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Arbitration From Bisq Wiki Jump to navigation Jump to search Arbitration refers to the last stage of the dispute resolution process-it's what takes place in case trader chat and mediation fail to resolve a dispute. This page first covers the arbitration process itself, in a practical sense, so that users can be made aware of what to expect when trading. Then it covers the process in more detail, including its motivations, how all the components work together, and how the process is expected to develop in the future. All trades placed from 1st January 2023 will use a new trade protocol ( Burning Men Protocol ) that is designed to further improve the decentralization of Bisq. The new protocol is a result of the proposal Distribute Burningman role to contributors who burned BSQ which was vote on in Bisq DAO cycle 41 with 100% approval. The protocol change means trades placed from 1st January 2023 will have an important difference should the trade end in arbitration. This is as a result of the accepted proposal do not pay out the security deposit of the trade peer to the arbitration case winner . What this means in practice is IF a trade ends in arbitration the arbitrator will only payout the trade amount plus one users security deposit. Previously they paid out the trade amount plus both user's security deposits. Therefore, traders ending in arbitration will notice the following: The arbitration 'winner' will not be compensated for the inconvenience caused by the trade going to arbitration. The arbitration 'loser' will not be refunded their deposit partially or in full. This chance is necessary for the security of the new protocol. Remember arbitration should be seen as the last resort. All efforts should be made for trader to come to an agreement with themselves or via the mediator. Contents 1 Process 2 Process, In Detail 2.1 Pre v1.2 Trade Protocol 2.2 Post 1.2 Trade Protocol 2.3 Time-Locked Delayed Payout Transaction 2.4 Avoiding Fraud 2.5 Donation Address Owners (burningmen) 2.6 Why We Cannot Merge the Arbitrator and Burning Man Roles 2.7 FAQ Process Bisq's arbitration process is a thoroughly decentralized approach to handling disputes between 2 strangers on the internet: one in which no user needs to trust a third party with authority over their funds, but one in which a user can still expect a satisfactory outcome if they have followed the Bisq trading rules . Arbitration is only available when: one or both traders reject a mediator’s suggested payout the time-locked delayed payout transaction is published A time-locked delayed payout transaction is signed (but not published) at the beginning of the trade process. Its purpose is to allow time for traders and mediators to work out a payout using the funds in the 2-of-2 multisig escrow, and to eliminate the possibility of fraud in case they can't. Requesting arbitration publishes this time-locked transaction, sending all funds in the multisig escrow (i.e., those of both trading peers) to the Bisq "donation addresses" (which are owned by the Burning Men , Bisq contributors who burn BSQ in advance). This transaction can only be published 10 days after the deposit transaction is confirmed (for altcoin trades) and 20 days after the deposit transaction is confirmed (for fiat trades), which means arbitration is only available after this time has passed. Burning Men burn BSQ after estimating how many BTC from trading fees and delayed payouts will be during a cycle, and a filter controlled by the DAO distributes the BTC in proportion to how many BSQ have been burned. This keeps BSQ supply balanced, allowing for a corresponding amount of new BSQ to be issued to account for the BTC payouts made to traders as part of arbitration. As a result, BSQ supply is largely unaffected. This dynamic essentially makes bitcoin deposits confiscatable, enabling a sort of mutually assured destruction to drive dispute resolution on Bisq without trusted third parties. In plain language, here's how the process works for traders: If you’re dissatisfied with the mediator’s suggestion and think you are entitled to a better outcome, request arbitration when it's available (doing so publishes the time-locked transaction and sends funds to the donation addresses owned by the Burning Men). Collaborate with an arbitrator to clarify the details of your case. If the arbitrator agrees you are owed BTC, they will pay it to you. The arbitrator will then request reimbursement from the Bisq DAO so they are not out of pocket. Takeaway: if you are owed BTC after a dispute, you'll get it from an arbitrator who will refund you with their own funds. The arbitrator then requests reimbursement from the Bisq DAO usually once per DAO cycle and asks for the BSQ amount as a reimbursement for the BTC they have refunded Bisq traders. . Process, In Detail To better understand arbitration, we need to first understand the new trade protocol, and how it improves upon the old trade protocol. Pre v1.2 Trade Protocol The previous model with 2-of-3 multisig deposit transactions (where an arbitrator was the 3rd key holder, and makes the payout to one of the traders in dispute cases) carried a significant risk: if the arbitrator was malicious (or was hacked), he could have taken all offers with a sockpuppet trader and made the payouts right back to his own sockpuppet. This risk made it impossible to scale dispute resolution and find more arbitrators-we were limited to filling the role with a tiny number of Bisq contributors who could be 100% trusted to not be malicious and who had a good enough background in computer security to make getting hacked highly unlikely. This element was the single most problematic element in Bisq’s old trade protocol, but since there weren’t any better solutions, we used it for as long as we had to. Post 1.2 Trade Protocol The new trade protocol, launched in Bisq v1.2 , eliminates the risks described above to a large extent by separating functions and involving the DAO. It significantly improves censorship-resistance, security, and scalability of dispute resolution on Bisq. Dispute resolution for trade protocol (v1.2+). The basic change is that it uses a 2-of-2 multisig in the deposit transaction with only the traders’ keys. On the happy path, the traders each sign the payout tx once the fiat or altcoin is transferred. If anything goes wrong, there are 3 stages to resolve the issue: The traders can have a direct chat where they can try to find a solution to their problem. If that does not succeed either trader can open a mediation ticket and request help from a mediator. Mediators play a role similar to that of arbitrators in the old model, except they don’t have a 3rd key. They only can make a suggestion for the payout distribution, which either trader is free to accept or reject. If both traders accept, they create and sign the payout tx and the trade is completed. If either trader rejects, the dispute goes to stage 3. This escalation can only take place after a certain time period has passed. For altcoins, this period is 10 days, and for fiat it’s 20 days. An arbitrator will investigate the case, just like a mediator would, and decide how a payout should be distributed. The arbitrator role currently has 2 parts: supreme mediator and refund agent (this is where the term refund agent comes from, but arbitrator is a better term for the role, as we will soon see). The supreme mediator part of the role is similar in function to that of a regular mediator (i.e., investigate a dispute). The refund agent reimburses traders BTC for disputed trades without requiring them to undergo the complex and time-consuming process of making a reimbursement request in the DAO. The ultimate goal, however, is to make such extreme dispute cases so rare that requiring users to request reimbursement from the DAO on their own becomes feasible (e.g., by reducing bugs, UX improvements, increasing security deposits, etc). But we’re not there yet, so for now, an arbitrator simply decides on a payout and funds this payout from their own pocket, and later makes a reimbursement request to the DAO to be reimbursed for their reimbursement to the user. To avoid potential fraud , and to keep the DAO from losing money in each arbitration case, we use the donation address to receive the funds from the trade via the time-locked delayed payout tx. Time-Locked Delayed Payout Transaction Since v1.9.8 , traders create a time-locked delayed payout tx where all the locked up funds (trade amount + both security deposits ) are sent to Bisq donation address owners, also known as burningmen. These addresses are defined in the DAO. The burningmen are Bisq contributors who burn their BSQ in order to get a portion of time-locked delayed payouts and trading fees paid in BTC. From v1.2 to v1.9.8, this address was controlled by a single burning man who exchanged BTC for BSQ to burn them afterwards. That supposed a risk for the DAO as, although the burningman had to place a BSQ bond, the amount of the bond was lower than the amount of expected BTC to collect. Distributing the role into multiple burningman and requiring them to burn BSQ in advance, this risk has significantly decreased. If a trade is not completed in 10 days (for altcoins) or 20 days (for fiat), either of the 2 traders have a chance (after mediation) to publish the time-locked payout tx where all deposit funds are sent to the donation address, requiring the aggrieved trader to request arbitration so they can receive a payout. With the preliminary solution we use now, the trader gets a payout from an arbitrator directly, but the eventual goal is that the arbitrator makes a suggestion which the DAO uses as a basis for voting on the reimbursement request made by the trader(s) . Avoiding Fraud The time-locked delayed payout tx is essential to avoid fraud. A trader could make a self-trade and then claim that his “peer” has not paid. Without the time-locked payout tx, he could go through the dispute process, make a reimbursement request, and receive BSQ for the equivalent “lost” funds in BTC. After that he could make the payout to himself from the trade, since he controls both “traders”-thereby scamming the DAO with the trade amount. To avoid this fraud, we require that locked up funds in the 2-of-2 multisig deposit tx are spent before opening an arbitration ticket. Thus it is not possible for a trader to defraud the DAO in the way described above. Donation Address Owners (burningmen) Burningmen are current and past contributors who earned BSQ by contributing to Bisq who opt to burn their BSQ to get BTC from time-locked delayed payout transactions and trading fees paid in BTC. A DAO filter distributes the BTC in proportion to their relative amount of BSQ burned. The amount of BSQ to be burned is limited for each contributor, to prevent that a single burningman could create self trades and take advantage from being refunded at arbit...