Brian Hoffman on Why VCs Aren’t Scared to Invest in OpenBazaar

OpenBazaar Silk Road
Brian Hoffman on Why VCs Aren’t Scared to Invest in OpenBazaar
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OpenBazaar has received a bit of a bad rap in the media due to the belief that the platform is nothing more than a decentralized Silk Road. While there are obvious similarities between OpenBazaar and the original Silk Road, there is also a need for a completely open, uncensored marketplace on the Internet. Some of the most well-respected venture capitalists in Silicon Valley seem to agree with this sentiment, which is why OB1 was able to raise $1 million as the first business built around OpenBazaar.

One would think that finding investors for “the new Silk Road” would be difficult due to the legal scrutiny such a platform could find itself under, so why have big players, such as Union Square Ventures and Andreessen Horowitz, provided their stamps of approval to this young startup?

Where OpenBazaar is Different

The first thing that should be pointed out when talking about OpenBazaar is that it is setup in a manner that is completely different from Dread Pirate Roberts’s Silk Road. OpenBazaar is nothing more than software, while Silk Road was a for-profit business operated by a group of individuals in an anonymous manner. In a recent interview with This Week in Startups (TWIS), OpenBazaar Lead Developer Brian Hoffman was able to explain the key difference between his platform and traditional darknet marketplaces:

“First and foremost . . . OpenBazaar is not a company; it’s not a business. We don’t have servers in some data center collecting all this data and controlling our users. It’s just a protocol. It’s just a bunch of computers talking to each other, so what happens on that network is up to the whim of the users.”

Much like Bram Cohen cannot be held liable for pirates using Bittorrent to download copyrighted material, the OpenBazaar team cannot be held liable for people using their open-source platform to perform illegal forms of online commerce.

Similarities with Silk Road

Having said that, there are definitely a few similarities between OpenBazaar and Silk Road. The idea that a central party will not be censoring certain products or services is at the core of both platforms, although Silk Road did not allow a small number of goods (weapons, child pornography, etc.) to be sold on its marketplace. Hoffman expanded on the similarities between Silk Road and OpenBazaar during his TWIS interview:

“The primary thing that’s similar is that it creates a platform for people anywhere in the world to sell anything they want, and there’s no real restrictions. So, it gives them this concept of freedom that a lot of e-commerce platforms don’t because they’re obviously conforming to their own corporate regulations and things like that.”

Of course, one could argue that OpenBazaar is even more open and less-restrictive due to the lack of fees required on transactions between merchants and consumers.

It’s the Right Thing to Do

There are arguments for and against the creation of OpenBazaar, but it appears that the venture capitalists who have decided to back OB1 believe that the positives outweigh the negatives. Union Square Ventures’s (USV) Brad Burnham wrote an introduction to OB1 for the USV blog, and Brian Hoffman talked about Burnham’s philosophy on the marketplace during the TWIS interview:

“I think [Burnham] feels very similarly to us in that this is a very important topic. Bringing free trade to the world in a way where corporations are not kind of controlling and restricting what’s going on here. I think it had to happen that way for a long time because you didn’t really have a good payment mechanism. PayPal, I think their original intent was to create something similar like a global currency, but it ended up not being because the world just wasn’t ready.”

Hoffman also referenced a previous TWIS episode in which USV Co-Founder Fred Wilson stated something along the lines of, “[Burnham] generally wants to do what’s right.” Although there is definitely a financial motive to invest in decentralized technologies such as OpenBazaar, it doesn’t hurt that a VC can feel like they’re building a better tomorrow along the way.

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