Nashx allows trading using Nash equilibrium and mutually-assured destruction

by oleganza • 13 years ago

26 28 13 years ago

This isn't mutually assured destruction unless they both put everything they have into the risked funds pot.

Say Alice is a squillionaire and Bob is pretty skint, then under this scheme Alice might deliberately screw the deal to burn the funds on purpose, as for Alice it is a small loss, but for Bob it is devastating.

oakwhiz• 13 years ago

And with Bitcoin this could be a valid strategy, since Bitcoin's value deflates as Bitcoins in circulation are destroyed.

quantumpotato_2• 13 years ago

Why not just send the BTC to a third-party, or is the idea that NASHX operates decentralized?

oleganza8• 13 years ago

It's mutually assured destruction within a specific deal, not within their biological lives (like in case of a military doctrine). This allows maintaining an equilibrium. Regardless of our wealth, we both put in 1 BTC before trading something worth 1 BTC.

Maybe the name is not perfect, but it's quite close to what NashX provides.

moocowduckquack2• 13 years ago

It isn't in equilibrium though unless each party knows how much that 1BTC is worth to the other party. Knowledge of the other person's wealth is vital in this, otherwise it is just an abuse of terminology.

Just as in the case that MAD is not in equilibrium unless both parties have extensive and reliable knowledge about the nuclear capabilities and procedures of the other, so this is not in equilibrium if there is any doubt about either what the financial capabilities of the other party are, or if there are doubts about what your item is worth to them personally.

Also, the whole thing is a bit odd anyway as it is using a currency to facilitate a direct barter. I am trying to think of situations where someone would want to do a direct swap and use something like this to insure it.

Bob's worst scenario is no item and no money, with Alice getting both items and no money and Bob has no idea beyond Alice's say-so whether Alice values both items more than the money.

So for low value items, this would seem silly as it would be better to just risk the item rather than the item plus some money, but the higher the value of the item, the higher the risk of miscalculating the funds required to secure the transaction.

aussetme• 13 years ago

Why not correlated equilibrium in that case as nashx can play the mediator?

Also I don't see the difference compared to the "real" market...

oleganza8• 13 years ago

If Nashx was a mediator:

1. It would require them to hire experts in all markets they wish to support.

2. And since mediation has a human factor, there will always be scammers with some success rate of fooling experts around. Considering the mediator has no power to fight back at anonymous/remote scammers, the cost of attack is very-very low.

By requiring both parties to risk their funds up-front, the cost of attack on a mediator becomes irrelevant. Scammers would have to either convince their victims that the good is delivered and get payment; or try to hack nashx website to hijack people's funds when they are being transferred back and forth.

Another funny part: no payment method except Bitcoin allows provable destruction without everyone gathering in the same room.

brilee• 13 years ago

How is this different from an escrow service?..

manmal• 13 years ago

It's not. Have you heard of any other escrow service for bitcoins?

kall• 13 years ago

Yes, there are a few quite prominent ones operating on tor.

phreeza2• 13 years ago

An escrow service would return the goods and funds to their original owners if something went wrong. Here the transaction is mirrored by the money in the box which is liable to destruction.

bostik2• 13 years ago

This story finally pushed me to creating an account.

As far as I understand, the approach outlined in the exchange's MAD option requires the exchange to prove that they have destroyed the funds.

I assume that the exchange creates a new bitcoin address for each transaction. If the transaction ever reaches an unresolved dispute, it would be possible for the site owners to simply move that single address to their "long-term retirement fund^W^W backup system", instead of simply deleting it. At that point, if the system ever shuts down, the owners can then simply move (in reality: shuffle) all the supposedly destroyed funds to their own accounts.

Apparently one can send bitcoins to any address, and an existing address becomes public only when it is used in a transaction. So the fund destruction can't just be a transaction to a so far unknown address - that would, again, allow the site owners to use their own addresses for the purpose.

After thinking this through a bit, it seems to me that the only way to really prove that the funds are destroyed would be to send them to an all-zero address. While thinking about this, a friend came up with the idea of spending the destroyed funds exclusively on transaction fees. I don't know why, but I have a weird feeling that could still be subject to gaming the system somehow.

A fascinating idea for a service, nonetheless.

javert• 13 years ago

Bitcoin actually uses a stack-based language in each transaction to specify what a spender has to do to spend funds. Typically, it's that the spender must has a private key matching the receiving address (public key). However, you can always specify something that is impossible for anyone to ever to validate.

oleganza8• 13 years ago

As far as I understand, the approach outlined in the exchange's MAD option requires the exchange to prove that they have destroyed the funds.

They explain in the FAQ: http://nashx.com/FAQ

They create a special address (hash of a public key) which would take thousands of years to generate from some private key. So by seeing that funds moved to such address, people can be sure the money is destroyed and not moved to a "long-term retirement fund". Their example: "1nashx1username11username22Wd4keb"

bostik2• 13 years ago

Thank you, I had somehow missed the FAQ.

That kind of completely bogus address is actually even better. If one wants to retain anonymity, it even encourages to use one-off ("not used anywhere else, not trackable across web forums") account names for the service.

terhechte• 13 years ago

How are non-bitcoin/litcoin assets being destroyed? Somebody is selling a wiimote controller on there right now, is it being destroyed-destroyed, or simply being taken away by the Nashx guys?

oleganza8• 13 years ago

Only BTC/LTC are accepted in the pot. If you want to sell Wii controller for 0.1 BTC, you have to put at least 0.1 BTC in the pot.

phreeza2• 13 years ago

What I love most about bitcoin (I don't own any) are all these creative ways people are using it. Like this or say Satoshi Dice. The rate at which these ideas are emerging makes me wonder if the real bitcoin killer app has yet to be discovered.

DannoHung2• 13 years ago

What's to stop Alice from ransoming the risked bitcoins for up to twice the cash selling price once she receives the payment for the transaction? Reptuation loss?

oleganza8• 13 years ago

Alice receives payment only after sending some good to Bob.

DannoHung2• 13 years ago

Yeah.

Let's call Alice's risk deposit Ad and Bob's risk Deposit Bd. Let's call Alice's good Ag and Bob's good Bg. Alice's Detonator is Da and Bob's Detonator is Db.

In the box are Ad and 2Bd. Alice has in her physical possession Bg with a value of 1d. Bob has Ag with a value of 1d. Bob destroys Db. Alice now has Da and Bg giving her control over Ad and 2Bd. She can say to Bob: "Hey Bob, y'know, I feel like I'd like more for this, why don't you give me another 1d or I'll destroy your 2Bd and my Ad."

I'm just saying that in the scenario presented, it seems like you have to ensure that Alice destroys her detonator first for the scenario to work correctly. Once Bob holds the only detonator, it's harder for him to justify ransoming Alice's single Ad since more of his value is at stake.

amalag• 13 years ago

Very nice way to avoid mediation.

Nashx allows trading using Nash equilibrium and mutually-assured destruction

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