OpenBazaar is not the next Silk Road, but an anarchist eBay

A bronze statue of a leprechaun on a motorcycle, an R2D2 T-shirt, a sock, imaginary products from the world of Rick and Morty, a pet dog, the most majestic cat… These are the kinds of items that users of OpenBazaar, a peer-to-peer digital marketplace that has been long in the making, can view from the comfort of their desks.

Although still in its very early stages (OpenBazaar is only open for testing, with full launch expected later this month), the current app is very different from what some hyperbolic commentators expected. When the OpenBazaar operators proposed the idea of ​​a distributed marketplace where there was no central authority responsible for holding accounts, the currency used was the untraceable (but practically traceable) Bitcoin, and regulations were almost non-existent, it led to some assumptions: OpenBazaar would become the next notorious marketplace, like Silk Road, where illegal weapons shops and child abuse content dealers were a hotbed of untraceable business for the police. But now, OpenBazaar is shaping up to be a stricter, more secure anarchic eBay.

The OpenBazaar app for Apple's Mac is a slick tool that includes a search function and an encrypted chat tool for talking to sellers.

There are undoubtedly some benefits to using OpenBazaar for anonymous transactions. The nodes used to host the network (see image below) have encrypted transmissions to help prevent some simple snooping, although the nature of the peer-to-peer (P2P) setup means the US government can't target an authoritative, centralized party, but it's not known whether they have subpoenas ready, or if tech workers are looking to break out of the servers. Although it's impossible to take down a P2P botnet as the police have shown, it would be quite difficult to bring down the network if the network's command and control is hosted on a small number of boxes. The chat function is also encrypted end-to-end, which should make this service very popular in light of revelations about large-scale government surveillance.

Global nodes currently handle the peer-to-peer OpenBazaar network. The lack of centralized management makes it difficult for governments to censor traders.

Why is OpenBazaar not Silk Road?

But there are a few key reasons that make OpenBazaar unlikely to become the next Silk Road. First, anyone with technical skills can view a user's IP address. If users can pull data from the OpenBazaar API (application programming interface, which allows outside access to some OpenBazaar systems), it would be possible to build a crawler that maps all the participants in this p2p network. If the police have a search warrant, anyone who does not route their traffic through other servers to mask their IP address can be quickly identified and located.

This is clearly stated during the user registration process: "OpenBazaar users are not anonymous by default. Most communications between parties are encrypted, but IP addresses are public and can be associated with activity on the network. Malicious actors can use this information to target you; it is your responsibility to protect your privacy."

Even if users take extra precautions, governments have ways to exploit VPNs and Tor.

Then there's the spirit of OpenBazaar's chief evangelists: Brian Hoffman, former chief assistant for cybersecurity at Edward Snowden's former employer Booz Allen Hamilton, Sam Patterson, a longtime Bitcoin expert, and academic Dr. Washington Sanchez. After taking over the OpenBazaar project and a few emails from the project's original creator, Amir Taaki, the three sought to create a government-free platform where companies could make more money by eliminating the middleman (usually the owner of a store, like eBay or Amazon, who takes a cut of the profits from platform sales). By using Bitcoin, the middleman, the banks and credit card companies that demand a cut of traditional transactions are eliminated. But the platform (yes, including dark web drug and gun markets) still gets its cut. On OpenBazaar, there's only buyers and sellers.

The creation of the network will not directly generate revenue for them. So they formed OB1 to find many ways to bring big names to OpenBazaar, and it will form partnerships with certain stores. It will also provide merchant support services, such as reviewing legal businesses and arbitration, which may be charged for.

Patterson told me over OpenBazaar's encrypted chat mode,

"When we go live, we've had hundreds of people and businesses ask to be notified over the last few months. So we'll start with those and others who want to join."
“We’re not going to target the big players right away. Part of that is we want to make sure the clients and the networks are well tested before we push it out to a wider audience. Part of that is that customers don’t have a lot of tools right now to do the proper inventory management that is necessary for slightly larger enterprises.”

“The initial launch was met with great community engagement and word of mouth, and we won’t do marketing until we are sure we have a clear path to using this new approach to online commerce. Peer-to-peer commerce is not going to take over the internet overnight, and we see this as a long-term play.”

The beginning of a retail revolution? Or more dark web drugs?

OpenBazaar is off to a flying start. Since it began testing in March, Hoffman told me, the app has been downloaded more than 15,000 times. OpenBazaar has raised a small amount of funding in its $1 million seed round from Union Square Ventures, Andreessen Horowitz, and angel investor William Mougayar, and Hoffman said the company is committed to continued growth and will not rely on outside investment in the future.

OpenBazaar remains attractive for illicit activity, and Hoffman and his colleagues plan to improve the app's security and provide more effective anonymity. They argue that buyers and sellers have a right to keep their identities private; in an environment of global surveillance, digital storefronts have been infiltrated by government spies, most notably the National Security Agency's attempt to infiltrate Google's Play Store.

More privacy features are on the way. In the coming months, as OpenBazaar tries to sell a new kind of retail concept to every merchant, it will tie itself to an anonymous network, Tor or the lesser-known i2P. OpenBazaar's encrypted chat is not yet as private as Jabber clients such as Adium or Tor Messenger. OB1 developer Chris Pacia told me that all OpenBazaar uses the NaCl cryptographic library. He noted that further updates could provide more privacy.

He said:

"OpenBazaar's encrypted chat is currently very basic. It is primarily just oriented towards connecting two OpenBazaar nodes and allowing buyers and sellers to talk. For example, we do not make any explicit attempts to hide IP addresses, and more advanced features will be added as needed."

At the time of writing this, I only found one dubious seller who was offering NATO-grade pepper spray and a 'flashlight stun gun.' One can't help but wonder if he or she is licensed to sell these items in the United States.

Items like these sold on OpenBazaar may raise concerns because the weapons may be sold illegally, but in its early stages, OpenBazaar doesn't look like a safe haven for criminals.

But even if this becomes a playground for criminals, blaming the OpenBazaar creators would be misguided. Hoffman explains that the OpenBazaar protocol is 'agnostic.' Like all code, it has no explicit moral bias.

"This distinction allows for the sale and trade of goods in one jurisdiction that may be illegal elsewhere, but does not intentionally or encourage users to engage in illegal transactions. OpenBazaar is a tool, not a business."

For now, drugs, fraud, and gun merchandise will likely stick to Tor Hidden Services, sites hosted on anonymizing networks that can only be accessed when users "hop" between randomly selected servers to reach their destination. There's no reason to doubt that darknet merchants will move en masse to OpenBazaar when it becomes more secure, as there's no sign yet that OpenBazaar will offer better protections to these darknet sellers.

If OpenBazaar can attract big merchants and independent retailers who want to save money and know how to handle Bitcoin, then it has a chance to shake up the market in a major way. While early adopters may be a little eccentric (expect the anarchic aspect to survive), there's no reason for the big players not to try something different that could save them a ton of money in the long run.