There needs to be an additional deposit amount paid by the buyer and determined by the seller.  Once the transaction is confirmed by both parties, the buyer gets this amount back.  This ensures that both parties have some "skin in the game" that motivates both to confirm that transaction.  This will eliminate any extraneous impulse of the buyer to simply never confirm the transaction.

Actually, now that I think about it, there should probably be a seller's deposit as well, to ensure he actually sends the product.  The buyer and seller deposits make it a bit more complicated, but they ensure everyone is motivated to conclude or mediate the transaction.

If you think about the three scenarios...
Current proposed:
1. Buyer puts up the money, seller delivers product. --> Both happy, price goes to seller.
2. Buyer puts up the money, seller does not deliver product. --> Buyer's money is destroyed.  Seller doesn't care.
3. Buyer puts up the money, seller delivers product, buyer doesn't confirm product. -->  Seller doesn't get paid.  Buyer doesn't care because, to him, he's lost the money either way.

With Buyer deposit:
1. Buyer puts up the money, seller delivers product. --> Both happy, price goes to seller.  Buyer's deposit returned.
2. Buyer puts up the money, seller does not deliver product. -->  Buyer's money is destroyed.  Seller doesn't care.
3. Buyer puts up the money, seller delivers product, buyer doesn't confirm product. -->  Seller doesn't get paid.  Buyer remembers deposit, completes/mediates deal.

With Buyer and Seller deposits:
1. Buyer puts up the money, seller delivers product. --> Both happy, price goes to seller.  Both deposits returned.
2. Buyer puts up the money, seller does not deliver product. --> Buyer's money is destroyed.  Seller remembers that his deposit is on the line, deliver's product.
3. Buyer puts up the money, seller delivers product, buyer doesn't confirm product. -->  Seller doesn't get paid.  Buyer remembers deposit, completes/mediates deal.

Both deposit amounts should be equal, for simplicity and also to ensure that the seller, who is listing the products by both price and deposit amounts, is doing so fairly.

1. Buyer and Seller generate 3 keypairs, swapping pubkeys, producing 3 2-of-2 addresses
2. Buyer deposits BTCamount to address A
3. Seller deposits BTCamount to address B
Am I right so far? How does the rest go?

One is the payment address, the other is the bond address : let it be a multisig one and make it
so the vendor signs a transaction that sends coins back to him and other coins to buyer.
So, buyer gives up his part of the privkey to the vendor, and the payment is settled, then bonds.
Vendor creates a transaction that send half of the bond to him and the other half to the buyer, signs it, doesn't broadcast it but send it over the buyer. Buyer signs it and sends it.

If anyone tries to cheat the system the other party will simply not allow it. This could also let buyer and vendor settle a % refund in case package goes missing.


First address contains payment, second multisig one contains bonds from both the buyer and seller. When buyer releases the payment the seller gets it, but then the seller wants the bond back. But to do it, buyer must sign the transaction. So, seller creates a transaction that gives the buyer bond back to buyer and his bond back to him. Seller signs it, sends to buyer. If buyer agrees with the settlement of bonds, it signs it : bonds are back.

Also lets say that vendor wants to give a % back to buyer because of an error or something, he can specify it and buyer gets it back as part of the bond.
Instead let's say vendor is dishonest and wants more money : buyer sees the settlement and doesn't agree, coin is lost, vendor just got his bond back from the unlocked payment, so both parties are at a loss, and coins can't be spent until they settle.

But how does that work? The problem everyone has been bumping their heads against with the p2p concept is that nobody has a good way to know what's going on at the fiat end of any given transaction.

This is not right. The answer is The Law.

One depends on an immutable understanding between human beings.

The other is political.

For BTC.

That would all be nice and fine, except it depends a lot on what legal classification Bitcoin trading falls under at this time. If it's considered more akin to gambling than banking, it could very well be argued that you aren't entitled to any refund. I don't think we'll really know until we see a few Bitcoin-related lawsuits and get the judicial system's take on Bitcoin. Until then what you're seeing is that people mostly expect Bitcoin not to be recognized or protected by the state as any kind of property or real value.