Despite its innovation, the online marketplace powered by bitcoin could very well turn into a shady business and become another Silk Road.
Reports emerged last week that venture capital giants Andreessen Horowitz and Union Square Ventures are investing $1 million in OpenBazaar, an online platform where users can buy and sell pretty much anything using the digital currency, bitcoin. If this sounds all too familiar, recall Silk Road, the bitcoin marketplace that U.S. authorities shut down last year for facilitating drugs sales. It’s rise and dramatic fall is the stuff of dark fiction, and I would argue that OpenBazaar is much worse.
Unlike its predecessor, OpenBazaar is completely decentralized and exists wholly within the network of users themselves. In other words, even if a criminal buys guns over the peer-to-peer system, he can’t be shut down without shutting down every computer in the network (which isn’t really feasible) since there’s no central hub for law enforcement to target.
The company has repeatedly made it clear that it isn’t trying to create a “Silk Road 3.0,” and lead developer Brian Hoffman told Business Insider that the company wouldn’t tolerate “misuse” of the platform, yet it’s unclear how the company would prevent illegality given its diffused architecture and professed desire to stay out of their users’ way.
While Hoffman could be right that OpenBazaar will revolutionize online commerce, its business model could also potentially threaten America’s tech industry. The wild and uncontrollable nature of OpenBazaar’s technology, especially if it winds up being used to facilitate terrorism, could push authorities to launch a broad crackdown on other technologies as well that law enforcement considers an impediment to its work.
And if the potential harm from a marketplace seems limited to you, consider what could happen from the combination of this type of technology with Artificial Intelligence. As AI evolves, even tech visionaries like Microsoft founder Bill Gates and Tesla chief Elon Musk have expressed concern over the ability of humans to control the outcome, especially if machines are eventually able to ‘think’ autonomously. Now apply OpenBazaar’s decentralized and police-resistant model to this and you have a recipe for disaster: machines with free will and the ability to communicate with each other under the human radar. Maybe an Isaac Asimov-inspired fantasy at one time, this is hardly an impossible scenario anymore given the rapid pace of technological development.
The point is that the real threat isn’t just OpenBazaar but the larger trend it could spawn.
To be fair, peer-to-peer networks that facilitate illicit transactions will continue to exist regardless of any controls, but the support and deep coffers of the venture capital community could help OpenBazaar attain scale faster than usual. That could make this small startup bigger and deadlier than Silk Road before people even realize what’s happening.
As technology evolves, the sector needs to think of ways to police itself. While most large companies in the space have yet to figure out how to do that without compromising their users’ rights and interests, their centralized technologies do provide the possibility of accountability. OpenBazaar, on the other hand, is predicated on the very lack of oversight and so hoping for anything other than chaos is naïve, unless of course the company figures out and implements crucial safeguards.
S. Kumar is a tech and business commentator. He has worked in technology, media, and telecom investment banking. Kumar is not an investor in the companies mentioned in this article.