The challenges facing Web3 ecommerce
Despite the clear advantages of direct peer-to-peer transactions, adoption of Web3 applications is still low, with a global participation rate of 2.5%. We have not yet created an "iPhone moment" or "killer app" to attract and retain the first billion users.
There are several explanations for this sluggish uptake, and the PiChain Global Ecosystem offers a meaningful solution to all these barriers to entry. First, we will present these challenges, and next, we will consider how our solution overcomes such obstacles.
Barriers to entry
Loss of the private key
Crypto novices are used to trusting a centralized financial agency with access to their funds. Lose a bank card, and you can ask your bank to issue a new card. Lose your private key, and you have lost recovery access to your crypto wallet.
Novice userbase
Beyond the tiny percentage of existing crypto adopters lies the rest of the world — users who do not have the know-how to purchase crypto nor have any confidence to safely undertake a token swap.
The “empty tank” issue
Until such time as Ethereum's ERC-4337 account abstraction is deployed, most crypto wallets require that the user have the native token to be able to pay gas fees. This creates an “empty tank” conundrum, whereby the wallet holder may own assets in a token they wish to trade, but be unable to transfer these until that wallet is topped up with the native token to cover the transaction fees. Our solution
Marketplace barriers
Trust is required
The purest form of crypto exchange is the atomic swap. That is, an exchange of one asset for another, whereby there is no gap between delivery and payment. Ecommerce, however, is an asynchronous arrangement. If a customer pays for an item or service on an ecommerce marketplace, delivery is not successful until such time as the correct goods are shipped to their hands or the service rendered.
The typical delivery versus payment flow is that the customer passes payment via their bank, and the seller initiates shipping. In most instances, the seller will receive the funds in their account before the customer receives their goods, and in most cases, those funds will not be retracted by a bank on the basis of card fraud. A crypto-native ecommerce model does not protect the customer per se. An atomic swap removes the risk to the seller of a transaction being reverted by the bank; however, the customer must still trust that the goods will arrive, or that the service will be rendered.
Even traditional Web2 ecommerce platforms often have difficulty maintaining this trust. Shopping scams on Facebook and Instagram are expected to cost UK consumers more than £27m this year alone, according to the Lloyds Banking Group.
Network effect
Not only do ecosystem players potentially suffer all these challenges, but they also face additional barriers, especially when attempting to launch new ecosystems. Web2 solutions such as Amazon have successfully leveraged the network effect to collate a large consumer base into one ecommerce solution that attracts sellers and customers. As yet, no Web3 solution has succeeded in creating a marketplace at this scale to allow sellers to invest with confidence that they can leverage a sufficient market share.
Archaic Web2 standards
While we acknowledge these barriers to entry and marketplace challenges, we believe these are all solvable. Furthermore, we assert that our vision of a Web3 ecommerce ecosystem overcomes the following Web2-native issues that live in the existing marketplace paradigm:
Data security
Web2 cross-border ecommerce platforms are usually centralized, meaning that users' funds and information are operated and controlled by centralized entities (such as companies). These entities are responsible for processing transactions, and managing user data and funds. Such data platforms provide a large attack surface that is both vulnerable and profitable to professional hackers.
Privacy control challenges
Centralized platforms often leverage their users’ personal information to perform data analysis and ad targeting. Users have little to no say about how their data is used.
"Trusted third-party" payment methods
Traditional Web2 cross-border ecommerce usually relies on traditional payment methods, such as credit cards, bank transfers, etc., exposing the seller and user to the issues discussed in The promise of cryptocurrency. The fees charged by such third parties are significant, often 3% of the total transaction. Similarly, the seller often pays much higher bank charges than a retail client, simply to hold a bank account to receive and make payments.
According to data from the World Bank, in 2023, there are an estimated 1.4 billion unbanked people worldwide; that is, they do not even have access to a trusted third-party fiat payment system and are, therefore, excluded from ecommerce marketplaces.
Lack of supply chain transparency
Web2 ecommerce has failed to control the spawning counterfeit ecosystem. Brand goods are copied and sold as genuine across global marketplaces. Similarly, even though the consumer base is becoming more sophisticated and selective in their demands, for example, for environmentally-friendly goods and ethically sourced products, the Web2 paradigm has failed to provide the transparency required for consumers to shop selectively.
Transaction inefficiencies
Web2 cross-border ecommerce usually requires intermediaries (such as banks, logistics companies, etc.) to handle transactions and logistics. Each intermediary adds complexity and cost, a cost the consumer is forced to absorb.
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