DAPPCON 2025: DeCom- Building the Infrastructure for Decentralized Commerce - Ori Shimony

Transcript

Hey, Dabcon. Today, I'll be talking about a new class of DAPs that I've been looking into as part of the Ethereum Foundation's App Layer Fellowship where we try to anticipate and unblock use cases that can drive new waves of adoption. So, I think as we all know, crypto's adoption story kind of starts in the dark web where Bitcoin was used through the tour network to help people purchase usually illicit substances. Uh, but eventually people kind of realized you'd be better off holding your Bitcoin rather than spending it. And then it just turns into a spec speculation asset, right? Where people want to hold it. And I think that Ethereum has experienced a similar arc where it

started off with a vision of a world computer to enable e-commerce and the internet of things. But then very quickly people realized that the highest ROI way to uh use the chain was to launch and trade tokens and create an ecosystem of uh tools around that. But it's starting to feel like 15 years later, uh, we've kind of come back around to the origin of crypto as commerce. Maybe not what how we as we expected it, but we have, you know, major fintexs and governments paving the way for stable coin adoption with PayPal, Stripe, Shopify, and many more companies on the way to offer stable coins to the masses. And pretty soon

probably the the key onboarding path for new users will be through stable coins buying or selling regular goods and services. But stable coins are really just the first step. And it's definitely not the end state that was originally envisioned for Ethereum, enabling a whole world of commerce, internet of things, and basically disintermediated trade, disintermediated um exchange of goods, services, assets for individuals, communities, businesses through smart contracts.

And so we need to get into the harder stuff that a lot of people here have been working on. Um, and the kind of adoption path that I'm arguing for here is to work on the increasingly difficult primitives beyond just payments that are going to unlock this future vision that I think a lot of us share. For example, identity, uh, peer-to-peer reviews and ratings for reputation, dispute resolution for when things go wrong and you need refunds, reimbursements, uh, insurance, which today is a common component kind of baked into peer-to-peer marketplaces, and embedded credit lines. And then once we do all of that, we can unlock the kind of holy grail of these more cryptonnative fully

onchain and smart contract mediated transactions that are not purely financial and self-referential. And so yeah, this is basically the process where we we need to perfect and then embed these primitives into the mainstream system the same way we've seen stable coins succeed. And then more and more of those legacy systems go onchain and eventually they themselves are part of the smart contract economy and it then opens the door to the more ambitious visions um that smart contracts enable once more of the legacy system is on chain.

And this is just a small snapshot of you know what people have tried over the last 10 or so years um in terms of decentralized commerce. But of course these were all far ahead of their time because we didn't have these underlying um primitives in the way. So Socket you know has this uh sharing economy vision universal IoT devices that are self-owned and enable access rights through smart contracts. Uh district ox and swarm city which en uh envisioned like a sharing economy and an interoperable backbone for marketplaces that would all tap into the same reputation system and inventories.

Open bazaar with a similar vision that more so levers Bitcoin and IPFS and dravel is an example of uh the idea of decentralizing Airbnb. Uh trip protocol and many other attempts at decentralized ride sharing ecosystems. But basically all of these projects didn't really get anywhere. And here's why. So one the the most common thing I heard when talking to marketplace founders people who attempted this it was was just the basics that we all know the that have plagued Ethereum and and blockchains over the years of complex onboarding high gas fees and then the fact of everything being transparent uh just limiting the extent of real world

commerce that can happen there. the primitives that we spoke about. Basically, every one of these projects was needing to build the full stack of commerce inhouse because they couldn't rely on existing systems of arbitration or reputation. And so, they really missed a big opportunity to get shared network effects from different kinds of marketplaces tapping into the same underlying inventories, liquidity, and so on. Also, there was clear strategic missteps from the way people thought about um onchain businesses early on. often focusing entirely on pure decentralization, having everything on chain or everything in decentralized tech um which was not ready, right? So that it really degraded the user

experience and didn't actually uh provide a superior alternative to the legacy uh marketplaces and then tokens being another kind of part of this people envision uh at first every marketplace basically was using tokens as a means of payment you know so instead of using stable coins they were using their own token and tokens as a means of uh governance which have has led to many messy situations and even if all the kind of technical problems are resolved I think the hardest are for any marketplace onchain or off-chain is obviously network effects. And so there needs to be creative solutions that actually help these new kinds of platforms uh compete with incumbents and create new marketplaces that the incumbents in web

2 just can't serve. So where are we today? Well, one, Ethereum has scaled. The UX is far better with account abstraction and soon all the L2s are going to feel like one unified Ethereum with crosschain messaging and and variety of other initiatives um to make chain interop more easy. This is just a small snapshot you know of the experiences that uh we've all had and how DAPs can actually work for us today. And then privacy. I think privacy is something that we often overlook because we feel like regular consumers don't care about privacy, but when it comes to everyday commerce, privacy is more of a a practical uh security issue. You know,

people aren't going to use the onchain Airbnb where everyone knows who where they're staying, who they're paying, how much they're paying at all times, where they're writing to, what they're buying, what they're selling, right? So obviously privacy is like a having no privacy is a non-starter for actual marketplaces for real world goods and services. And then I think one interesting um approach here is fluid keys stealth addresses where you don't need necessarily need to have the whole transaction be private but you have obfiscation and who the funds are going to. So you can have an address generated on the fly for every new transaction without them being linked to one another. And then we have different uh um approaches that selective disclosure where you can actually validate identity

with you know several solutions having a lot of traction there and credentials information about someone that you only prove you know a selective attribute of rather than the underlying credential itself and who issued it and other details. And ZKTLS has been one of the biggest explosive changes of the last year where a lot of these solutions are actually usable to import credentials from web 2. So instead of needing to create our own cryptonnative ecosystems of attestations to build trust, you can just import them from the web 2 world.

So you can take your Upwork history or your um Airbnb history or or whatever credentials you're a superhost and just import them and smart contracts can validate that you have those in order to you know unlock kind of rewards or just access to more users who want to consume your services. One interesting uh uh experiment recently was cursive's private set intersection which uses MPC to blind match people who have the same needs and wants.

Next, open social protocols I think unlock a whole new wave of of potential marketplaces that can tap into these. And so I think for the most part people have thought of uh open social as social networks and entertainment but I think the potential is way bigger because once you have a social graph like that you can then bootstrap actually marketplaces on top of it. So you can use the the social graph as a reputation layer through algorithms like IEN trust or page rank or just social proximity to understand like the trustworthiness of an actor and the the the chances you know that they'll deliver on the service the quality of good that you want from them. And the social protocols also serve as a as a discovery service. So um

with Farcaster for example you have hubs and so you can uh broadcast your your offers or your requests as casts as posts. Um, and then the mini app uh kind of angle is another interesting even more recent development that we've seen from Farcaster World where people can build an app and it can inherit all of the the kind of integrated uh wallet notification system and while also tapping into that social graph and in world ca in world ID's case uh you have authentication as well. Here are just some simple examples. Slice doing e-commerce through a Farcaster mini app and then Icebreaker which lets you uh post for a job or look for a job um again through the Farcaster social

graph. They actually also use ZKTLS to import your LinkedIn connections creating a better network effect bootstrapping externally. And these are just some examples of simple Farcaster based apps that are market focused. So we have a kind of Farcaster marketplace which is basically looks like a Facebook marketplace. You just post in a channel what you're selling and then the UI automatically turns that into like a familiar format of an e-commerce store. And then Bounty Cer takes a slightly different approach.

Instead of a Farcaster channel, you can just make the post, but you tag the Bountybot and then it indexes you in their UI, which is a bounty marketplace. Then AI agents. So I think AI agents solve a more fundamental problem in marketplaces that actually gives us a higher chance to decentralize them because smart contracts are obviously deterministic and therefore we can only ver verify objective uh information that's inside of the the ecosystem itself. But with AI we can kind of get subjective data analysis embedded into transactions. And so one example of this is just listings. So today we rely on the platform marketplaces obviously to

their databases or hosting all of the different offers. Uh but then also they they do the recommendations and the filtering and the matchmaking um to help us find what we're looking for because we don't want to look through millions of listings. But with AI agents, we basically supercharge the ability of people to do search client side. Also the p the process of pricing and closing a deal is also very subjective, right? I'm sure people have all used these marketplaces where there's a there's a price and you go back and forth to get the price to something that both parties agree on. And AI agents, this is just one example from virtuals, can do this back and forth through basic human text messaging through uh text and then they can resolve it on chain

through smart contracts. And then on the actual payment part, we have a lot of new standards lately that are tailored towards AI agents so that they can use simple HTTP requests to make a payment. Coinbase has X42 and then we have Skyfire and Payman. And what these let you do is define these kind of conditions, limitations on what who you can buy from, who you can send money to, how much you can send. And then beyond these primitives, we have some new experiments that I think kind of show the way of of what's coming when it comes to onchain commerce. So Slice like I mentioned early earlier is basically trying to bring commerce onchain. So it's an onchain Shopify where your goods are onchain, the

representation of them, the inventory, the pricing strategy. You can you can implement custom smart contracts to price your um hats that you're selling on a bonding curve or whatever you want as as well as referrals and other all the other things that we can do with tokens. Keep uh you can think of it like a web 3 stripe connect. And really what it does is behind the scenes uses account abstraction and stable coins to handle payment orchestration in a marketplace um without requiring anyone to have a license like you would in in Stripe because it's non-custodial.

Then local is more focused on local services. So building a transaction graph and then a reput deriving a reputation system from that that they can then price insurance for transactions through an AMM. um so that the actual uh services that are rendered there like food delivery can happen reliably. And they actually already have a pilot live in Northern Colorado with a food delivery app called NSH. And then this is super recent. This is just last week. Coinbase and Shopify announced the commerce payments protocol which also uses Stripe to really not just do stable coin payments but bring the authorization flow of payments that is typical in uh web 2 commerce

environment on chain. And so they're actually they actually developed new smart contracts that handle this kind of authorization flow of you pay and escrow and then the merchants's API or the merchant itself, you know, approves the the inventory is available, let's say, and then the payment goes through to the receiver and then it reverts if that isn't done in a sufficient time frame. And this is super uh programmable. You can you can, you know, add all these different kind of hooks to make it work however a particular merchant needs. And so what I found is kind of some high potential lowhanging fruit is uh to to really make decom take off. One is to have a standard or some sort of way of

abstracting over the different identity and reputation solutions out there. So, we have loads of credentials, um, anonymous credentials that people can assign to particular addresses and accounts, but really the these don't talk well with one another. And if you're building a marketplace today, it's really not clear which one to go with since none have a sufficient network effect. I also think there is a really big opportunity for the listings to be shared, the inventory and this is what could really create a 10x better experience than traditional commercial marketplaces where the inventory of Upwork or um Fiverr is separate and even like different kinds of services uh could interoperate their inventory if

there's standards around um what is a listing and this can basically create like a way better liquidity between marketplaces and programmatic uh like combinance torial auctions where you buy things from multiple places at once. And when it comes to reputation, uh I also haven't really seen reviews, which is a really critical primitive in all web 2 marketplaces. You know, you leave a rating score, you write a text review sometimes. Uh and this really creates that web of trust that's relied upon. And I think you could simply do this, you know, on top of something like the Ethereum atistation um standard.

And risk management is definitely the most complex area. And that's why um web 2 commerce has exploded is because you can you know that you can rely on the platform in many cases to help you if you have some sort of problem. If you need your money back um they have have insurance baked into everything and if you have an issue you can talk to customer support and they can help you resolve your issue. And like I said with AI agents, I think there's a big opportunity to do this. But there's also simpler ways like even just having a centralized company that's just like, hey, we do arbitration for all these different um marketplaces and they're just a third party that like checks if something goes wrong and you know hits the switch of whether to reverse the payment or not.

And so a lot of a big question I get is what kind of marketplaces are going to take off first? So given that a lot of the pieces are falling into place, where should we focus? Because it feels like web 2 has already dominated and monopolized everything and we should just, you know, still just focus on finance and let web 2 handle commerce. But I would disagree. I think that there's plenty of markets that are not served by the incumbents because they're either too fragmented or they're in a regulatory gray area or they just haven't been made legible because the transaction costs aren't worth uh getting them represented in these marketplaces that rely on fintexs that charge decent sized percentages.

Um also the I think that there's a nearer term potential to focus on markets that are higher margin with differentiated inventory. So basically this is because when you have low margin and commoditized markets um like let's say Uber where it's really just driver time is the key metric like how long is it going to get take to get you a driver and what's the cost these are really better served by vertical integration where you have some company that has a ton of data and they can really optimize the algorithm around like squeezing that extra margin and eventually maybe protocols will be able to compete there but I think there's a you know way greener space to start just some examples. Uh think many more exist, but areas that you know you can't

just off the top of your head think of, oh, I use this all the time for that and always have a great experience. You know, maybe these are a little more illeible by the current system. And so I hope I've made a compelling case for decom for having interconnected marketplaces that are built on open building blocks and open standards. And if you want to read more about this, feel free to scan the QR code. And thank you. Thank you so much. Uh let's open for questions.

Raise your hands for questions. No raised hands. Okay, I guess we're hi. Uh so I was looking at uh the features that you mentioned about uh for identity what we can use and do you think circles can also be used? I saw the mention of world so I wanted to ask definitely definitely so I think uh web of trust is a powerful tool as we saw kind of in forecaster implicitly but in circles it's very explicit in the data model and as we see network effect interaction there not

only I think you could use circles for um identity but also for payments because it's basically a decentralized credit issuance system and so based on how much you trust someone you can accept their circles token. Yeah, question there. Um, thanks for your talk. Um, it's very interesting to finally build like the parallel economic world we wanted like in the meme like you know with Morpheus saying you don't need any money where we going right but um I'm looking at it from a supplier side like if I am a

supplier at some point I need to buy in more stock then I'm going to need like probably need like traditional fiat money Right. So I need to ramp off or Mhm. And I have a feeling like um if governments are feeling threatened they might ring fence this. So what can we do about this? I have a feeling that they are going to cut off the supply. Yeah. Yeah. So, I think in peer-to-p peer marketplaces, it's it's not as clear because you have, you know, supply is is one side of the market and the demand is also there. So, the the suppliers can just be, you know, regular

individuals, not necessarily big companies. And maybe what they're providing is, you know, a service that has low capex, right? That's just um your time. But when it comes to Yeah. Anyone that would have costs, sure. Yeah. I don't think it's a problem if they're offboarding. if you know, Bitcoin miners are are selling their Bitcoin for fiat all the time to pay for electricity and, you know, Bitcoin still works. And that's really what I was trying to make the case for with the progressive substitution is that even if we're only substituting a small part of the stack at a time, the aggregate effect, I think, could get us to that future.

Thanks.