Open, fee-less marketplaces that are financially valuable

Online marketplaces and exchanges have traditionally spent heavily to onboard users, with the goal of building a closed network that they can profit off of fees with. However, closed networks are suboptimal for network participants because they are limited to those they can interact with.

I’m investigating digital platforms such as peer-to-peer marketplaces or exchanges, whether these are order book or request-for-quote systems.

Which participants in these closed networks would benefit most if listings or orders were open and transparent, which allows for better price discovery, and no fees were taken by a middleman? This could also lead to increased selection if the network is open without the network owner being a gatekeeper.

Traditional networks like Airbnb or Coinbase are run by a trusted institution, who pay for hosting and running the code that matches participants, as well as serves as a trusted intermediary. A new network would have its code hosted and run by an open crypto protocol, which also serves as a trust-less intermediary.

This network wouldn’t take transaction fees and allows anyone to use it. This guarantees to users that their listings or orders reach the widest possible audience, and with the lowest fees paid. It also encourages competitors to build on top of it, since they can’t be locked out.

To make this network financially valuable, we need to include a switch to turn on fees that is governed by a crypto token. Token owners can turn on the fee at any time with a vote, which would provide short-term value but be long-term value destructive, since users may take their listings or orders to another network without a fee. This creates a natural market force to value these tokens.

Crypto protocols have reached the scale, latency, and cost efficiency needed to operate at internet-level scale. For example, Solana has 100% uptime for 6 months, handling 10k transactions per second (tps), 400ms latency, and per transaction costs of $0.00025, with Firedancer able to take this to 100k tps. LayerN is an Ethereum L2 for finance use cases which theoretically handles 100k tps with <50ms latency.

Whether this is a B2B or B2C product, our users or businesses would choose use because we provide significantly better financial outcomes. Primarily, this could come from removed middlemen costs or better price discovery. Secondary ways this occurs is due to more options due to lack of regulation, aka being available 24/7, lower settlement times, or wider range of product availability.

An example of this is Uniswap, a decentralized financial exchange, vs. a centralized exchange competitor like Coinbase. Uniswap often has better prices due to deeper liquidity, removes middlemen fees, and has every digital asset available.

Inspiration, and much of the content, comes from this article: