Marketplaces for goods and services in the age of blockchains
|Jun 3||Public post|
A core value proposition of cryptocurrencies is that they are uncensorable. That is, no single actor controls these currencies and no single actor can censor payments made using them. To be specific, the government cannot stop you from sending anyone money at anytime anywhere around the world. Nor can they seize your funds. The only way for someone else to gain access to your money is for them to steal your private key somehow.
The property of uncensorability is fundamentally a very important thing for money. But it equally important for markets as well. Platforms like Ethereum and EOS are powering new types of businesses, economies, and services; these are also uncensorable. If you create and deploy a service on these platforms there is nothing anyone can do to stop them from operating.
What will these new types of businesses, economies, and services look like? It’s difficult to tell, but decentralized autonomous organizations (DAOs) are a good place to begin. DAOs are organizations governed by smart contracts. They take traditional governance structures and turn them into hard code that is automatically executed, in turn this creates an auditable and decentralized entity that operates in a predictable way. A high profile example of a DAO was “The DAO”, an investment vehicle that raised millions of dollars and was hacked early on in Ethereum’s history.
There is an endless list of potential applications for DAOs but I’m particularly interested in their ability to act as a coordinating mechanism to create a marketplace between parties. For example, a DAO could be made that pairs drivers with rideseekers, or a DAO could be made that pairs physicians with patients. I draw upon a lot of healthcare examples here, but the concepts are applicable beyond healthcare.
How would that work?
Token curated registries (TCRs) could be used to create two classes of actors within a DAO, consumers and service providers. The TCR could be a list of service providers who have the appropriate credentials. In turn, those who are verified can verify others and have the incentive to only do so in the case that it is proper to do so.
Using a TCR like this, you could create a decentralized market for medical second opinions. To do so you would need two parts: 1. a TCR that manages a list of verified physicians and 2. a DAO that paired verified physicians together with patients and enables some line of communication between them.
Patients would share their electronic health record with their paired physician and some payment would be held in escrow by a smart contract. After the physician reviewed the files and gave their opinion the funds would be released.
If a group of people believed they could perform these services they could start their own token curated registry as well as corresponding DAO and take their case directly to consumers. Different groups of people with varying levels of credentials, assuming they self-segregated into different TCRs (see footnote for further thoughts on this), would then compete for consumers based off of their preferences.
As an example, let’s assume I had some scans done and I want several opinions on the right way to interpret them. I could consult the specialist network, the primary care physician network, or perhaps the bespoke algorithm network, which is populated by people who have created AIs specific to interpreting my type of scans. Depending on my preferences, the nature of the scans, and the prices each network offers their services for, I’d choose who I want to go with.
Here’s the problem
In order to protect consumers it is necessary to wall off niche services such that they are only performable by a individuals with the appropriate level of credentials. Healthcare systems rightfully go to extensive length to ensure that their providers meet these credentials, and it is a scandal when this process goes wrong.
Theory tells us the incentives exist for curators in a TCR to apply the same level of scrutiny on their applicants that healthcare systems give their providers. In practice I doubt this is going to cut it for regulators. But what can they do about it? If you tried to practice medicine without the proper credentials in real life you will be aggressively pursued by regulatory bodies. If you had a physical location that too will be pursued. Meager teeth whitening kiosks ended up resulting in a Supreme Court case because they didn’t have the proper credentials.
The rules change with blockchain technology; DAOs for niche services cannot be shut down because they are uncensorable. You might be able to target individual professionals providing their services but you would not be able to shut down the coordinating mechanism that paired people together. Even the strategy of targeting those providing services seems untenable in the long term; privacy technology like zk-SNARKs could be used to protect their identities. It’s going to be really, really difficult to uproot these uncensorable marketplaces once they are established. That’s going to really surprise and scare regulators as well as industry incumbents. I would anticipate a regulatory crackdown in response to the first uncensorable marketplace that provides services that are usually walled off by regulations.
In a perfect world we would each have an interoperable digital identity that included any of the credentials we have acquired in real life; that means your schooling, degrees, professional credentialing, online MOOCs, etc. You could then hard code a requirement for a particular qualification in as a prerequisite for providing a particular service. There are several blockchain based digital identity projects underway but we are a long ways away from having Universities or medical societies issue credentials that tie to these. It’s likely that there will be a number of scandals and scares before things get better.
There are a lot of challenges to be faced here. But what an exciting time it is to be facing these challenges.