The existing models of commerce are monopolistic. NFT-enabled decentralized commerce could offer a viable alternative and save small businesses.
In the last four years, the blockchain scene has been expanding its list of disrupted industries almost at a yearly rate. During 2017 and 2018, there was the now-infamous initial coin offering (ICO) boom. The following year, it was smart contracts that hogged the limelight.
Paving the way for innovation
Ethereum (ETH) established itself as a big player in the scene by introducing smart contract functionality, and, hence, giving birth to customizable decentralized applications (dApps). This allowed anyone to create a dApp of their own, overcoming the need for traditional software giants.
2020 was the year of decentralized finance (DeFi), which essentially decentralized most services — if not all — of traditional financial institutions. It offers a wide variety of peer-to-peer transaction possibilities, such as lending and borrowing, staking, yield farming, and, even, betting. Importantly enough, the DeFi upsurge established a new decentralized financial paradigm and paved the way for new innovations to come.
Non-fungibility allows for new kinds of transactions
The very concept of non-fungibility itself allows for new kinds of transactions, where users are not limited to monetary exchanges, but can enjoy the exchange of assets, be it digital or physical.
Transaction data is also preserved for the transacting parties, while the asset’s royalties are forever stamped on the smart contract itself. In other words, NFTs are in a position to power the next generation of commerce, namely, decentralized commerce (or dCommerce).
The question “why have NFTs and dCommerce not already become the next big thing,” is a reasonable one given the fact that the ERC-721 protocol surfaced into existence a few years ago. In simple terms, it is a standard interface for non-fungible tokens, also known as deeds. However, it is important to first understand the framework in which they operate and what scheme they are promising to disrupt.
Tech companies becoming e-commerce oligarchs
Although e-commerce came to revolutionize the traditional physical commerce status quo, it capitalized on the concept of online peer-to-peer (P2P) commercial transactions by manipulating it to its own advantage. A few tech companies quickly managed to become e-commerce oligarchs, controlling vast amounts of commercial activity on a global scale.
For instance, Amazon’s market share alone accounted for nearly 50% of the US e-commerce retail market in 2020. With more than 25 years in existence, such monopolies have been exploiting their role as intermediaries by hoarding consumer data and capturing the surplus value created by users.
The data protection frenzy of the last few years has tapped into several industries’ data management practices, and the e-commerce sector is no exception.
In fact, various blockchain-based projects have attempted to disrupt the traditional e-commerce scheme empowering users by offering alternatives to current data management and transaction processes.
However, despite such first-layer dCommerce initiatives having laid the foundations for emancipating users from traditional monopolistic giants, some consumer needs (e.g. trust, decentralization, and data transparency) are still to be addressed. Hence a significant mass adoption of such services is not ripe just yet.
Powering the next generation of dCommerce
The NFT scene can now enjoy the hard-earned accomplishments of its crypto predecessors and power the next generation of decentralized commerce.
By using NFTs to eliminate e-commerce intermediaries, consumers can enjoy a new era of peer-to-peer commerce. This revolutionary innovation that NFTs can enable will put the power back in the hands of the consumer.
It will also enable smaller retailers to reclaim their footing amidst the increasing dominance of e-commerce giants, thus democratizing and demonopolizing commerce. If that is not a worthwhile quest of crypto pioneers, then what is?
Current commercial activity in the crypto world is limited to include digital only assets, which in turn disconnects the multi-trillion-dollar real-world commerce industry from smart contracts and the next-generation web.
It can be argued that the rise of NFTs should in itself fuel a paradigm shift in mindset in this regard. The economy of things should not be limited by their “digitality:” digital products and services can be paired with real-world items.
It’s time to act
The technology is already here; it is up to the crypto leaders of our industry to act upon it. NFTs themselves provide the technical infrastructure to disrupt the need for human arbitrators and allow for physical asset redeemability in a novel way.
Digital to physical redemption can then be automated by tokenizing the commitment to trade “things,” which include anything from baseball cards to BMWs, to houses, as NFTs.
On the one hand, it is indisputable that e-commerce big players have been repetitively exploiting users and the respective dataflow, adding extra friction and costs to the whole process of digitally trading an asset.
Besides, the DeFi scene has proven how necessary it might be to disrupt existing monopolizing schemes even if at first sight it seems a rather hard thing to do. Pair this pursuit with the fact that utilizing NFTs to fuel commerce will offer smaller retailers a fighting chance while giving consumers greater access to the goods of their choosing, achieving this goal should seemingly be a top priority.
Nevertheless, the NFT scene has matured enough to be the founding cornerstone of a new page in the history of commerce, where anyone can trust and use a truly peer-to-peer commerce architecture liberated from mediating third parties and arbitration costs.