District0x

Ethereum Use Cases Logo

Overview

District0x calls themselves a collective of decentralized marketplaces and communities, when in fact they are an infrastructure group (you could never call them a company) that will enable their vision of decentralized marketplaces.  This is great, because the big up-front work is on the infrastructure.  The infrastructure code is called d0xINFRA.

I won’t call them a company because these guys are very non-profit.  Their ethics are exemplary, and their transparency of their token sale funded enterprise is an example for all other token funded companies.  These guys live what they preach and let the whole world watch as they do it.

They also tie together other Ethereum powered organizations including governance by Aragon and storage by IPFS.

Maturity

They have 2 active marketplaces in operation today; EthLance  and Name Bazaar.  The Meme Factory is in final preparation as of Jan 2018.  But these marketplaces are using preliminary coding bases and will be updated to use production d0xINFRA once available.  This would put them at Beta level maturity.

Problem Being Solved

The objective is to decentralize marketplaces and community discussion boards.  They use in their whitepaper the examples of Uber and AirBnB which through decentralization has caused significant advantages for consumers, but they still must pay a fee to the central organization (Uber and AirBnB) and the users have no means to influence the organization.  The Districts they will create will have no central authority and be community rules based.  This means the users will be able to vote and propose rule changes through each district’s distinct token.

How it works top level

Operation seems pretty clear when we look at the websites of EthLance and Name Bazaar.  EthLance shows a variety of jobs for Ethereum companies and Name Bazaar offers for sale ENS Names that are being resold by their owners. To the user these are straightforward marketplace websites, but when you look close, differences appear.

These distributed marketplaces must live with the limitations of Ethereum contracts, such as each bid costs gas and once the rules of a smart contract is set, it cannot be changed.  This reduces flexibility of the contracts.  A comparison of ENSListing.com (which is run by a person) and Name Bazaar (which is fully decentralized) is described here.  Both websites offer the same service, but ENSListing can be more flexible because it does not have the limitations of a smart contract.

However, the advantages of distributed marketplaces are clear also.  They run all the time, not just when the admins are available.  There is no middleman during transactions, vastly increasing trust and reducing costs. Both of these websites are still Beta.  The final versions will have improvements.

The connection to Ethereum for each website can be through MetaMask or Parity.

DAO

Each marketplace is a DAO.  In order for a contract to be considered a DAO it must meet three criteria;

  • It must hold capital (Check! When a marketplace mediates a sale between two parties, it at least briefly holds capital. The ENS names held for auction can be considered capital, even the jobs in EthLance might be considered capital
  • It must make some decisions autonomously (Check, with EthLance the DAO can manage the staged payment to the consultant)
  • It must have low limits on the number of external participants (Check, both websites allow on-boarding with minimal effort)

It seem that the Aragon entity and the District will not be tightly coupled, at least to start.  This make sense but it will be interesting to see how it develops as each technology becomes mature.

District Tokens

Within the Aragon entity related to each district, the district would distribute tokens.  These tokens are specific to the district and give voting rights for decentralized management of the district by its users.  The district must create rules to distribute the tokens, for instance one token for each transactions.  Users would vote on changes to the district via their tokens,  I could easily imagine a district having a management group and users delegating their votes to that group as long as they are doing a good job.

You could easily imagine a district becoming controlled by an individual or a single group, or taken over by a group that  games the system to get majority control of the district tokens.  However a district fully controlled by one group is just an inefficient centralized website.

District management will be messy, at least to start but it may evolve into something much better than our present centralized systems.  It will. at the very least, offer a choice.

Costs

District0x does not add any cost or collect either revenue or information from their marketplaces.  From their token sale they raised $9M in August 2017, so they are self-funding their development.   This appears a truly altruistic group (see Governance below).

While district0x won’t take costs, there is nothing stopping an individual district from collecting a surcharge.  An amount can be allocated to an account, managed by the DAO to collect funds for future improvements.  These decisions would be made by the token holders in the district’s Aragon entity.  The money would be collected by the district.  This will get interesting.  Can a district or entity without a centralized manager hire and execute a contractor to improve the code or add a feature?

District0x sees in the future add-ons to the doxINFRA base district software.  These add-ons could be made by district0x or third parties and envisions potential charges for the add-ons.

Centralized Websites

Districts will compete directly with centralized websites.  A centralized website is faster, more flexible in its operations and, at least for now, easier to use.  Some are very altruistic but need donations to run.  It may collect and hoard data about its users.  It could also allow full anonymity (though this could be lost with a bad actor (as in the Ashley Madison hack). A centralized site is much more vulnerable to hacking.

A district could be paid entirely by the users as gas for their transactions, with no need for donations.  A district would be more secure.  The transactions would be public (as they are on the blockchain) so anyone can collect statistics on its users and trends.  Anonymity of users will be  more difficult (at least to start) for users on a district.

Advantages and Disadvantages of Blockchain

For districts the clear advantage is the removal of a centralized middleman controlling the transactions and hoarding the information gleaned from the site. Will this advantage allow districts to beat centralized websites for the bulk of users is an interesting question that time will answer.

The disadvantages are transaction costs and a loss of flexibility in the types of transactions.

Governance

Since their inception District0x has been a model of fair, transparent self governance.  All spending is published for any one to peruse, including salaries of all personnel.  Their wallet is open on their website.  They publish their github and roadmap.  It is all at district0x transparency.  They also have a community suggestion board and discuss the growth of the DNT token capabilities.

They publish weekly and quarterly updates on their progress of their development and their company.

 District0x Token

The district0x token (DNT) is district0x’s specific token that will be used to govern the district0x infrastructure.  Their goal is to have full governance of the doxINFRA code and district registry managed by voting rights of the DNT holders.  At the moment the moment the DNT holders can vote on the next district to be added bby district0x, that it.  In their white paper District0x is very open in that the future capabilities and are still TBD and will be developed gradually.

One element that is clear is that to initially get district specific tokens for the management of a new district’s Aragon entity, they must be purchased through staking DNT.  In other words, to open a district, the founders must purchase some DNT.  This DNT is not spent, but staked (so probably it can be recovered later).

Ideal Use Case for Blockchain?

According to Vitalik’s 5 Points how well does this use case suit a blockchain application?  Score 16/25, 64%.  Great!

Censorship Resistant  (4/5) – For some District’s (though not all) censorship resistant may be key
Fraud Resistant (4/5) – It will be very important that no one can tamper with the results of transactions on a District.  Trust will be key.
Transparency (4/5) – It will be important that the public using a District can independently verify that it is dealing fair and above board
Robustness – (3/5) – The Districts will lean on the robustness of Ethereum but it less vital than other use cases
Interoperability – (1/5) – Interoperability is not key in this use case.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.