Irish company Cryptoauction is aiming to become the new eBay of bitcoin.
The company is due to launch on 30th November under the helmsmanship of entrepreneur Daryl Cusack.
He believes that, since the closure of Bitmit.net, the field is wide open for a new bitcoin-based auction marketplace.
Cusack will present a talk on decentralised corporate models “in order to achieve a people-not-profit corporate outlook”. He will explain how Cryptoauction’s trustless model fits in with concepts from game theory that incentivise trusting relationships between users without the need for third party mediation.
He said:
“There’s no way to eliminate bad actors entirely. The best we can do is mitigate the risk by incentivising trust amongst users. We employ an innovative mechanism to discourage improper use of the site whereby those with good reputations are rewarded financially and those with bad reputations are penalised.
We’re trying to create a system where the users create the best possible outcomes for themselves without the need for a trusted third party. When you take that variable out of the equation you end up with a purer vision of user to user interaction.”
Users will be able to post one listing a day for free, and can post subsequent listings for 2.9% + €0.10 each (capped at €95) – a measure designed to stop spammers from listing endless junk items. Each auction will last between one and 14 days.
Sellers, whose identities are always protected, can choose to hold a regular auction where the item can sell for any price, or they can opt for a fixed-price auction, with or without a ‘buy it now’ price. They also have the chance to choose which cryptocurrency they prefer to sell for, bitcoin, litecoin or primecoin, when they register.
“We’ll be moderating the items that are posted and do periodic reviews for inappropriate items, items in bad taste, illegal items and so on, so you won’t find drugs there,” Cusack stated.
To mitigate against a ‘bad actor’ not sending funds to the seller, Cryptoauction has integrated an automatic settlement feature, which Cusack says will resolve any disputes by “comparing the relative karma of each of the transactors”.
The aim is to judge buyers and sellers on their reputations in a user review system, effectively creating a ‘wall’ around good buyers and sellers, protecting them from those who are less reputable.
Cusack said building trust among a distributed network of users is a “chicken and egg situation”, but he hopes it will catch on as trust flows into the system organically.
“Users with high ratings will benefit when the escrowed funds are in dispute, as they’ll be awarded equally to users with an approval rating above 80%,” he explained.
According to Cusack, the company uses a dynamic system, so if a user’s reputation starts going down, their rewards will too. He explained:
“There’s a weighted review system over a fixed number of reviews that ensures, over time, good sellers will develop good reputations.
We also have a cancellation system where … once the funds are held in escrow, the buyer cannot cancel it but the seller can, and we employ a messaging system for buyers and sellers to work out their differences if need be. It’s an off-block chain escrow system too.”
Cryptoauction has registered multiple domain names in different locales around the world to cater to different national markets, and, if the idea takes off, it will push out in new directions.
When asked about the site’s security measures, Cusack said the company has made every attempt to keep as few bitcoins online as possible. However, he says there’s always an element of risk, so the user has to exercise due diligence. Cryptoauction has also tried to minimise the amount of time each user’s funds are held, he explained.
“We use cloud flare to avoid going offline during a DDoS, and we’re registered in Ireland, under the Business Names Act, as an Irish company and under Irish law, and we intend to work with the Bitcoin Foundation and DATA to ensure that we meet best practices for handling cryptocurrency,” Cusack added.
In terms of Cryptoauction’s profitability, the company claims to be taking a cut of 1% on each sale, plus a $0.10 fee to avoid creating dust on the block chain, but their take is capped at 75 euros per transaction and there’s an minimum user account activation fee of 0.0001 BTC per account, to cover any transaction fees the user incurs.
The company has taken tax advice on using cryptocurrency and has spoken to Elizabeth Ploshay of the Bitcoin Foundation to ask for guidance. However, crypto-currency has yet to be recognised by the Irish Government as legal tender, so the firm will be paying its taxes in euros.