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Increase security deposits to avoid future trades and mediation. #155

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taxd opened this issue Dec 17, 2019 · 14 comments
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Increase security deposits to avoid future trades and mediation. #155

taxd opened this issue Dec 17, 2019 · 14 comments
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@taxd
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@taxd taxd commented Dec 17, 2019

This is a Bisq Network proposal. Please familiarize yourself with the submission and review process.

I propose that the minimum security deposit for both buyer and seller should be increased to at least 15%. This will increase the skin in the game for the traders and incentivize them to quickly finalise the trade themselves without going into mediation which is very costly for the DAO. In addition there will be fewer future trades. As is it now a standard trade is in fact an option for the buyer and a cheap one at that. This is not sustainable in the longer run. Sophisticated traders will know that they should increase the security deposit in volatile times, but most traders are not that sophisticated.

@chimp1984

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@chimp1984 chimp1984 commented Dec 17, 2019

We have currently following values for the security deposits:

For buyer (he can do the chargeback, so it is higher here - maker can define between the min-max):

Default: 5%
Min. 0.5% for Altcoin, 5% for Fiat
Max. 20% for Altcoin, 50% for Fiat
Absolute min. deposit in BTC: 0.001 BTC (currently 7 USD)

For Seller:
Fixed: 5%
Absolute min. deposit in BTC: 0.005 BTC (currently 33 USD)

I would suggest to change to following values:

For buyer:
Default: 20%
Min. 15% for Altcoin, 10% for Fiat
Max. 50% for Altcoin, 50% for Fiat
Absolute min. deposit in BTC: 0.003 BTC (currently 20 USD)

For Seller:
Fixed: 15%
Absolute min. deposit in BTC: 0.005 BTC (currently 33 USD)

EDIT: See updated number in a comment below...

I don't remember the motivation why Altcoin buyer deposits have been so much lower as fiat. I think volatility risk is higher with altcoins and should be reflected in the buyer sec. deposit.
A motivation to keep buyers deposit low was to not increase too much the problem that you need BTC to buy BTC. Another one for both buyer and seller was to not require too much BTC to make a small test trade to try out Bisq. But I think the problem of "future trades" and not responding traders is a bigger one than the risk to increase the burden to try out Bisq. Specially if you end up in dispute because the peer has not enough skin in the game to follow the trade protocol at such a "demo" trade the intended effect of a demo trade (e.g. to get confidence in Bisq) would be contrary.

I am not sure if the suggested changes are too radical and if we should make smaller iterations to see how much effect they have. But I fear market volatility is a major factor which will overload any of our decisions, so it might be if there is low volatility over the next months that we assume we are fine with a moderate increase, but once a higher volatility hits the market we get overloaded with future trade disputes and with the refund agent that becomes risky for Bisq (BSQ volatility) and expensive. So maybe its better to play on the safe side and if we see that the higher requirements cause too much opposition from traders we can lower it again.

I tested the changes with trades between old and new client versions and all worked without backward compatibility issues. Still would require proper testing but changing those values seems to have no risk.

@clearwater-trust

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@clearwater-trust clearwater-trust commented Dec 17, 2019

The entire amount of the trade is the security deposit for the SELLER. In ten days their funds are sent to a "donation address".

Why would we require more skin from the seller when all of their funds are locked in a time-locked 2 of 2?

Security deposits should not increase for sellers. In fact, they should be decreased.

@m52go

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@m52go m52go commented Dec 17, 2019

I've been loosely advocating for this change in other communication channels so I'm glad to see this proposal.

The entire amount of the trade is the security deposit for the SELLER.

This becomes moot once the buyer sends payment to the seller. What's the seller's incentive to remain responsive after he's received payment, if he doesn't have a meaningful deposit to lose?

Deposit amount can also be an important measure for discouraging this attack vector.

A motivation to keep buyers deposit low was to not increase too much the problem that you need BTC to buy BTC.

I don't think increasing the security deposit would have an effect on this issue. It seems the friction is with needing to acquire BTC to begin at all, not having to acquire a particular quantity of BTC to begin.

As for amounts, I would prefer to see percentages be as alike as possible (i.e., 15% across the board instead of 10% fiat buyer variable, 15% altcoin buyer variable, 15% altcoin seller fixed, etc). But this is more for ease of understanding and communication than for tactical reasons.

@sqrrm

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@sqrrm sqrrm commented Dec 17, 2019

I like this proposal. I also agree with @m52go that it's worth having the same values for all users, much easier to explain. If one of the main reasons for the security deposit increase is to limit he value of the free option it's even worth making buyers and seller having the same deposit. The free option works for both buyers and sellers, although the seller should not be able to get the payout after exercising the option, the arbitrator is likely to pay out anyway.

@mpolavieja

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@mpolavieja mpolavieja commented Dec 17, 2019

For fiat, I don´t see why the minimum fiat deposit for the buyer (10%) should be lower than the seller (15%). If there are no other strong reasons to make them different, I like @m52go suggestion to use 15% as much as possible (default and minimum for the buyer, and fixed for the seller).

@chimp1984

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@chimp1984 chimp1984 commented Dec 17, 2019

I agree with @m52go about keeping values the same.

@sqrrm

The free option works for both buyers and sellers,

You refer to the "future trade" option, right? I only see that the buyer can do that. Once the buyer has sent the funds the seller can only confirm it, not confirming is breach of contract and leads to loss of his funds but he cannot avoid that his BTC got send to the buyer.

Another important issue is that we need to keep a minimal part of the deposit to return to any trader to keep some incentive to accept the mediated payout result. If one trader does not get anything because he violated the protocol he might decide to not cooperate to accept the mediated payout as he has nothing to lose anymore. If a certain part of the deposit always goes back to any trader in the mediated payout suggesting then some incentive stays. When it comes to arbitration the arbitrator will not pay out that min. refund, so a not accepting trader risks to lose that amount.

@chimp1984

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@chimp1984 chimp1984 commented Dec 17, 2019

Here is an updated suggestion:

For buyer:
Default: 15%
Min. 15% for Altcoin, 15% for Fiat
Max. 50% for Altcoin, 50% for Fiat
Absolute min. deposit in BTC: 0.006 BTC (currently 40 USD)

For Seller:
Fixed: 15%
Absolute min. deposit in BTC: 0.006 BTC (currently 40 USD)

Min. amount any trader gets back at mediated payout suggestion:
0.003 BTC (currently 20 USD)
This should give enough incentive to the losing trader to cooperate and accept the mediated payout. The UI for mediated payout suggestion would be adjusted so that the mediators cannot go below that amount.

@taxd

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@taxd taxd commented Dec 17, 2019

I don't see much of an asymmetry here. Before the fiat transfer the buyer can default, but will then lose his security deposit. After the fiat transfer the seller can default, but will then lose his security deposit.
I suggest simplicity here, i. e. not finetuning the security deposits but having the same for alts and fiat and for buyer and seller.
I would like the situation that mediation and appealing to the refund agent is only needed because of bugs or technical problems. All other problems should be solved by the traders. They can do this, having a communication channel, incentives and the terms written out in the contract.

@chimp1984

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@chimp1984 chimp1984 commented Dec 17, 2019

@taxd - I agree.
I think we also should emphasize more in the app that users try to solve their problems by themself first. I added a issue for that here: bisq-network/bisq#3801

@MwithM

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@MwithM MwithM commented Dec 18, 2019

If we want to prevent future trading, seller should have min-max values too instead of a fixed value. This way, if buyer as maker expects high volatility, she can protect herself.

I propose 15% min & default, 50% max.

Edit: buyer can loose up to trade funds + deposit if wants to make future trading, so fixed 15% is good enough.

@chimp1984

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@chimp1984 chimp1984 commented Dec 20, 2019

While security deposits is needed mainly to avoid spam,

No, that is not the reason for the sec. deposit. To incentivice traders to follow the protocol is the reason.

cannot accomplish the trade protocol by some legitimate reason like sickness, accidents, death or other unpredictable events.

Mediators take such things into account.

chimp1984 added a commit to chimp1984/bisq that referenced this issue Dec 23, 2019
According to bisq-network/proposals#155

For buyer:
Default: 15%
Min. 15% for Altcoin, 15% for Fiat
Max. 50% for Altcoin, 50% for Fiat
Absolute min. deposit in BTC: 0.006 BTC (currently 40 USD)

For Seller:
Fixed: 15%
Absolute min. deposit in BTC: 0.006 BTC (currently 40 USD)
@sqrrm

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@sqrrm sqrrm commented Jan 2, 2020

With bisq-network/bisq#3826 this is now implemented with the values in #155 (comment)

@mpolavieja

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@mpolavieja mpolavieja commented Jan 2, 2020

@taxd Do you agree to close this proposal as approved?

@mpolavieja

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@mpolavieja mpolavieja commented Jan 9, 2020

Closed as approved

@mpolavieja mpolavieja closed this Jan 9, 2020
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