Public Market’s Path To Decentralization

Oct 15

“Decentralization” is one of the most important and, at the same time, most abused concepts in the crypto space.

On the one hand, decentralization is shorthand for a variety of properties that stand in stark contrast to the monopolies that central banks have on our money and that the tech giants have on our data and online activity. On the other, the word is thrown around totemically, meaning too much and nothing at all — all at once.

Our team believes two things when it comes to decentralization.

First, we believe that teams should articulate why decentralization matters in the specific context of their goals. Are they trying to achieve censorship resistance? Are they trying to eliminate intermediaries? Decentralization isn’t an avatar of virtue; it is a strategy for achieving an ends.

Second, we believe that there is an inherent tension between operational efficiency in young projects and decentralized goals. Most companies address that tension by moving along a spectrum from less to more decentralized. As investor Travis Kling recently said, “centralization is used as a 4 letter word in this community.” We believe that rather than hiding behind the word decentralization, companies who can articulate why it matters should also be able to articulate how they intend to move along the centralization spectrum, and in what dimensions.

With that in mind, we’re happy to share our current thinking about decentralization, in terms of both its purpose in our ecosystem and its sequencing in our practice.

Why Decentralization Matters To Us

Public Market’s mission is to break the growing monopoly of eCommerce marketplaces, which brings with it deteriorating control and profit for sellers and higher prices and less choice for consumers. Put simply, decentralization is a mechanism to make a no-commission marketplace model work; to allow sellers who have been displaced a new home where they can be in control of their own business and not be at the mercy of a monopoly (and in turn, make higher margins); and a place where consumers can enjoy higher value as sellers pass on a part of those margin savings. By decentralizing the eCommerce infrastructure stack, we unlock and open key parts of the eCommerce infrastructure stack including inventory, catalogue, reputation, and fraud protection that have previously been closed and leveraged to build competitive moats.

From an operational perspective, decentralization is also a mechanism for warding against a re-concentration of power in the hands of Public Market or any associated storefronts built on the Public Market protocol once we’ve established network effects on a commission-free model. In the short term, everyone’s incentives are aligned to simply drive as big a network effect away from private marketplaces and towards Public Market storefronts as possible. In the long run, decentralization creates a bulwark against any future temptation to recreate monopolistic pricing practices to capture the value of a new network.

Vectors & Phases Of Decentralization

Our belief is that there is nothing more important in the battle against the eCommerce giants than to start building competitive, decentralized network effects. In some cases, this means building network effects in advance of the ability to store all data on chain. The trade-offs of UX, functionality, and on-chain data storage lead us to an initial approach that is a blended model with a path to opening up as the technology and governance models are ready.

We’ve organized this progression as a series of phases, each of which is articulated below. Within each phase, we’ve also broken down decentralization by “vectors.” All too often when companies speak of decentralization, they don’t articulate whether they mean it in terms of protocol development, token concentration, data availability, governance, or something else entirely. We’ve broken down decentralization into four vectors:

Protocol Development — Who is actively building on and contributing to the open eCommerce protocol?
Protocol Governance — How is the protocol governed and who is involved?
Token Network — How distributed are token holdings and who determines how tokens are distributed?
Data — How much data is open and on-chain versus closed and/or proprietarily held?

Phase 1: Early

The priorities of the “Early” phase are to facilitate the most efficient minimum viable development of a consumer grade storefront user experience that allows the Public Market ecosystem to begin building network effects around users, inventory, catalogue data, reputation data and more. In this early phase, the launching parent of the Public Market protocol, Abundance Labs, has the most centralized authority in the project.

Decentralization vectors:

Protocol Development — Building during the early phase is mostly limited to the Public Market team at Abundance Labs. The flagship storefront at public.market is maintained by the AL team and is being used to improve different aspects of the protocol before opening it to the larger developer community. We open source the majority of our code to our Github.
Protocol Governance — No formal process outside of decision-making by Abundance Labs.
Token Network — In advance of the token generation event, early beta users receive credits that may later be exchanged for tokens.
Data — The first data that will be opened and put on chain as part of the open Public Market protocol are seller reputation scores. This will happen sometime during the early phase of the project.

We anticipate the early phase lasting approximately 1 year.

Phase 2: Intermediate

The priorities of the “Intermediate” phase are to begin opening our eCommerce protocol, expanding who can build with it while also expanding who can interact with tokens. Additionally, this phase will be a learning period. The PM team will be studying different forms of decentralized governance with an eye towards expanding and distributing control over the medium to long-term while retaining the ability to make efficient decisions in the short-term.

Decentralization vectors:

Protocol Development — Throughout this phase, more aspects of the eCommerce protocol will be released to open source, enabling other developers to build on it. Additionally, we will begin the first formal developer programs as well as start to provide basic developer tools for other storefronts to use core aspects of the protocol.
Protocol Governance — A protocol improvement proposal process will allow outside developers to begin making suggestions. Additionally, a formal developer program allows interested parties more access to the Abundance Lab team, who will in this phase begin to actively integrate developer community ideas into the protocol development roadmap, but who retain final authority. Additionally, during this period, we will be researching various approaches to governance, with a particular eye towards systems that can achieve finality through democratic means.
Token Network — Token distribution continues to expand as more buyers enter the network and more Storefronts are built on top of the Public Market protocol. Early buyers and storefronts also participate in the Early Adopter Token Rewards pool, further decentralizing token concentration.
Data — We will move to storing our large data sets on-chain once blockchain technology has matured to the point that we can do so without sacrificing cost and speed. We are currently investigating many options that combined layer 1 and 2 solutions, abstraction layers, and other exciting innovations to start to address the needs of large and oft-updated data sets

We estimate the intermediate phase will last ~12–24 months.

Phase 3: Advanced

During the “Advanced” phase, the intention is that the Public Market protocol for eCommerce is fully open and empowers anyone anywhere to build a storefront.

Decentralization vectors:

Protocol Development — With the protocol fully open source, we’re now additionally inviting others to build tools and middleware that make it simple for non-technical audiences and publishers to build their own storefronts and other applications using Public Market.
Protocol Governance — We intend to be moving towards adoption of a formal decentralized protocol governance system. Whether this is on-chain, off-chain, or some hybrid thereof will depend largely on the demonstrated success of democratic governance systems in the market and our ability to discern best practices that achieve our communities need for adaptation and sustained decentralization.
Token Network — The token network continues to expand and get more distributed as the vast majority of tokens are earned from purchases and used on other purchases.
Data — As much data as is technically feasible will be open and on-chain.

Conclusion

The purpose of these phases of decentralization isn’t to provide a perfect, immutable path from closed and controlled to open and democratic. Instead, the purpose is to:

Articulate our intended trajectory, based on the best information we have available
Be specific about dimensions and vectors of decentralization over time
Put our path to decentralization in the context of a larger argument about why decentralization matters.

If you’re interested in learning more, visit publicmarket.io and join our mailing list to stay up to date on all of the latest progress.