Decentralized Reputation/Marketplace

[aquapanic]

What would be the ideal way to use a sidechain or fork of Ethereum/Bitcoin to establish a trustless 2-of-2 escrow system?
The major problem with 2-of-2 escrow for non-cryptocurrency transactions is that there is no way on-chain to verify the transaction validity without the use of a centralized oracle system or other means.
2-of-2 escrow then allows an attack by which they "reject" delivery, receiving a refund but have actually received the product. This is very inconvenient for anyone trying to set up a decentralized type marketplace.
My potential solution is to issue (via ethereum smart contract or other means) a token for X coins to the smart contract (giving them some amount of value) and establishing a secondary market for them (any major crypto exchange works fine here, more is better).
A Seller (Alice) could then require a given TX require a given amount of collateral tokens per the smart contract.
A Buyer (Bob) would be responsible for "putting up" or "staking" the contract in addition to the crypto used for payment.
In the event of a seller-accept buyer-reject "scam" - the buyer would still be refunded his coins, but the reputation token would be "burned" into the void for malicious behavior. This occurs whether the seller shipped the item or not - creating a disincentive both to initiate a false dispute, and to initiate a dispute, generally. The problem that I see is the value of the collateral token must be strictly controlled such that X is a high enough value to incentivize accepting delivery it would be within standards, but not so high as to make a defection staggering in the event of a scam. Potentially you could write the contract such that the seller chooses the amount of collateral tokens required for the transaction based on the value, and the buyer chooses whether to accept this risk or not.

[ChluNetwork]

What would be the ideal way to use a sidechain or fork of Ethereum/Bitcoin to establish a trustless 2-of-2 escrow system?
The major problem with 2-of-2 escrow for non-cryptocurrency transactions is that there is no way on-chain to verify the transaction validity without the use of a centralized oracle system or other means.
2-of-2 escrow then allows an attack by which they "reject" delivery, receiving a refund but have actually received the product. This is very inconvenient for anyone trying to set up a decentralized type marketplace.
My potential solution is to issue (via ethereum smart contract or other means) a token for X coins to the smart contract (giving them some amount of value) and establishing a secondary market for them (any major crypto exchange works fine here, more is better).
A Seller (Alice) could then require a given TX require a given amount of collateral tokens per the smart contract.
A Buyer (Bob) would be responsible for "putting up" or "staking" the contract in addition to the crypto used for payment.
In the event of a seller-accept buyer-reject "scam" - the buyer would still be refunded his coins, but the reputation token would be "burned" into the void for malicious behavior. This occurs whether the seller shipped the item or not - creating a disincentive both to initiate a false dispute, and to initiate a dispute, generally. The problem that I see is the value of the collateral token must be strictly controlled such that X is a high enough value to incentivize accepting delivery it would be within standards, but not so high as to make a defection staggering in the event of a scam. Potentially you could write the contract such that the seller chooses the amount of collateral tokens required for the transaction based on the value, and the buyer chooses whether to accept this risk or not.

aquapanic you pose an interesting idea here worth giving some thought to. Decentralized reputation is something our team has been thinking long and hard about. You can check out our white paper at chlu.io, we would definitely be curious what your thoughts are.

We will be posting an announcement on bitcointalk soon with more details

[aquapanic]

Like your idea - some questions -
1. Support for transacting with other chains?
2. How to prevent malicious marketplace action using the vendor's marketplace signing key. Vendor must have a way to respond on chain by verifying their own private key to invalidate a PoPR from marketplaces using Vs.

[ChluNetwork]

Like your idea - some questions -
1. Support for transacting with other chains?
2. How to prevent malicious marketplace action using the vendor's marketplace signing key. Vendor must have a way to respond on chain by verifying their own private key to invalidate a PoPR from marketplaces using Vs.

Hi aquapanic,

Thanks for taking the time to read our paper. You raise some excellent questions.

1. Chlu does not need a new blockchain, instead Chlu allows reputation data to be saved on IPFS with references from transactions on bitcoin, litecoin, zcash and ethereum. The first three chains allow use of op_return to save a reference to the Review Record and PoPR. This way, Chlu can support payments through as many cryptocurrencies as possible.

2. That is very good point. One way for the vendor to stop a malicious marketplace would be to remove the marketplace's key from the /ipns/vendorname/chlu/keys/pubver/mi/. There is a drawback to this solution, that the vendor's historical reviews from a marketplace can no longer be validated. But if the marketplace is acting maliciously then the vendor would want to disassociate themselves from the marketplace. We'll update the paper to reflect this issue you have raised.

Thanks again for the help.

[aquapanic]

Considering that the only reason I can think of for a marketplace to maliciously place PoPRs is to give themselves review rights for a given vendor and trash their rating on the network - removing reviews on that marketplace would probably be a feature not a bug.