Seeding a Bitcoin marketplace



Bootstraping marketplaces is always an extremely difficult task.

No sellers? No buyers. No buyers? No sellers.

This essay discusses a model of seeing a bitcoin marketplace from the lense of an Uber-style market, a similar model could be likely applied marketplaces with different requirements.

Parties Involved

Coordinating Company

An company that controls a set of keys, publishes apps, etc.

Motivated buyers

Let's begin with the assumption of a number of motivated buyers in a particular location. Buyers could be motivated for whatever reason: lack of alternatives, interest in paying with Bitcoin, orange-pilling.

Willing sellers

These are the least interested parties involved and no ask can be made from them other than willing to exchange their services for money.

Seeding scheme

One of the problems of marketplaces and orange-pilling businesses is that, if a seller starts to accept bitcoin, only for no one to pay with it, the seller has a bad experience.

To avoid this, before a marketplace becomes active we need the explicit buy-in (POW) from buyers who signal they are willing to pay.

Buyers deposit bitcoin into a 2-of-2 multisig.

One of the keys is provided by the buyer, the other key belongs to the coordinating company. The multisig is constructed in a way such that after 1-year the buyer can reclaim the funds by themselves.

Once a threshold of funds for a particular location is reached, the market becomes available and sellers can begin operating in that area.

Spending scheme

Buyers can use their prefunded money in the 2-of-2.

In order to do that, when a buyer wants to pay a seller, the seller, using the Coordinator app generates a Lightning Network invoice locally (similar to the Blockstream Greenlight model) via Nostr encrypted DMs, the buyer sends a signed PSBT paying for the agreed-upon amount. This PSBT has a 1-of-2 signature (the buyer's).

The seller generates a lightning invoice using a locally-choosen nonce and this PSBT as the r_preimage and sends Nostr-encrypted DMs back to the buyer this invoice.

The buyer sends this invoice to the coordinating party