
Bitmarkets: Private decentralized marketplaces based on two party escrow - stevedekorte
http://voluntary.net/bitmarkets/
======
Animats
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.

~~~
sanswork
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.

~~~
ada1981
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.

~~~
mcherm
What might work well would be if the amount put up for escrow were determined
in part by the reputation of the entity doing the trade. The entities could
still be pseudonymous (it's got an identity, but no one knows who is behind
it).

~~~
sanswork
There is nothing there to stop sock puppet reputation gaming though which is
going to be the main attack vector of any distributed
anonymous/pseudoanonymous reputation network.

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fernly
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
Done. Thanks for the suggestion.

------
oleganza
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.

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

------
murbard2
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.

~~~
oleganza
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).

~~~
murbard2
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.

~~~
oleganza
When Alice and Bob communicate over Bitmessage, Eve can only see garbage being
propagated through the network.

But when Alice sends a message to Bob (who is an undercover TLA agent), Bob
could monitor traffic and statistically figure that certain IP address sends
messages addressed to him earlier than other nodes. So he goes and busts the
owner of that IP address.

Onion routing attempts to make this discovery harder for Bob because Bob will
always receive messages from different IPs that supposedly do not belong to
him. They have little value to him because they themselves are connected to
relaying nodes, not to initial senders. Bob would have to bust too many IPs
before finding the sender, which could be too expensive.

Onion routing begins to fail when Bob has a lot of his own nodes in the Tor
network, so for a large enough number of messages he can trace route back to
the sender's physical address.

To achieve real anonymity when chatting with strangers (e.g. blackmarket
merchants), one needs to use a combination of these factors:

1) Bitmessage or alike to avoid evesdropping.

2) Tor to make it harder for recipient to find location of the sender.

3) Low-latency network to make statistical analysis less efficient. Every
relaying node (both Tor and Bitmessage) should delay broadcasting messages
randomly.

4) Infrequent communication, so it takes time for recipient to gather data.
(This is a variant of #3)

5) Change physical location frequently, randomly and rarely reuse them. E.g.
connect from various free wi-fi points in cafes, parks, shops, Apple Stores
etc.

6) Never reuse identity between people you communicate with. Merchants must
have separate Bitmessage and Bitcoin address _per invoice_ (once item is sold,
post another item with different identity). Buyers must use different
Bitmessage and Bitcoin address for each purchase. This way amount of
information available to an adversary will be strictly limited to just one
deal. And that deal will be limited to one unique location and a few exchanged
messages that hopefully won't be enough to locate the person. And even if that
happens, person couldn't be charged with more than one sin.

If you communicate with people you trust (friends, family members), you only
need #1 and that would be enough.

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em3rgent0rdr
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.

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

~~~
gojomo
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.)

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

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

~~~
oleganza
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.

