Constructing electronic marketplaces using peer-to-peer technology

Abstract

Due to the widespread appearance of filesharing systems like Napster, the peer-to-peer concept has recently become well known. So far, these file-sharing systems have been used for the exchange of digital goods. We recommend a concept, based on that of the file-sharing system, for a decentralized electronic marketplace that focuses on the exchange of physical goods. In contrast to file-sharing systems, the decentralized electronic marketplace would emphasize the decentralized management of transactions instead of the delivery of the goods themselves, since it would be impossible to distribute the traded goods via digital networks. Such a concept can be imagined as a "Napster for transactions ", the difference being that this peer-to-peer system would be used for files that contain parts of a transaction e.g. a demand document, a supply document, or an invoice document instead of for the exchange of audio and video files. In contrast to conventional file-sharing systems, these transaction elements are dependent on one another, i.e. they need to be combined to complete a transaction. It is the role of the peer-to-peer infrastructure to manage the flow of the transaction elements in order to complete a transaction. Such an infrastructure would allow the management of transactions without the presence of a middleman, leading to lower prices of the traded goods. What follows is a description of the conceptual and technical details of a decentralized electronic marketplace based on peer-to-peer technology and a discussion examining the extent to which the functions of a conventional intermediary can be replaced by a decentralized peer-to-peer-infrastructure.