government’s best efforts to combat counterfeit or deceptive goods, the numbers are only rising.*

This situation sparks another question. Have you ever wondered what goes into the glorified 5-star rating of a product? The answer to that question is actually quite disturbing. It all starts with a basic sorting algorithm that takes into account special parameters and outputs the rankings of a vendors’ listing. The higher the ranking, the more likely people view a product. As you may have already guessed, one of the key inputs to such an algorithm is customer satisfaction. Naturally, businesses seeking to increase their bottom-line will find ways of bending this system; as it turns out, gifting customers with free products in exchange for high ratings is actually quite a lucrative scheme

In fact, Amazon recently removed over 20,000 product reviews after a Financial Times investigation determined that reviewers were profiting from leaving positive ratings. This is a big problem. If businesses are not being honest about their products and consumers are not reading real reviews, then the integrity of e-commerce will slowly decay into an unreliable and inferior means of shopping. Surely, there exists a technology out there that would encourage both transparency and honesty. 

Enter a new player–blockchain

Whenever blockchain is mentioned, an inevitable topic pops up: bitcoin, usually followed by volatility and impracticality. Yet many of the core concepts that make blockchain appealing are oftentimes overlooked. Decentralization, among many others, creates an environment of mutual-trust where information is not controlled and regulated by a single entity but rather distributed amongst all actors of the market. In essence, data is stored and constantly being updated openly within the memories of every computer in the network: a shared database. The integration of this fundamental idea could potentially alter the pillars of many SMEs’ business models: from deception to transparency. 

Today, this idea is closer to reality than it ever was. The previously rocky subject of blockchain has been brought to a new level by Chinese-owned Ant Group. Of course, major technology companies in the United States like Amazon, IBM, and many others have also explored the possibilities; but the latest studies show that Alibaba, the parent to Ant Group, owns over 10x more patents and creates double the amount of blockchain applications per year when compared to IBM, a heavy US investor in blockchain technology. 

Essentially, the idea is to leverage the transparency of blockchain and the automation of smart contracts to encourage these small and medium-sized businesses to list and vend legitimate products. The process of building credit and reputation takes time; but with blockchain, customers can be sure that the transactions made and logged by a certain vendor are legitimate and have not been subject to tampering. From traceability to security, the history of a single product will be open to inspection and subject to stricter scrutiny than it now is. 

Take-Home Points

If you’re wondering how much a complete transition to a blockchain-based e-commerce system like Amazon and eBay will affect your lives, the answer is not much. The fact is, blockchain and decentralization is merely a tool for businesses to gain credibility in the most open and transparent manner possible. While the server-side of a website is subject to a major transformation, the client-side, which is you and me, will most likely remain the same. It is important to embrace change amidst the dire situation that many e-commerce platforms face. Maybe within the next few years, ratings and reviews will finally assume a more reliable role than it does now. 

1 Comment

  1. A very interesting read. Recently, during the pandemic online shopping has become my guilty pleasure–customer satisfaction ratings are the pull-factor when I purchase any product.

    Introducing blockchain to this platform could be an interesting solution to the deceiving comments on every online shopping website.

    Great insight! Would love to see more of you work.

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