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How to Build Marketplaces & Why Many Will Be Decentralized

Why do marketplaces exist?

Marketplaces exist because they are an improvement over the alternative. If you can imagine, the alternative would be salesmen yelling aimlessly for buyers, and buyers potentially doing the same as they look for viable sellers. Whether in person or online, this situation would quickly devolve into chaos with buyers and sellers indiscriminately yelling for each other.

As an improvement over this chaos, marketplaces naturally form around large buyers and sellers of distinct goods and services. This generally happens because the larger buyers and sellers soon form reputations as such, and participants on the other end know that they can find their good, service, or buyer in one place. Other buyers and sellers who have not built their reputation as powerful participants can tag along with those who have and will benefit from the uptick in traffic and interest that the bigger buyers and sellers receive.

Why do participants pay fees?

Sellers pay fees because it’s cheaper for them to pay to access a large pool of buyers than it would be for them to hire salespeople to go find them individually. ...

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