Option for buyer to cancel?

I’m in the middle of my first trade with bisq (sale) and I have a suspicion that the buyer may decide not to complete. The confirmation of the multi-sig transaction took a long time to go through (over 17 hours) and in that time the market fell considerably. Admittedly it has still been less than a day since confirmation, so perhaps the buyer will still come through, but unless things pick up considerably, the 0.01 BTC deposit looks like a small price to pay relative to the difference between the trade price and the current market price. If the buyer decides that it isn’t worth his while, I guess he’ll just leave the trade to expire - which may cost him his deposit but presumably nothing else.

In the meantime, I will have had a bunch of bitcoin tied up in a dead trade for 6 days. I’ll come out with slight more bitcoins than I went in with, even after deducting the mining fees (I guess I don’t pay the trade fee though?), but the opportunity cost might be quite significant if the market corrects further downwards.

If the buyer has already decided that they’re not happy to continue prior to starting the fiat transfer, can they cancel the transaction at that point and give up their deposit voluntarily? If not, is that an option that you would consider adding? It seems better for everyone than requiring that I sit with my bitcoins locked up waiting for the trade to expire…

Hi @herodotus. I am in the exact position you are. Maybe even with same buyer. Sorry this is happening the first time you use bisq. I have done a lot of sells here since July and I have never had an issue - so far. Please be patient.

One measure the bisq team is taking is to continuously decrease the maximum trade limit. Over the last months this went to 1 BTC, then 0.5 and now 0.25. This way the deposit loss gets at least proportionally higher. It may be time to cut the limit further to maybe 0.15? Another thought I have is to allow higher limits between peers that have already traded before, if this is technically possible… Or, instead of the system forcing rules upon us, we as sellers could also be more cautions and split offers to decrease risk.

Anyways, having only dealt with many honest traders on bisq I am very hopeful our trades will go through.

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You can always open a dispute by pressing cmd+o that will get you to the arbitrator.
But in a way, there is nothing wrong with the trade, so you can’t really blame the other trader yet. You agreed to the max trade period.

The problem is in the Bitcoin network being maxed out with transactions right now and Bisq can’t do much in such scenarios, since it does everything over Bitcoin. Using different cryptos as base currency in these scenarios when Bitcoin is in trouble is probably the best you could do.

You can always open a dispute and tell the arbitrator that you don’t want to go with the trade that you agreed to. You will be punished by taking away your security deposit in such case.

Hey guys,

Thanks for the replies. For the avoidance of confusion - I’m not unhappy with the trade and I have no intention of cancelling. I’m the vendor and currently I stand to do quite well out of selling at the price that was accepted. Obviously I’ll wait until the end of the period in the hope that everything works out. I totally accept that I agreed to the time window and that’s fine.

However, there is an intrinsic inefficiency in the current system that is not purely down to the underlying bitcoin congestion. Bisq has a mechanism to penalise the buyer if they decide to back out of a transaction; but there are situations, increasingly common right now, in which the penalty is lower than the cost of continuing with the transaction. In a world where bitcoin prices can move hundreds of dollars in a few minutes, there’s really no way round that without a centrally managed exchange controlling fiat deposits.

The vendor can manage that to some degree by setting a buyer deposit to a level that seems appropriate for the current level of volatility. Sometimes that will be right, sometimes it won’t. But when (as looks likely to be case now) the market moves down very quickly after a trade has been agreed, it becomes rational for the buyer to sacrifice their deposit and buy their coins at a lower price elsewhere instead. Even if you built a reputation system into bisq, there would come a point at which the cost of continuing the trade outweighed the cost of abandoning - especially for one-off or occasional traders.

Given that buyers are highly likely to behave in this way when the market moves down fast enough, it seems to make sense to allow the buyer to do this explicitly without us both having to sit around waiting for the end of the trade period even when they buyer has no intention of honouring their trade. The buyer knows that they’d rather lose their deposit than pay the original price, the vendor wants to get their coins back into circulation ASAP, so this works out better for everyone. Do you see my point?

The maker can set the deposit for the buyer up to 0.05 BTC that is 20% of the usual limit for Fiat of 0.25 BTC. So a 20% volatility can be covered by that. I know it is not well explained in the UI and we are working on improvements. It is not easy to explain all that complexity for all types of users.

See that as insurance contract for the buyer. He gets into the deal with max risking the deposit in case of high volatility.

To open a dispute before the period ends is possible with cmd+o. But the buyer will wait usually to see if the at the end of the period the market has moved to his benefit. We also don’t want to motivate users to cancel out trades. It is just the only best solution for that volatility issue.

Also to emphasize that future trade options with high deposit it might make dispute resolution harder as there is more money at stake to gain for the other peer. So it is not that easy…

Please note that a decentralized exchange cannot compete with efficiency and speed to centralized.
We offer other benefits like: Privacy, security, trade without asking for permissions and censorship resistance
People tend to quickly forget security problems and ignore the consequences of lost privacy. I bet many MtGoxers have regretted badly to use the “efficient” model to short term gain a bit and long term lose a lot.

@herodotus I understand your point, but I have a different “moral” perspective. In my opinion at the time when the buyer agrees to purchase he formally agrees (= binding handshake between two parties) to go through with the deal and both parties understand that it can take up to x days to exchange despite the volatilities in the market. If one of the traders does not stick to this agreement, not only should he lose his deposit, but I think he should also get banned from the system for not following the rules.

In your specific situation you are assuming the buyer won’t stick to his side to the deal. His greed makes him dishonest. If this is true then why would the buyer decide to not wait the entire trade period in case the price goes back to above what you and him agreed to? In other words I don’t think a dishonest trader would agree with you to terminate the trade early because this could still work in his favor.

I am hopeful that arbitrators ban users from future trades, if it is clear they are trying to work the system by being dishonest.

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Yeah, some people will still follow the trade for moral reasons. It would unfair to them to just assume that they won’t pay for it. They might simply want to get as much of bitcoins as quickly as possible as well, so this would hurt them. Deal is a deal, in my opinion. You shouldn’t break the deal based on the assumptions of intentions of the other user.

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On the moral thing: I understand those who feel “a deal is a deal” and that would generally be my perspective on it. But in practical terms, most people’s integrity has some monetary limit and it is foolish to pretend that this is not the case. As Manfred says, the buyer’s deposit does effectively act as an insurance policy against volatility for them. If you take this away it’s going to be even harder to persuade people to use a system that is as “vulnerable” to volatility as Bisq, and just push them back into the clutches of the centralised exchanges.

Even if you wanted to try a reputation/banning system a) if Bisq gets popular you can be sure that the majority of users will only ever do a very small number of trades, so this is a minimal deterrent vs a big potential loss and b) effectively banning people in a system like this is pretty hard

@alexej996 I wasn’t proposing that one side would ever “break the deal based on the assumptions of the intentions of the other”. Sure, I’m make assumptions about the other side of my deal, but I’m not proposing that I get the chance to cancel the trade on that basis. I’m proposing that the buyer be given an explicit option to do that himself (at the cost of his deposit) rather than just sitting around waiting for the expiry of a trade that he doesn’t intend to complete. Maybe in this case my assumption is wrong and the other party intends to honour their trade (great!) but my suspicion is probably not, and I think that this is likely to get more common if the value of bitcoin continues to be as volatile as it has recently

@ManfredKarrer Thanks for your very clear and informative response, and thanks also for your work on this software - even if there are a few practical challenges I do greatly value the benefits of having a structured means of exchange that doesn’t rely on a central exchange. I had money in Mt Gox - but got it out just in time and recently have been having very bad experiences with Kraken - I very nearly lost a lot of money thanks to it being unusably slow and broken in the last month. So, yeah, I realise the benefits!

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Well in that case, as @mjimb said, I also doubt that such trader would actually stop the trade himself and lose the deposit, instead of just waiting it out to see where the price goes.

Also let’s not assume that these issues are long term issues. Neither does it make sense that volatility will be there forever in Bitcoin nor that these transaction congestions will be there forever. It is a work in progress, this whole crypto-ecosytem is, but we need to be focused on the big picture here.

I just don’t think that changing the protocol for these types of issues would make sense. Maybe some better communication or something like that makes sense, but the protocol itself shouldn’t change for this situation. That is at least my opinion on it.

@alexej996 Fair enough, I see your point. Good communication would certainly help to alleviate these and other similar problems, so maybe that’s a better thing to focus on. Thanks to everyone who has responded to my queries with patience and insight in the last day or so - this seems like a really cool community!

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We have to deal what is possible and we cannot rely on morality. Luckily from my experience as past arbitrator a surprisingly huge majority of users in such case acted fair and continued even they could have made financial gains, so most stick with “deal is a deal”. But I assume once our user groups extends the idealistically motivated we will see more an more who simply want to make profit if it is possible.
We cannot ban such users because that would introduce centralization and censorship issues. What the other user can do is that he bans that user to not trade again but of course that has limited effect.
A decentralized reputation system is a bit of a holy grail waiting to get solved. So far I have not heard/seen such a system.
So taking those facts into account best we can do is to see the trade as a kind of option contract.
The buyer only has that option, not by intention but as result of that circumstances. I still try to not advertise that as option trades as it might cause new problems that people try to get the security deposit of the peer by searching for ways how they can trick and lie to the arbitrator to get there.
But who knows maybe in future we will present that more as a form of a financial product.
You can see it positive. The buyer has insurance for max loss. The seller has limitation of max. gain. If deposit is high (0.05 BTC) he earns about 2300 USD by that (deposit goes to the seller). Not that bad. Bitcoiners get a bit spoiled with the current market craziness ;-).