Bitmarkets: Private decentralized marketplaces based on two party escrow

http://voluntary.net/bitmarkets/

by stevedekorte • 12 years ago

78 41 12 years ago

voluntary.net

voisine• 12 years ago

Very cool Steve, congratulations. I think this is the first 2 party escrow market to come out. Exciting stuff.

jdfellow• 12 years ago

What are the chances that this could be built for Windows or Linux using GNUStep?

oleganza6• 12 years ago

It uses BitcoinJ for Bitcoin stuff and Bitmessage library, those are multi-platform already. Anyone could fork the code and build alternative UI using these components for their platform.

zaroth• 12 years ago

Some background I wrote last year on two-party escrow: http://opine.me/future-of-bitcoin-escrow/

I think its a great approach. The reputation system and efficient private search which doesn't require copying the entire database are the hard parts!

em3rgent0rdr• 12 years ago

very great! And as a voluntaryist myself, I love the voluntary.net branding! It would be nice if they made these tools cross-platform with linux and windows builds.

fernly• 12 years ago

Could you please go through your whitepaper document and change all the possessive "it's" to the proper "its"?

(Mnemonic: possessive its uses the same number of apostrophes as his and hers and theirs do.)

stevedekorte• 12 years ago

Done. Thanks for the suggestion.

slagfart• 12 years ago

Could this be hosted somewhere else? It's blocked as a suspicious site for a few of us corporate readers.

gojomo• 12 years ago

You should mention what blocking-service/blacklist is being consulted, so that if it's an error, it can be corrected. (If it's not an error, moving the content will just get another domain/IP blocked... so it could make more sense for you to circumvent your minders locally.)

Animats2• 12 years ago

Cute. Here's the short version: "So for the sale of an item costing X, the buyer would put up 2X (1X for payment and 1X for deposit) and the seller 1X so a total of 3X would be locked in escrow."

If the buyer approves the transaction stuck in escrow, they get their 1x the price back, the seller gets their 1x deposit and 1x payment.

If the seller gives a refund, everybody gets back what they put in.

If neither party does anything, the buyer is out 2x and the seller is out 1x. This encourages the buyer to pay up and the seller to deliver.

This is bolted onto Bitcoin, but it could be bolted onto any payment system - Visa, PayPal/eBay, Venmo, Snapcash, MMORPG in-game currencies, etc. It would probably be more useful on Venmo than on Bitcoin.

nodata2• 12 years ago

How does this work for expensive items where the buyer doesn't have 2X?

ada19813• 12 years ago

The same way other things work in the real world where you don't have the resources / can't afford it -- you don't utilize the service ;)

oleganza6• 12 years ago

You simply don't. If it's your last 2X bitcoins, you probably should not trade on anonymous p2p marketplace in the first place. Ask your relatives and friends to help you with whatever problem you are trying to solve.

shazow• 12 years ago

This is bolted onto Bitcoin, but it could be bolted onto any payment system - Visa, PayPal/eBay, Venmo, Snapcash, MMORPG in-game currencies, etc. It would probably be more useful on Venmo than on Bitcoin.

It could be bolted onto any payment system that has scriptable multisig transactions. Visa, Paypal, and friends would not work without a trusted third party escrow.

michaelt• 12 years ago

  If neither party does anything, the buyer is out 2x and
  the seller is out 1x. This encourages the buyer to pay 
  up and the seller to deliver.

If the seller doesn't mail the goods and cannot be contacted, surely the buyer will have a choice to either (a) leave the payment in escrow, getting nothing back (but giving nothing to the seller) or (b) approve the transaction, getting 1X back (but giving 2X to the fraudulent seller).

Wouldn't buyers choose (b) because getting back 1X is better than nothing?

And if you're going to release payments even when you're the victim of fraud, you might as well not bother with the escrow?

sanswork7• 12 years ago

This is the situation that no one who releases a system based on this method(I can think of a few over the past year) thinks of. They assume the buyer will always act on social instead of financial best interest in the event of a scam.

sanswork7• 12 years ago

This method of escrow comes up fairly regularly in the bitcoin world. Each person ignoring the reasons the previous version stopped being promoted.

Say I am a malicious seller and I am offering a brand new XBox for 1BTC. You the purchaser start the order put up your two BTC, I put up my 1BTC and send you a used XBox only worth 0.75BTC. Now you as the buyer have two choices. You can either a) Refuse to confirm in which case you'll be out 1.25BTC or b) you can accept your loss confirm the order and be out 0.25BTC. Very few people will chose option (a) to the point that it would almost certainly be profitable for the malicious seller.

The fall back is reputation systems which require centralization to avoid gaming/having enough data points to be useful.

paulbaumgart2• 12 years ago

Counterevidence: http://en.m.wikipedia.org/wiki/Ultimatum_game

ada19813• 12 years ago

Even if I put up 2BTC and get nothing, I still have an incentive to approve it to get my 1BTC back.

The profitability for the malicious seller is a function of the probability a given buyer in the system will choose to punish the seller or recoup some money.

Also, is there a time limit? For example, what if the seller ships and buyer receives but is lazy / not incentived by the deposit..

The challenge here is this is an attempt to create a "Justice Algorithm".

I think a reputation based system is probably the solution here, and it doesn't need to be centralized. You could have anonymous reputation nodes -- which would become valueable in the system over time the more trust you have built. Trust seems to be the responsibility of the seller to manufacture by delivering goods as promised. It would be less useful for 1 off transactions with individuals.

You'd also want to calculate some trust score based on volume and value and the non-trivial challenge of preventing manufacturing trust via buying / selling to your self.

murbard25• 12 years ago

Reputation systems do not need centralization to have enough data points, what they need is traction. That can very well be achieved with a decentralized system.

But most importantly, the idea of making "trust" graphs using a weak form of transitivity needs to die. Reputation networks should encode sign statements of facts, from which trust can be estimated by participants, using a variety of approaches - in particular non-local approaches which aren't fooled by cliques.

Animats2• 12 years ago

If you can create new fake identities cheaply, reputation systems can be spammed. Google tried that in 2011, weighting inputs from social networks heavily. They were spammed, badly. A whole ecosystem emerged for spamming social search. Not only was there "Google +1 supply" and "Bulk Likes", there services for fake phone numbers for fake phone number verification appeared.

http://www.sitetruth.com/doc/socialisbadforsearch09.pdf

So, anonymous reputation systems don't work.

oleganza6• 12 years ago

Sorry, it does not make any sense "to bolt onto Visa/PayPal/Venmo" a two-party escrow like that. The whole point of two-party escrow is to solve the problem when you cannot (or don't want to) rely on any third party. E.g. PayPal can block/revert funds if they want to.

Full two-party escrow ensures that only these two parties can decide what to do with the funds and no one else could decide for them. You must use Bitcoin to ensure that. If you still have some 3rd guy to decide, you don't need such a setup in the first place.

murbard25• 12 years ago

Please, do not run this on Tor. The p2p aspect will definitely help, as it will be harder to locate a single server with traffic analysis, but it isn't enough. Run this on bitmessage (or a fork thereof) which broadcast messages to all peers, making traffic analysis futile for an attacker.

oleganza6• 12 years ago

This runs on bitmessage over Tor. Tor is just another layer to make it more difficult for merchant to recognize your location.

Think of it this way:

1) Bitmessage ensures that FBI has to catch merchants or buyers individually instead of catching them in one single server like SR. 2) Tor makes it harder for them to locate a party by tracing where message came from.

Tor is not perfect, but Bitmessage is not better, but worse than Tor in terms of tracing the origin of the message (because BM does not use onion routing with layers of encryption).

murbard25• 12 years ago

How cam bitmessage possibly be worse than Tor? All that bitmessage indicates is that you're taking part in the network, not what you're actually saying or who you're talking to.

oleganza6• 12 years ago

The idea is that everyone locks up more value than they can potentially win by cheating. So every side is egoistically interested in getting their money back, so they have to find a compromise. Trolling people at your own expense is possible, but I expect it to happen infrequently to not be a big concern (just like vandalism does not happen everywhere all the time, but only somewhere, some of the time; plus in this case vandalism is quite pricey).

Many people discuss extortion scenario, so let me reply to all of you. Extortion is limited when both parties are anonymous or have little knowledge about personality of another person. If I try to play dirty with you, how do I know that you are in a desperate position and will submit? Maybe you will turn out a better player in this poker? Or maybe you will simply send me a message "no, please pay as we agreed initially, period" and we won't be able to discuss this longer.

This Nash Equilibrium approach is particularly great for automated agents. E.g. two apps paying each other for measurable service and owners of both apps know perfectly well how another app will behave - there's no one to extort. Either you follow the contract, or you don't. So you can troll someone by simply losing your own funds, all alone in a sad silence.

Bitmarkets: Private decentralized marketplaces based on two party escrow

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