The challenge of decentralized marketplaces

TL;DR

This paper discusses the challenges in decentralized online trust systems, focusing on reputation mechanisms, security issues like Sybil attacks, and the strategic behavior in two-sided markets.

Contribution

It provides an analysis of trust system challenges, security threats such as Sybil attacks, and the strategic considerations in two-sided decentralized marketplaces.

Findings

Reputation systems face significant security challenges like Sybil attacks.

Strategic behavior impacts the effectiveness of trust mechanisms.

Matchmaking in two-sided markets requires strategy-proof designs.

Abstract

Online trust systems are playing an important role in to-days world and face various challenges in building them. Billions of dollars of products and services are traded through electronic commerce, files are shared among large peer-to-peer networks and smart contracts can potentially replace paper contracts with digital contracts. These systems rely on trust mechanisms in peer-to-peer networks like reputation systems or a trustless public ledger. In most cases, reputation systems are build to determine the trustworthiness of users and to provide incentives for users to make a fair contribution to the peer-to-peer network. The main challenges are how to set up a good trust system, how to deal with security issues and how to deal with strategic users trying to cheat on the system. The Sybil attack, the most important attack on reputation systems is discussed. At last match making in two sided markets and the strategy proofness of these markets are discussed.