Even though @ManfredKarrer has stated against Mutual Assured Destruction (MAD) and this method has not been deployed in favour of the current one, I’ve been thinking about it lately and I belelieve it’s still a great solution for face to face transactions.
For those unfamiliar with MAD:
If maker is buying 1 btc, he has to sign a transaction that will send 1 btc to a 2/2 multisig address. Then, taker signs a transaction with 2 btc to that address, so 3BTC are locked like a security deposit.
Then, the fiat payment is made on a public place, face to face and both parts can go back home. When the seller is ok, she releases the funds. 2BTC goes to the buyer and 1BTC goes back to the seller.
With this protocol, both parts have something to lose until the end of the trade, and only the parts involved are responsible that the protocol have been followed. If one of the parts doesn’t aggree with the other, s/he could destroy all the funds.
Advantages:
- No need to bring any laptop or even a smartphone to the trade: Because seller has also something to lose until the end of the trade, s/he can go back home with fiat and then sign the release locked funds + payment to buyer.
- Private keys can stay safe, no need to bring them with you: That diminishes incentive for extortion.
- No third party involved: It’s already stated in the current protocol that “The lack of verifiable actions makes arbitrating face-to-face disputes much harder”. As arbitrator can’t do very much is better to remove it. That also fulfills Bitcoin’s philosophy.
- No need to provide evidence: No one knows better what happens in any trade than the parts involved. They are the best witness possible, and if someone lies or is confused, they have the tools to defend themselves.
Disadvantages:
- Asimetry and blackmail: There’s always one part which could lose the double than the other. I don’t think trying to blackmail someone in this situation is rational, as the other part can defend itself. Would you risk loosing an eye if the other part gets blind?
- Both parts need twice the amount to be traded.
Maybe we could be affraid that Bisq can’t add value with this method, because there are no arbitrators involved. I think that this is not true, and even if it were, that wouldn´t be a reason to stop trying to impulse it. Bisq can still offer quality software, ready to be used easily in a private way, and a little but growing community. The decentralized reputation systems that is being developed by Bisq could be used for this payment method as well.
I know that F2F payments have little volume and it’s not because the current protocol is bad, so maybe this is not the main thing that Bisq should focus on. But once the DAO has been released and it’s stable, we could try to give an impulse to F2F trading and this MAD protocol is, in my opinion, the best way for it, and it will be very important to have tools like this in case the “then they fight you” phase starts sooner than expected. If MAD success for trading fiat, it could be used to trade any kind of goods.
You can see a good infography of how MAD works here:
http://nashx.com/HowItWorks