Any decentralized system which is not purely trustless will be inferior than centralized trust systems. The reason of bitcoin's success is not only that it is decentralized, but also it is trustless. All these efforts like Bitsquare.io or OpenBazaar has failed to be purely trustless and relying on an arbitrator. IMHO, as soon as you bring in human interference you are no more trustless and just a flavor of centralized trusted systems.
But the arbitrator is decentralized. Anyone can become an arbitrator, all they are doing is confirming a transaction just like a mining computer would confirm a transaction.
Not sure about OpenBazaar, but arbitrators maintain a hierarchical structure in Bitsquare.io (ref:
https://bitsquare.io/arbitration_system.pdf), which is very much like BitcoinTalk's Trust system. They have a supreme court type of thing, which can be compared with our DefaultTrust. Now, imagine some CanaryInTheMine will be sitting in that supreme court. How will he try to f**k around the arbitration system for his own profit ? This is impossible in bitcoin network, because there is no human judgement. Same is impossible in decentralized exchange/marketplace because FIAT transfer is always requiring manual approval (unless we can have a fixed value ALt).
I only read the OpenBazaar paper on it. It looked quite decentralized. I need to read more on the BitSquare setup.
Can u plz point me to the OpenBazaar's whitepaper ?
The docs I found are on their GitHub page. Here is one about the web of trust:
https://github.com/OpenBazaar/OpenBazaar/blob/develop/docs/02%20Web%20of%20Trust.mdAs for BitSquare's centralization. I do see that they have 10 arbitrators that are queried upon a problem with an arbitrator. But they are not a static 10, they are the 10 highest rated arbitrators and that could change daily. If they abuse their power, their rating goes down and they are no longer the top 10.
That is why the rating solution should be solid and decentralized. So that there cannot be abuses of the ratings in order to try to get to the top 10.
And even if you reach that top 10, people choose from among those 10 to resolve disputes with their arbitrator. If the arbitrator is found to be in the wrong then they lose some of their initial deposited funds.
The main drawback of this rating is people will create sockpuppet and false trades to stay in the top 10. See how CanaryInTheMine is abusing DefaultTrust. He is adding those to his trust list, who is leaving him +ve feedback and thereby having a huge green signal. Same will happen for these decentralized arbitration systems. It can not be trustless, if it is manual.