3. OpenBazaar Protocol

OpenBazaar is a marketplace platform compromised of the following components:

  1. The Kademlia-style Peer-to-Peer (P2P) Network
    • The network architecture governing peer-to-peer connections
  2. The Trade Protocol
    • The fundamental rules governing the type trade between peers
  3. The Application
    • How a users access the network and executes the trades protocol

Users download the OpenBazaar application to access the network and execute the trade protocol with other users on the network.

3.1 Peer-to-Peer Network

The OpenBazaar network is the backbone of the project. It is designed to be scalable, supporting millions of people finding goods and services offered by fellow peers, who could be located anywhere in the world.

The Kademlia-style architecture theoretically supports this vision, and has a track-record of connecting millions of peers as demonstrated by BitTorrent. The chief engineering difficulty of building OpenBazaar historically has been implementing this component.

The Kademlia-style P2P network is older and distinct from the Bitcoin blockchain. To create a node, a network identity or global unique identifier (GUID) needs to be created. Firstly, random number is generated between a range of 1 to 2256 to obtain a private key. From this key, a public key is derived.

The public key is then digitally signed with the the private key (self-signature) and sha256 hashed. The resulting hex is then further hashed by RIPEMD160 to generate the GUID. This GUID is impossible to forge or spoof without compromising the private key, and is the basis of a node's pseudonymous identity on the network.

GUID = RIPEMD160(SHA256(self_signed pubkey))

The GUID is mapped to your dynamic IP address and port on a distributed hash table (DHT). This is not a distributed ledger like the blockchain, but a local 'map' of GUIDs (peers) and their IP addresses in your 'bucket' ('bucket' defined as similar GUIDs within a defined range). Each peer's DHT allows anyone on the network to find the location of a specific peer in only a few hops (i.e. think 6 degrees of separation). On this basis, peers can connect to each other to exchange data.

The network allows for a GUID to be associated with more than just an IP address, but other attribute-value pairs that can be searched (i.e. decentralized search).

In OpenBazaar, the DHT lists GUID hashes of contracts that the a peer (GUID) is selling and keywords that are associated with that contract. This enables other peers to decentrally search the network for specific contracts by their hash and/or keyword, compiling a list of relevant hits and their corresponding GUIDs. The user can then select the peer and directly access their store to commence trade.

The overall features of this architecture are:

  1. Minimal resources are required to run an OpenBazaar node (relative to Bitcoin)
  2. Scalable to millions of users
  3. Uses Bitcoin only as a currency for decentralised trade
  4. Contracts (listings) are hosted on the merchant's node.
  5. Enables rapid listings, as distributed consensus isn't required to list goods/services

This design does have some drawbacks, which third party services (or future technological innovation) can address:

  1. Nodes are required to remain online for listings to be accessible by peers
  2. The project is exploring using the DHT as a temporary cache for listing contracts and placing asynchronous encrypted orders
  3. Nodes can be targeted (hackers, spammers, governments) on the basis of what they are listing, although the marketplace and protocol remain censorship-resistant

Presently, both TCP/IP AND rUDP are used to to make connections between peers. The rUDP-based connections tend to overcome NATs (network address translation) and other obstacles preventing peers from accessing the network, and thus avoiding complicated port forwarding requirements beyond the skills of most users. This also means that these connections cannot be easily used through TOR to obfuscate the true IP address of a node.

3.2 Trade Protocol

The trade protocol describes a set of fundamental rules that govern decentralised trade on OpenBazaar between two or more trading partners.

The protocol is made up of two major sub-components:

  1. Bitcoin Payments and Escrow
    • Payment with Bitcoin
    • Escrow selection
  2. Ricardian Contracts
    • Formalizes the terms of trade

3.2.1 Bitcoin Payments and Escrow

All trade over OpenBazaar exclusively uses Bitcoin. OpenBazaar will support four payment options with Bitcoin:

  1. Direct payment
    • Alice transfers bitcoin to Bob in a simple payment
  2. Double-deposit 'MAD' escrow
    • Alice and Bob create a 2-of-2 multisignature escrow address
    • Alice and Bob need to agree to release funds from that address
  3. Notary escrow
    • Alice, Bob, and Charlie (a third party 'notary') create a 2-of-3 multisignature escrow address
    • Two members of this party are required to release funds from the address
  4. Notary pooled escrow
    • Alice, Bob, and others (multiple third party notaries) create a n-of-m multisignature escrow address
    • Multiple parties from the pool of notaries are required to release funds from the address

Hierachical Deterministic Wallets

Irrespective of the payment option selected, individual bitcoin pubkeys are derived from a hierarchical deterministic (HD) seed to avoid address reuse and efficiently manage the signing keys. All signing keys can be recovered from the seed if the node is inadvertently destroyed or lost.


Of the three payments options, direct payment and MAD escrow have no enforceable dispute resolution mechanism and zero redundancy if keys are lost. However, their use in OpenBazaar is appropriate in following scenarios:

  1. Direct payment from well-established merchants and with high reputation; presumption is that the buyer possesses a high degree of trust to the merchant.
  2. MAD escrow between two parties who want to transact directly without any third party involvement, but do not share a high degree of trust. These users are assumed to have an above average level of technical skill to manage risks such as key loss or incapacitation, and who have a firm understanding of the implications of a failed trade.

Multisignature transactions used are for notary escrow payments, which enable an innovative form of multiparty escrow. Rather than funds being send into the exclusive custody of a trusted third party, funds are sent to an address that are not in the exclusive custody of any individual. The multisignature address is generated by comining the unique bitcoin pubkeys from the merchant, buyer, and notary. To release funds, cooperation (in the form of digital signatures) between two of the three participants is required. A higher level description of multisignature transactions can be found in the Bitcoin documentation. The overall effect of this system avoids a situation where one party in the trade can run away with the funds. The third party keyholder in these payments is called a notary. The role of a notary is further described below.

3.2.1.1 Altcoins

While theoretically other crypto-currencies can be supported in the core code, provided they follow a similar specification to Bitcoin multisignature transactions, altcoin implementations will not be pursed. Third party services (e.g. Shapeshift.io) can be used to either:

1) Convert altcoins into bitcoin to fund the multiparty escrow address 2) Convert bitcoins to altcoins when funds are released from multiparty escrow.

In this model, Bitcoin is being used as the 'backend' transactional currency, while altcoins are used as an onramp and/or offramp from Bitcoin escrow via these exchanges.

3.2.1.2 Fiat Payments

Similar to altcoins, fiat payments may be supported using third party services to convert fiat currencies into Bitcoin to fund multisignature escrow addresses, or automatically convert bitcoin payout funds to fiat currency of the merchant's choice.


Role of Third Party Exchanges

Exchanges


3.2.2 Ricardian contracts

A Ricardian Contract can be defined as a single document that is a) a contract offered by an issuer to holders, b) for a valuable right held by holders, and managed by the issuer, c) easily readable by people (like a contract on paper), d) readable by programs (parsable like a database), e) digitally signed, f) carries the keys and server information, and g) allied with a unique and secure identifier.
- Ian Grigg

Ricardian contracts (RC) are digital documents that record an agreement between multiple parties, which are signed and cryptographically verified, and formatted to be human and machine-readable. The one-way hash of RC establish a tamper-proof receipt of the terms and conditions of a trade, which eliminates potential disputes that may arise from hearsay claims between counterparties.

To be 'machine readable', the terms and conditions are formatted in JSON with a hierarchy of attribute-value pairs: the contract schema. As there are multiple types of trade that OpenBazaar aims to support, each will have its own contract schema. Common to all schemas are four modules:

  1. Metadata module
  2. ID module
  3. Trade module
  4. Ledger module

Ricardian contracts in OpenBazaar will typically have one metadata, trade and ledger module. Multiple ID modules are required to represent each party in the trade (at least 1 merchant, buyer, and notary).

3.2.2.1 Metadata module

The metadata module is the header of the RC and informs users and the app what type of trade will take place and the period of time the contract is valid.

3.2.2.2 ID module

The ID module contains the necessary identifying data for a peer on the network. It will contain the following types of ID:

  1. Network ID (minimum ID required for a trade)
    • GUID (global unique identifier)
      • Unique network identifier
      • One GUID per node on the network
    • Bitcoin pubkey
      • Used to create/sign multisignature escrow address
      • Generated from HD seed
      • One key per contract
    • PGP pubkey
      • Used to sign contracts
      • Establishes a 'mobile' identity
      • Multiple nodes can provably belong to 1 PGP key
  2. Passcard ID
    • Passcard - Digital identity as per the 'Blockchain Name System'
      • Links to email and other communication channels
      • Verified links to social networking platforms
  3. Legally accessible ID
    • Contact details that are verified by a third party (think certificate authorities), which basically verifies that this identity is legally accessible in the event of some dispute that needs to be resolved in court

For the purposes a basic trade, only the pseudonymous identity is required. Unlike traditional e-commerce platforms, neither the meatspace or legally accessible identities are required for trade. This point is as much about maintaining privacy as it is about supporting trade for jurisdictions that lack infrastructure to support ID verification.

3.2.2.3 Trade module

The trade module contains the necessary semantic data to define the good or service to be traded for bitcoin. The structure of this module will vary depending on the type of good or service to be traded. As a result, we will pursue community engagement to evolve categories, standards and templates.

3.2.2.4 Ledger module

The ledger module of the Ricardian contract traces the various stages of the trade between the parties involved. The structure of the ledger will dictate the signing order. The ledger module is read by the client/app, which enforces signing and forwarding of the contract to the next appropriate party. The final product is a contract that has a completed signing order and transaction history to act as a tamper-proof trade receipt. The structure of the ledger module will also vary according to the type of good and service to be traded for bitcoin.

The ledger is formatted according to the step-by-step stages where data and signatures are required from each participating party. As a platform, users will be able to design custom Ricardian contracts with unique signing orders to support new types of markets.

3.2.2.5 Example of a full contract

{
    "01_merchant": {
        "01_listing": {
            "01_metadata": {
                "01_obcv": "",
                "02_expiry": "",
                "03_category": "physical good",
                "04_category_sub": "fixed price",
                "05_order_flow": [
                    "merchant",
                    "buyer",
                    "merchant",
                    "buyer"
                ]
            },
            "02_id": {
                "01_guid": "",
                "02_pubkeys": {
                    "bitcoin": "",
                    "pgp": ""
                },
                "03_handle": "",
                "04_passcard": "",
                "05_contact": {
                    "bitmessage": "",
                    "email": "",
                    "subspace": ""
                },
                "06_role": "merchant"
            },
            "03_item": {
                "01_title": "",
                "02_description": "",
                "03_condition": "",
                "04_price": {
                    "bitcoin": 0
                },
                "05_shipping": {
                    "est_delivery": "",
                    "region": ""
                },
                "06_images": {
                    "image_hashes": [
                        "",
                        "",
                        "",
                        "",
                        ""
                    ],
                    "image_urls": [
                        "",
                        "",
                        "",
                        "",
                        ""
                    ]
                },
                "07_keywords": [
                    "keyword1",
                    "keyword2"
                ]
            },
            "04_notary": {
                "01_guid": "",
                "02_pubkeys": {
                    "pgp": "",
                    "pubkey": "xxx",
                    "pubkey_selfsig": "XXX"
                },
                "03_handle": "",
                "04_passcard": ""
            }
        },
        "02_signatures": {
            "bitcoin": "",
            "pgp": ""
        }
    },
    "02_buyer": {
        "02_order": {
            "01_id": {
                "01_guid": "",
                "02_pubkeys": {
                    "bitcoin": "",
                    "pgp": ""
                },
                "03_handle": "",
                "04_passcard": "",
                "05_contact": {
                    "bitmessage": "",
                    "email": "",
                    "subspace": ""
                },
                "06_role": "buyer"
            },
            "02_item": {
                "01_semantics": {},
                "02_shipping_address": ""
            },
            "03_multisignature": {
                "01_chaincode": "",
                "02_multisignature_address": "",
                "03_redemption_script": "",
                "04_txid": ""
            }
        },
        "02_signatures": {
            "bitcoin": "",
            "pgp": ""
        }
    },
    "03_merchant": {
        "01_shipped": {
            "01_shipping": {
                "01_tracking_id": "",
                "02_shipper": "",
                "03_payout": {
                    "01_payout_address": "",
                    "02_signed_tx": ""
                }
            }
        },
        "02_signatures": {
            "bitcoin": "",
            "pgp": ""
        }
    },
    "04_buyer": {
        "01_delivery": {
            "01_item": {
                "01_received": true,
                "02_dispute": false
            },
            "02_payout": {
                "01_signed_tx": "",
                "02_txid": ""
            },
            "03_rating": {
                "01_rate_merchant": "",
                "02_rate_item": "",
                "03_rate_item_description": "",
                "04_rate_shipping": "",
                "05_rate_customer_service": "",
                "06_feedback": ""
            }
        },
        "02_signatures": {
            "bitcoin": "",
            "pgp": ""
        }
    }
}

Note: future articles will breakdown the component parts of the contract and how they should be used.

Within the ledger section of the contract, the signing order is divided into several stages. Each stage immediately identifies the party responsible for filling the empty data fields. The user signs the contract and forwards it to the next user in the ledger. The user won't be required to manually send it to the user in the ledger. Rather, the client will verify the signatures first before sending the signed contract to the next party. In a loose sense, this enables OpenBazaar Ricardian contracts to adopt some 'smart' characteristics.

An abstraction of the signing order:

signing order

The signing order should be defined in the structure of the JSON contract.

3.2.3 Notaries

{{Insert something here about notaries}}

3.2.3.1 Voting Pools

Consider a typical exchange between two parties with an arbiter mediating the transaction, where a 2-of-3 multisignature address is generated. The buyer in this exchange sends bitcoins to the multisignature address, to be released upon the pre-agreed conditions with the seller. While seller or arbiter alone cannot steal these funds, there remains a non-zero risk of collusion between them to defraud the buyer. Unfortunately, soley relying upon reputation systems is not an adequate solution this problem, no matter how well designed. An effective strategy is to minimise the risk of collusion by adding more arbiters to the mix, a voting pool. A majority vote by the pool of arbiters makes it more difficult for a corrupted arbiter to defraud the transaction, and is thus a favorable means of managing risk for high value exchanges in OpenBazaar.

Voting pools in OpenBazaar would be created from the list of preferred arbiters from the buyer and seller's profile. In the case of an uneven number of arbiters within the pool, the benefit of the doubt goes to chance with the client randomly selecting a well-ranked arbiter. The total size of voting pool is limited to the maximum number of parties in a multisignature transaction on the Bitcoin network. An important element in forming a voting pool is to prevent the risk of a 'sore loser attack', where the multisignature transaction is constructed without the possiblity of the seller and the arbiters recovering the funds if the buyer fails to initiate the transaction, after receiving a good or losing a bet for example.

Notary pools decrease the overall risk of collusion and increase the redunancy of transactions, a multisignature escrow address is made up of several additional parties on top of the merchant and buyer. For example, an 8-of-15 multisignature escrow address can be created made up of:

  1. 3 notaries selected by the merchant
  2. 3 notaries selected by the buyer
  3. 1 notary selected at random
  4. 4 keys from the merchant
  5. 4 keys from the buyer

Signatures from 8 keys are required to release funds from the multisignature escrow address. If the merchant and buyer have any reason to doubt the pool, they can move the keys to a different multisignature address. If there is a dispute, a majority of signatures is required in combination with one of the parties to release funds from the address. No single party can steal the funds, and the likelihood of collusion is reduced with more parties involved.

Notary pools can be designed according to the 'Lucas Algorithim':

Two traders, Alice and Bob, require equal number ("n") of keys, as you do not know a priori who will win the trade (or bet). In general, Alice needs "n" keys, Bob needs "n" keys, and the jury needs "2n - 1" keys. The majority of 2n - 1 is always n. In the simplest case, Alice has one key, Bob has one key, and the jury size (2x1 - 1) is one (i.e., the arbiter decides with Alice or with Bob). In the above example, n = 4. Alice has 4 keys, Bob has 4 keys, and the jury size = (2x4 - 1) = 7. The "best of 7" is of course 4 (= n). The total number of keys is 4n - 1 = 15. The multisig is therefore 8 of 15, which is achieved with Bob + Alice, or Alice + voting pool (majority thereof), or Bob + voting pool (majority thereof). These numbers should work with any integer n > 0.

Interaction of the notary pool with the arbiter is managed over the OpenBazaar application:

The notary pool will received a digitally signed ruling from the arbiter. The ruling can be blinded from the notaries (i.e. encrypted with the public keys of the merchant and buyer), to maintain the privacy of both parties (discussed in more detail below). Aside from the arbitration notes, the ruling will also contain an unsigned bitcoin transaction with:

  1. Input: the multisignature escrow address
  2. Output_1: the winning party from arbitration
  3. Output_2: notary fee
  4. Output_3: arbiter fee

In more complex settlements, where both parties receive a portion of the funds, additional outputs are added to the transaction. The bitcoin transaction is digitally signed by either both parties, or the winning party with the notary pool and broadcast to the Bitcoin network.

3.2.3.2 Accredited Notaries

Even with a notary pool, the question remains how users will choose notaries within OpenBazaar? The most direct way is for users to access the storefront of other nodes in the network, select the 'services' tab and manually add them to their list of preferred notaries. Users can also search for nodes on the network that they wish to add on their list. These approach however, assume that the user already knowns what node to trust as a notary.

One approach is for notaries to be accredited by a voluntary private orgaisation, which creates some open standards for notaries to voluntarily subject themselves to in order to earn an 'endorsement badge'. These open standards may include:

  1. The notary node has an up-time of >22 hours per day
  2. Communication response times are < 12 hours
  3. Notaries issue a surety bond held in a multisignature address by the accreditation organisation

This approach is a form of self-regulation, whereby accreditation is earned after demonstrating compliance. The accrediting organisation can also hold the surety bond in the event that an accredited notary defrauds a client. In this scenario, a corrupt notary is excluded from the organisation, their surety bond is forfeit (perhaps used to compensate a defrauded member), and they lose their public accreditation with the association. A notary may choose to become accredited from several such organisations to bootstrap trust.

Technically this can be achieved by the private organisation keep a public record of accredited notaries, digitally signed, that a notary can link to within their 'notary description' field within the client.

From a user's perspective, they can search and filter potential notaries according to the presence or absence of accreditation by various organisations. Of course this does not restrict users from finding and using unaccredited notaries that they prefer.

3.2.3.3 Contract Blinding

Data fields within the Ricardian contract can be hashed prior to forwarding to the notary for their digital signature. Nearly all data fields can be hashed with exception to the bitcoin pubkeys necessary to create a multisignature address. Hashing is preferable to encryption with the buyer or seller's public key as the data fields can be easily verified by an arbiter in the event of a dispute, rather than going through additional decryption steps. The goal is to create an immutable record of the product details of the contract while obfuscating them.

3.2.3.4 Example

For example, imagine that Alice wants to sell an item to Bob that she should not like the notary to be aware of. The unblinded contract that both Alice and Bob see is shown below:

{
    "_OpenBazaar_ Contract": {
        "OBCv": "0.1",
        "Category": "Physical good",
        "Sub-category,": "Ask price: negotiable",
        "Nonce": "01",
        "Expiration": "2014-06-29 12:00:00"
    },
    "Seller": {
        "NymID": "abc123",
        "NodeID": "Alice",
        "BTCuncompressedpubkey": "044448c02963b8f5ba1b8f7019a03b57c80b993313c37b464866efbf61c37098440bcdcc88bedf7f1e9c201e294cf3c064d39e372692a0568c01565b838e06af0b",
        "PGPpublicKey": "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=28tV"
    },
    "Physical Good Contract": {
        "ItemName": "Little House on the Prairie DVD Anthology",
        "Currency": "Bitcoin",
        "Price": "0.01",
        "Description": [
            "The entire collection."
        ],
        "Delivery": {
            "Country": "USA",
            "Region": "All States",
            "EstimatedDelivery": "13 days after triple-signing",
            "PostagePrice": "Included in the item price"
        }
    }
}

Bob accesses the contract via the OpenBazaar client for signing. However, as both Alice and Bob want to maintain privacy in their transaction, Bob blinds the transaction first before sending it to the notary.

Contract blinding requires the following steps to take place:

  1. Bob hashes the original seed contract
  2. Bob prepares a blinded double-signed contract
  3. This contract includes the hash of the original seed contract from (1). The purpose of this hash to provide an immutable reference to what Alice and Bob are actually trading.

An example of the blinded contract:

{
    "_OpenBazaar_ Contract": {
        "OBCv": "0.1",
        "Category": "Physical good",
        "Sub-category,": "Ask price: negotiable",
        "Nonce": "01",
        "Expiration": "2014-06-29 12:00:00"
    },
    "Seller": {
        "NymID": "abc123",
        "NodeID": "Alice",
        "BTCuncompressedpubkey": "044448c02963b8f5ba1b8f7019a03b57c80b993313c37b464866efbf61c37098440bcdcc88bedf7f1e9c201e294cf3c064d39e372692a0568c01565b838e06af0b",
        "PGPpublicKey": "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=28tV"
    },
    "Buyer": {
        "NymID": "def456",
        "NodeID": "Bob",
        "BTCuncompressedpubkey": "04a34b99f22c790c4e36b2b3c2c35a36db06226e41c692fc82b8b56ac1c540c5bd5b8dec5235a0fa8722476c7709c02559e3aa73aa03918ba2d492eea75abea235",
        "PGPpublicKey": "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=7H5F"
    },
    "Physical Good Contract": {
        "Blind_contractHash": "544e7ddb8b5b7771303a9d45449b8de328d331b1c7cc473840017f1d67a35542",
        "Currency": "Bitcoin",
        "Price": "0.01"
    }
}

As per the standard process, the buyer forwards the contract to the notary who adds a third digital signature to the contract. However, the notary will not be able to determine the contents of the good being sold on OB. OpenBazaar client, exports and emails it as an attached .json file directly to Bob. Bob can then who imports it into the OpenBazaar client. Bob signs the contract and selects a notary.

3.3 The OpenBazaar Application

The client/app enables the user to fulfill any desired role on the network (merchant, buyer, notary, arbiter). The UI/UX will likely vary on the type of trade to be conducted.

3.4 Ratings, Reviews and Reputation

3.4.1 Introduction

In this article we attempt to design a decentralised rating and review system for the sale of physical goods on the OpenBazaar network. Ratings and reviews are sometimes considered interchangeable with the challenge to create a global decentralised reputation system. For OpenBazaar, this is not the case as the system described here is:

  1. Performance based
  2. Made on a per item basis
  3. Not applicable to other types of marketplaces built on the OpenBazaar platform

Decentralised reputation refers to the overall trustworthiness of an identity within a network. In the future, decentralised reputation can be layered over OpenBazaar if and when it is ever developed. For ratings and reviews, they are strictly concerned with the merchant performance of that identity on the network. Both systems are theoretically compatible and need to be fully developed.

Ratings and reviews are defined in this article as: 1. Ratings - scores on the behavior of the merchant, the quality of the item, and shipping time.
2. Reviews - written summary of the trade experience with the merchant

As mentioned earlier, ratings and reviews are made on a per trade basis.

3.4.2 Ratings

Who are we rating?

The merchant.

Who is making the rating?

The buyer.

Why isn't there a rating of the buyer by the merchant?

There is very little for the buyer to get wrong in a trade other than failing to release funds from the escrow address, whereby the notary would have to step in to payout the merchant. As a result, a notary can develop internal systems to prevent or mitigate in advance this type of behavior. Also buyer reviews are not common in typical e-commerce platforms for physical goods.

Side note: For trades using mutually-assured destruction escrow addresses (i.e. 'MAD' 2-of-2 multisig), decentralised reputation is a critical metric for users to predict the likelihood of good behavior by the counterparty identity.

3.4.2.1 Considerations with Decentralised Ratings

  1. Sybil attacks - fake ratings made by an attacker using sockpuppets identities
  2. Distributed storage - ratings must be persistent publicly accessible and immutable

Sybil Attacks

Distributed Storage

There is no magic bullet, any choice is associated with different trade-offs.

In our view, storing merchant ratings is best achieved by directly embedding the rating into the blockchain.

3.4.2.2 Storing the Rating Score in the Blockchain

In plain text, the rating score would look like this:

OBR 1 5 5 5 b20c6947b11ac5bdb4b4338bc196df0b0f3f452d 23TplPdS (tag, merchant rating, item rating (description, delivery time, customer experience, merchant GUID, IUID)

As a hex value, it looks like this:

4f4252202b31203520352035206232306336393437623131616335626462346234333338626331393664663062306633663435326420323354706c506453

The overall size of the rating score should be around 62 bytes, well under the new 80 byte limit for OP_RETURN.

3.4.2.3 Validating Legitimate Ratings

How do we determine whether a reputation score is valid, as anyone can create 100 transactions to give themselves a positive rating?

3.4.3 Reviews

Where and how are reviews stored decentrally?

0 (Blockstore Schematic)

Irrespective of the DHT, the data structure for OpenBazaar rating and review may appear this way:

{
    "_OpenBazaar__opreturn_ref": "4f4252202b31203520352035206232306336393437623131616335626462346234333338626331393664663062306633663435326420323354706c506453",
    "trade_ref":{
        "merchant_guid": "b20c6947b11ac5bdb4b4338bc196df0b0f3f452d",
        "notary_guid": "f4b5c505fd5abe9d9c631be65dfa52c9df34ae3c",
        "contract_hash": "3dbb901141c71351bcafee94274a9c67f0b3e9065531fbc7c6f9d0abd70c641a",
        "item_code": "23TplPdS"
    },
    "ratings": {
        "merchant_rating": 1,
        "item_description": 5,
        "delivery_time": 5,
        "customer_exp": 5
    },
    "review": "That bucket of nuts was amazing. Loved the free funnel!"
}

3.4.4 Attack Vectors

  1. Sybil rating attack
  2. A user creates multiple nodes to cover multiple merchant, buyer, and notaries to issue fake positive or negative ratings
  3. An underlying assumption is that a few notaries will have a large market share, thus positive/negative ratings from an obscure notary may not be taken seriously
  4. Blockchain bloat
  5. The use of OP_RETURN will contribute to blockchain bloat, resulting in nodes automatically pruning this data from the blockchain
    • May result in the increased trend towards centralisation
  6. However, OP_RETURN is such a valuable utility, we consider it unlikely that this data storage entry will be closed.
  7. We already have a small centralisation risk by using Obelisk servers as block explorers.

3.5 A Pseudonymous Trust System in OpenBazaar

Dionysis Zindros, National Technical University of Athens dionyziz@gmail.com

3.5.1 Keywords

pseudonymous anonymous web-of-trust identity trust bitcoin namecoin proof-of-burn timelock decentralized anonymous marketplace _OpenBazaar_

3.5.2 Abstract

Webs-of-trust historically have provided a setting for ensuring correct identity association with asymmetric cryptographic keys. Traditional webs-of-trust are not applicable to networks where anonymity is a desired benefit. We propose a pseudonymous web-of-trust where agents vote for the trust of others. By disclosing only partial topological information, anonymity is maintained. An inductive multiplicative property allows propagation of trust through the network without full disclosure. We introduce additional global trust measures through proof-of-burn and proof-of-timelock to thwart Sybil attacks through an artificial cost of identity creation and maintenance and to bootstrap the network. Existing blockchains are used to provide friendly names to identities, and the network is applied to a commercial setting to manage risk. Finally, we highlight certain attacks that can compromise the trust of the network under certain assumptions.

3.5.3 History

Webs-of-trust are traditionally a means to verify ownership of encryption and signing keys by a particular individual whose real-world identity is known. The first widely deployed web-of-trust is the GPG/PGP web-of-trust [Zimmermann][Feisthammel]. In these webs-of-trust, a digital signature on a public key is employed to indicate a binding between a digital cryptographic key and an identity. Such a digital signature does not designate trust, but only signifies that a particular real-world individual is the owner of a digital key.

Webs-of-trust have also been utilized for different purposes in various experimental settings. In Freenet [Clarke], it is used to guard against spam [Freenet WoT]. In a commercial setting, the Bitcoin OTC web-of-trust successfully attempts a centralized approach to establish a true trust network [OTC], contrasting identity-only verification webs-of-trust of the past.

3.5.4 Introduction

The aim of our web-of-trust is to construct a means to measure trustworthiness between individuals in a commercial setting where goods can be exchanged between agents. The goal of such a measure is to limit, as much as possible, the risk of traders in an online decentralized anonymous marketplace. We are proposing a system to be used in production code as a module of OpenBazaar [OpenBazaar], a peer-to-peer decentralized anonymous marketplace that uses bitcoin [Nakamoto] to enable transactions.

Risk management in OpenBazaar is based on two pillars: On one hand, Ricardian contracts are used to limit risk through mediators, surety bonds, and other means which can be encoded in contract format [Washington]. On the other hand, the identity system is used to establish trust towards individuals. In this paper, we introduce the latter and explore its underpinnings.

Trust management in OpenBazaar is established through two different types of mutually supporting systems; projected trust and global trust. Projected trust is trust towards a particular individual which may be different for each user of the network; hence, trust is "projected" from a viewer onto a target. Global trust is trust towards a particular individual which is seen as the same from all members of the network. Projected trust is established through a pseudonymous partial knowledge web-of-trust, while global trust is established through proof-of-burn and proof-of-timelock mechanisms.

3.5.5 Threat model

The identity system is threat modelled against various adversaries. We are particularly concerned about the malicious agents highlighted in this paragraph, with their respective abilities.

First, we wish to guard against malicious agents within the network. If there are malicious buyers, sellers, or mediators, the goal is to disallow them from gaming the network and obtaining undeserved trust.

Second, we wish to guard against malicious developers of the software. If a developer tries to create a bad patch or influence the network, this should be detectable, and the honest agents should be able to thwart against such an attack by choosing not to upgrade by inspecting the code. The system must not rely on the good faith of developers; it is open source and decentralized.

Third, we wish to guard against governments and powerful corporations that wish to game or shut down the network. These agents are not always modelled as rational, as their objectives may involve spending considerable amounts of money and processing power to game the system, with no obvious benefit within the system bounds. Their benefits may be legal, economical, or political, but cannot be simply modelled. Their power may be legal and can defeat possible single points-of-failure on the network.

However, we assume that the malicious agents have limited power in the following areas. We assume that the bitcoin, namecoin, and tor networks are secure. We assume that malicious agents have limited processing power, bandwidth, monetary power and connectivity compared to the rest of the network. As long as malicious agents control a small portion of such power, the network must remain relatively secure.

The limited connectivity assumption requires additional explanation. We assume that a malicious agent will not be able to find and control a graph separator for any non-trivial induced graph between any two parties on the web-of-trust. This assumption is detailed in the sections below.

Our trust metrics are heuristic; some trust deviation for malicious agents who try to game the system with a lot of power is acceptable. However, it is imperative that trust remains "more or less" unaffected by local decisions of agents, unless these decisions truly indicate trustworthiness or untrustworthiness. Trust should be primarily affected by trading behavior, and not by technical influence on the network.

3.5.6 Web-of-trust

The OpenBazaar web-of-trust maintains three important factors: First, it maintains strict pseudonymity through anonymizing mechanisms; second, it establishes true trust instead of identity verification; and third, it is completely decentralized.

The OpenBazaar web-of-trust is used in a commercial setting. Trust is used to leverage commercial risk, which involves losing money. Traditional identity-verifying webs-of-trust such as GPG are in purpose agnostic about the trustworthiness of the web-of-trust participants. That type of web-of-trust verifies the identity of its members with varying certainty. However, it remains to the individual to associate trust with a particular person for a particular purpose: Whether they can be trusted with money, for example [GPG identity].

In OpenBazaar, the participants are inherently pseudonymous. In this setting, we wish to maintain an identity for each node. This identity is strictly distinct from the operator's real-world identity. While the operator may choose to disclose the association of their real-world identity with their pseudonymous node identity, the network gives certain assurances that such pseudonymity will not be broken. Hence, pseudonymity is closely related to anonymity: Pseudonymity allows the creation and maintenance of an online "persona" identity with a certain history; anonymity ensures the real-world identity of the persona operator remains unassociated with the persona. Hence, our goal is to provide both pseudonymity and anonymity.

A true web-of-trust is a directed graph where nodes are individuals and edges signify trust relationships. In contrast to identity-verifying webs-of-trust, in a true web-of-trust, edges do not signify identity verification; they signify that the edge target can be trusted in a commercial setting. For example, when trust is given to a vendor, it signifies that the vendor is trustworthy and will not scam buyers by not delivering goods. When given to a mediator, it signifies that the mediator is trustworthy will resolve conflicts between transacting parties with a neutral point of view judgment. And when given to a buyer, it signifies that the buyer is trustworthy and will pay the money she owes. Clearly, trust is not symmetric.

While identity verification is a concept successfully leveraged by individuals for secure communications and other transactions, it is meaningless to try to verify the identity of a pseudonymous entity, because a pseudonymous entity is the cryptographic key in and of itself, and therefore identity verification would constitute a tautology. It is therefore required to adopt a different meaning of "trust" than in a traditional setting of real-world identities. Hence, trust in this case signifies the trustworthiness of an individual in a commercial setting, their financial dependability, their reliability as mediators, and their credibility as trust issuers [1] [2].

3.5.7 Pseudonymity

Each node in OpenBazaar is identified by its GUID, which uniquely corresponds to an asymmetric ECDSA key pair. This GUID is the cryptographically secure hash of the public key. The anonymity goal is to ensure this GUID remains unassociated for any real-world identity-revealing information such as IP addresses.

Each GUID is associated with a user-friendly name. These user-friendly names can be used as mnemonic names: If someone loses their trust network by reinstalling the node without first exporting, they know that certain agents remain trustworthy. Furthermore, user-friendly names are used in the trust bootstrapping procedure in which it becomes easier to peer-review that the bootstrapped nodes are the correct ones. Finally, user-friendly names can be exchanged between users out of the software usage scope; for example, a user can directly recommend a vendor by their user-friendly name to one of their friends via e-mail.

To maintain a cryptographically secure association between node GUIDs and user-friendly names, we utilize the Namecoin [Gilson] blockchain. A node can opt-in for a user-friendly name if they so choose. To create a user-friendly name for their GUID, they must register in the "id/" namecoin namespace [Namecoin ID] with their user-friendly name. For example, if one wishes to use the name "dionyziz", they must register the "id/dionyziz" name on Namecoin. The value of this registration is a JSON dictionary containing the key "OpenBazaar" which has the GUID as its value. As Namecoin ids are used for multiple purposes, this JSON may contain additional keys for other services. The namecoin blockchain ensures unforgeable cryptographic ownership of the identity. When a node broadcasts its information over the OpenBazaar network, they include their user-friendly name if it exists. If a node claims a user-friendly name, each client verifies its ownership by performing a lookup on the namecoin blockchain. If the lookup succeeds, the name is displayed on the OpenBazaar GUI and the information is relayed; otherwise the information is discarded.

As namecoin names can be transferred, this allows for participants to transfer their identity to other parties if they so desire; for example, a vendor can transfer the ownership of their store by selling it.

3.5.8 A naive solution

The most obvious and naive choice for a trust system in a commercial setting is a global voting system. While this solution is obviously flawed, it constitutes an important foundation upon which the next ideas are built. In this section we describe this idea in order to determine its flaws, which are solved in our next proposal.

In typical centralized systems, including eBay and Bitcoin OTC, there is a global rating which is determined as the sum of the individual ratings of others towards an individual. Attacks of fake ratings are taken care in the system in an ad hoc fashion which is enabled by the centralized nature of the system.

In decentralized systems, Sybil attacks [Douceur] make this situation particularly more challenging and without an easy way to resolve. Hence, this naive solution is undesirable. The solution to this problem is to first introduce a cost of identity creation and maintenance for global trust, and allow for the trust through edges to be projected. We explore these solutions below.

3.5.9 Partial topological knowledge

It is a conclusive result in the literature that, by analyzing graph relationships between several nodes, given certain associations between nodes and real identities, it becomes possible to deduce the real identities behind other nodes. In particular, if an attacker is given only global topological information about a web-of-trust as well as some pseudonymous identity associations with real-world identities, they can deduce the real-world identities of other nodes [Narayanan]. Hence, by revealing the complete topology of the web-of-trust graph between pseudonymous identities, an important loss of anonymity arises. For this reason, we propose a web-of-trust with partial topological knowledge for each node. Under this notion, every node only has knowledge of its direct graph neighbourhood – they are aware of the direct trust edges that begin from them and end in any target. This does not disclose any information about the total graph, as they are arbitrarily selected by each node. These ideas have been explored previously in the literature as friend-to-friend networks [Popescu].

3.5.10 Trust association

In the pseudonymous [3] web-of-trust, each node indicates their trust towards other nodes that they understand are trustworthy. This understanding can come from real-life associations among friends who know the real identity of the pseudonymous entity. An indication of trust does not harm anonymity in this context. This understanding can also come from external recommendations about vendors using friendly names. For instance, under a threat model that trusts some centralized third parties, it is possible to establish trust in this manner. As an example, if a vendor is popular on eBay, and a buyer trusts eBay, the vendor can disclose their OpenBazaar user-friendly name on their eBay profile, and the buyer may opt to trust that identity directly.

Trust is indicated as edges with a source, a target, and a weight. The weight is a floating-point number from -1 to 1, inclusive, with 0 indicating a neutral opinion, -1 indicating complete distrust, and 1 indicating complete trust. These can be displayed in a graphical user interface in a more simplistic manner; for example, the canonical client may opt to present a star-based interface for positive trust, and flagging for negative trust; or, alternatively, it may choose to present a simple thumbs-up and thumbs-down option, indicating discrete trust of 1 or -1 if employed, or 0 if not used [4]. These trust edges remain local and are not disclosed to third parties. We call the direct edges "direct trust" and the weights will be denoted as w(A, B) to indicate the direct trust from node A to node B.

3.5.11 Trust transitivity

As topological knowledge is partial, we resolve the projected trust between nodes through induction. Let t(A, B) denote the projected trust as seen by node A towards node B. Projected trust is then defined as follows:

t(A, B) = w(A, B), if w(A, B) is defined
t(A, B) = a Σ w(A, C) t(C, B) / |N(A)|, for C in N(A), if w(A, B) is undefined and w(A, C) > 0

Where: t(A, B) denotes the projected trust from A to B. w(A, B) denotes the direct trust from A to B. N(A) denotes the neighbourhood of A; the set of nodes to which A has direct trust edges. |N(A)| denotes the size of the neighbourhood of A. * α is an attenuation factor which is constant throughout the network.

The meaning of the above equation is very simple: If Alice trusts Bob directly, then Alice's trust towards Bob is clear. If Alice does not trust Bob directly, then, since we wish to retain only partial topological knowledge, Alice can deduce how much to indirectly trust Bob from her friends. She asks her friends how much they trust Bob, directly or indirectly; the trust from each friend is then added together to produce the projected trust. However, the trust contributed by each friend is weighted based on the local direct trust towards them; if Alice trusts Charlie directly and Charlie trusts Bob (directly or indirectly) then the projected trust that Alice sees towards Bob is weighted based on her trust towards Charlie; for example, if Alice trusts Charlie a little, he's not allowed to vouch for Bob a lot. Finally, the projected trust is normalized based on the number of friends one has, so that it remains within the range from -1 to 1.

The condition w(A, C) > 0 is imposed so that negatively trusted neighbours are unable to vouch for their trust towards others – otherwise they would be able to lie about their trust towards others if they knew they were negatively trusted and impose onto them the opposite trust from what they claim.

The attenuation factor α is used to attenuate trust as it propagates through the network. Thereby, nodes further away from the source gain less trust if more hops are traversed. We recommend a network-wide parameter of α = 0.4 as is used by Freenet, but this can be tweaked based on the network's needs.

This simple[5] algorithm assumes that trust is transitive; if Alice trusts Charlie and Charlie trusts Bob, then Alice trusts Bob[7]. This is a strong assumption and may not always hold in the real world. Nevertheless, we believe it constitutes a strong heuristic that allows a network to deduce trust with partial topological knowledge.

3.5.12 A comparison to other webs-of-trust

It seems worthy to compare this approach to existing webs-of-trust to point out their differences. In contrast to GPG [GPG identity], our proposal maintains both anonymity and true trust. In contrast to Freenet, trust is used for commercial purposes and not just to fight spam. In contrast to Bitcoin OTC, the network is decentralized, the topology is only partially known, and the trust is only projected and not global.

Certain services provide webs-of-trust in a centralized way, but they do not advertise them as such. eBay ratings provide webs-of-trust, but the topology is globally known and the platform is centralized. Facebook's social graph provides trust through friendships. Interestingly, Facebook's social graph allows partial topological knowledge depending on the privacy settings of the participants. However, centralization is still a problem. In centralized solutions, pseudonymous identities through user-friendly names can also be maintained without a blockchain. The simplicity of implementation benefit is also a strong one.

Centralized solutions have the drawback of a single-point-of-failure. As one of the goals of OpenBazaar is to avoid Achilles' heels (single points of failure), centralized solutions become unacceptable. The purpose is, for instance, to eliminate the ability for government intervention in the web-of-trust through secret warrants served to the administrators of such a centralized system that may require the handover of private encryption and signing keys.

3.5.13 Man-in-the-middle vendors

This framework is susceptible to a man-in-the-middle attack which is unavoidable in pseudonymous settings. The attack works as follows: A malicious agent wishes to gain trust as a vendor without really being a trustworthy vendor. They first create an OpenBazaar vendor identity. Next, they choose one other vendor that they want to impersonate. They subsequently replicate their product listing as their own. They also monitor the actual vendor's catalog for product changes, and they relay messages between buyers and the actual vendor when buyers message them. When a buyer purchases a product for them, the rogue vendor also forwards the purchase to the real vendor. Notice that this problem does not directly apply to mediators.

If, after the purchase, the buyer and seller rate each other positively, this rating will not impact the actual parties, but will only be reflected on the rogue vendor. Hence, the rogue vendor will gain trust as both a seller and a buyer without actually being either. This process can be automated. At a later time, the rogue vendor can use the man-in-the-middle position to read encrypted messages between buyers and sellers and may sacrifice their maliciously gained reputation to cheat on a desired buyer or seller. Continuous operation of such rogue nodes can undermine the network.

It is difficult to guard against such attacks. The question of whether someone "really" knows a pseudonymous vendor becomes philosophical; what does it mean to know someone who is pseudonymous to you? And if a man-in-the-middle vendor is always delivering goods, are they not also a trustworthy agent? It is recommended that users establish direct trust only with pseudonymous vendors whose real identity they already know, or have signals that the pseudonymous vendor is not being man-in-the-middled. The latter is difficult to establish, but may be possible through independent verification on different networks and a continued trustworthy history. If we assume that the delivery of products will not be intercepted, the product delivery itself may be used as a mechanism to include a physical copy of key fingerprints in order to establish that no man-in-the-middle is being present.

Nevertheless, negative trust is semantically a different notion from positive trust. Negative trust can be attached to vendors whose identity is unknown; if a man-in-the-middle behaves in an untrustworthy manner, it is imperative to rate them negatively. This distinction between positive and negative trust is made clear in the condition for w(A, C) > 0 to be positive in the equations above. It is a challenging problem to communicate this difference to the user via a clear user interface.

3.5.14 Feedback

Feedback can be given by buyers to vendors, by vendors to buyers, and by buyers and vendors to mediators in text form. Feedback is a piece of text from a particular source pertaining to a particular target. Keeping the above man-in-the-middle vendor attack in mind, it may in cases not make sense to rate vendors or buyers directly if their real identity is unknown by the rater, even if they trade fairly, unless they can establish an existing trust relationship towards them in order to at least determine their legitimacy.

To avoid fake feedback, feedback must only be relayed by the OpenBazaar client if it is from a node that has transacted with the target. Therefore, feedback must be digitally signed and include a reference to the transaction that took place – the hash of the final Ricardian contract in question, as well as the bitcoin transaction where it was realized.

However, given that transactions are free to execute, to avoid Sybil attacks from vendors or buyers who transact with themselves, feedback must only be trusted when it is given from parties that are already trusted using the total trust metric defined below. Otherwise, it must not be displayed or relayed.

3.5.15 Bootstrapping the web-of-trust

It is hard to establish trust targeting a new node on the network with no web-of-trust connections to it. This issue is addressed in the Global Trust section. However, it is easier to allow new users entering the network to trust individuals who have established some trust through the web-of-trust. Bootstrapping trust is widespread practice in the literature [Clarke].

This bootstrap can be achieved by including a hard-coded set of OpenBazaar node key fingerprints that are known to be good in the distribution. At the beginning, these can be the OpenBazaar developers. It is crucial that the number of nodes included is wide so that no individual can influence the bootstrapped trust. Advanced users are advised to further diminish the weights of the direct edges to the bootstrap-trusted nodes and to include higher-weighted edges to people they physically trust.

The special bootstrapping nodes must be configured to always respond to trust queries, regardless of whether they trust the query initiator.

This practice in particularly useful to guard against illicit uses of the network, which have been experienced in similar, centralized but anonymous solutions [Barratt]. By ensuring the bootstrap-trusted nodes highly rate only non-illicit traders, it is expected that the network will promote legitimate uses of trade. While black market goods can still be traded, the user will be required to opt-in for such behavior by manually introducing trust to nodes who highly rate trusted black market vendors.

3.5.16 Graph separator attack

The web-of-trust security strongly depends on the size of graph separators. Let us examine the trust as seen from a node A to a node B. Let G' be the graph induced from the web-of-trust graph G as follows: Take all the acyclic paths from A to B in G whose every non-final edge is positive. These contain nodes and edges. Remove all nodes and edges that are not included in any such path to construct graph G'. Then G' is the induced trust graph from A to B. An (A, B) separator is a set of nodes of G' which, if removed from the graph, make the nodes A and B disconnected.

We define an entity "controlling" a set of graph nodes as being able to arbitrarily manipulate the reported t and w functions when the controlled nodes are inquired about their trust beliefs.

We will prove the following theorem for any separator. The smallest separator, mentioned below, is simply easier to manipulate by a malicious party, as they are required to control a smaller set of nodes.

Theorem: A malicious entity controlling the smallest (A, B) separator on the induced graph G' will be able to change a negative projected trust to a positive projected trust towards the target as seen on the original graph G.

Proof: Let S be any (A, B) separator on G'.

Since the trust from A to B was originally negative, this means that A and B are connected on the induced graph G'. As the projected trust is negative, this means that there are direct negative edges in G' from some intermediate parties B1, B2, ..., Bn to B; these edges cannot be indirect, as indirect edges are not traversed for trust discovery.

We will show that the trust through any of Bi can be manipulated to be positive. Indeed, take some arbitrary Bi. Then there will exist some paths from A to B with Ci as their penultimate node. Take some arbitrary path P_i,j from A to B through Bi. We will show that this path can be manipulated to produce positive trust. Since S separates A and B, then there must exist some element s in S that is also in P_i,j. Since s is controlled by the malicious entity, they can modify their claimed direct trust towards B and set it to 1. They can also completely ignore any indirect trust, including Bi's opinion:

w(s, B) = 1

Through this mechanism, every path can be manipulated through the control of S. Therefore, all paths ending in a negative edge can be eliminated. Since A and B were originally connected, they will remain connected through this trust manipulation. Finally, at least one path ending in a positive edge will exist. Therefore, since t(A, B) will be a sum of positive terms, A's projected trust towards B will be bounded from below as follows:

t(A, B) >= α t(A, s) / |N(s)|

But t(A, s) must be necessarily positive. Therefore, t(A, B) must also be positive on the induced graph. However, projected trust on G is only based on results on the (A, B) induced graph G', and the value of t(A, B) will necessarily be the same as seen on G. QED.

We have shown that a determined attacker can manipulate trust if they control some separator on the network. Therefore, it is crucial to avoid hub nodes in the network, and especially the existence of trust through only non-disjoint paths. As the web-of-trust develops, it is important to form trust relationships that connect nodes from regions with long distance.

This result is expected; a separator of size 1 is essentially an Achilles' heel for the system. Such single-points-of-failure necessarily centralize the web-of-trust architecture and completely undermine the decentralized design.

3.5.17 Topology detection through queries

As one of the web-of-trust goals is to disallow malicious agents to learn the global network topology, it is crucial that the default node configuration is to not respond to trust queries initiated by nodes they do not trust. If this mechanism is not employed, a malicious entity can query all known network nodes and eventually deduce the global network topology easily.

The exception to this is bootstrapping nodes, which, due to necessity, must be configured to answer all trust queries. Some ε-positive trust can be used as the minimum threshold of trust below which the canonical client does not respond to queries. To ensure queries are authenticated, imagine a query from A to C about whether B is trustworthy. The query must be signed with A's OpenBazaar private key to ensure topological information is not revealed to unauthorized parties asking for it. The query must be encrypted with C's OpenBazaar public key to ensure that nobody else can read it, even if the inquirer is authorised. Finally, the response must be signed with C's private key, to ensure that trust is not manipulated as it travels the network, and encrypted with A's public key, again to ensure topological confidentiality.

In this sense, most trust must necessarily be mutual. However, the topology of the graph still remains directed, as the trust weights can be different in either direction.

3.5.18 Association with other identity systems

It is worthy to attempt an association of the web-of-trust network with other identity management systems. However, given the highlighted differences in the previous section, such an association would compromise some of the security assumptions of the model. It is therefore mandatory that interconnection with other networks is an opt-in option for users who wish to forfeit some of our security goals.

An interconnection with the GPG web-of-trust may be achieved by allowing OpenBazaar nodes to be associated with GPG keys. A particular OpenBazaar node can have a one-to-one association with a GPG identity through the following technical mechanism: The GPG identity can provide additive trust to the existing trust of the system. To indicate that a GPG key is associated with an OpenBazaar identity and that the GPG key owner wishes to transfer the GPG trust to an OpenBazaar node, the GPG key owner cryptographically signs a binding contract which contains the OpenBazaar GUID of the target node, and potentially a time frame for which the signature is valid. The GPG-signed contract can then be signed with the OpenBazaar cryptographic key to indicate that the OpenBazaar node operator authorizes GPG trust to be used for their node. The double signed contract can then be included in the metadata associated with the OpenBazaar node and distributed through the OpenBazaar distributed hash table. Each client can inter-process communicate with the GPG software instance installed on the same platform to obtain access to existing keys and signatures.

Nevertheless, it is advised not to include such an implementation in the canonical client, as traditional GPG webs-of-trust are identity-verifying, not trust-verifying, as explored in the section above. Furthermore, the GPG web-of-trust does not offer any assurances on pseudonymity. While it is possible to exchange GPG signatures anonymously, the GPG web-of-trust is typically based on global topological knowledge of the GPG graph and is distributed through public keyservers. If a user opts-in to interconnect with the GPG web-of-trust, they are forfeiting these benefits of the OpenBazaar network.

An interconnection with the Bitcoin OTC web-of-trust is also possible. Existing trust relationships can be imported to the OpenBazaar client manually through a file, or automatically downloaded from the Bitcoin OTC IRC bot dynamically upon request, as the Bitcoin OTC website is an insecure distribution channel and does not offer HTTPS. In the dynamic downloading case, the threat model is reduced to trusting the TLS IRC PKI, which is known to be attackable by powerful third parties [DigiNotar].

This web-of-trust has the benefit of being a true-trust web-of-trust, and has a history of support by the Bitcoin community. A double signature is again required to interconnect two identities. The GPG key associated with the Bitcoin OTC network is used to cryptographically sign a binding contract similar to the one described above, and the rest of the procedure is identical to GPG identity binding.

In this case, an Achilles' heel is introduced to the software, as the user is required to trust the Bitcoin OTC web-of-trust operator and the distribution operator, both of which identities can possibly be compromised by a malicious third party. The situation can be improved if the Bitcoin OTC operator begins GPG signing the trust network, or by requiring the Bitcoin OTC trust edges to include GPG signatures by the users involved. However, the topology of the network is again public, forfeiting pseudonymity requirements. Therefore, an implementation is again not advised for the canonical OpenBazaar client at this time.

If the user is not concerned with single-points-of-failure and centralization, the web-of-trust can be temporarily bootstrapped by binding identities to existing social networking services which include edges between identities as "friendships" or "follows". For example, the Twitter and Facebook networks can be used. Such bindings can be weighted with a low score in addition to existing scores as described in the Total Trust section below [6].

Further research is required to determine how such interconnections will impact the security of the network.

3.5.19 Global trust

In addition to the projected trust system provided by the web-of-trust, it is desired to provide some global trust in the network. This serves to allow the network to function with nodes that need to receive trust, but are not associates with other users of the network, or wish to remain pseudonymous even to their friends. In addition, this allows to bootstrap the network for someone who wishes to use it without explicitly trusting any entities.

Global trust mimics the trust given in real-world transactions towards vendors that have invested money in their business, something that can be physically verified. When a buyer visits a physical shop to purchase some item, they trust that the shop will still be there the next day in case their item is faulty; they do not expect the shop to disappear overnight. The reason for this expectation is that it would clearly be unprofitable for the vendor to open and close shops every day, as it costs money to establish a store, and the money needed to establish a store is more than the money a vendor could gain by selling a faulty product.

Similarly, hotels ask for the passport of their residents in order to be able to legally hold them accountable to limit financial risk. While it is possible to create counterfeit passports every other day, it is economically irrational to do so, as building a new identity is more costly than a couple of hotel nights.

In these situations, rational agents are economically incentivised not to cheat on transactions through physical verification of proof that it would be costly to forfeit their identity – either to create a counterfeit passport or to shut down a physical store overnight. However, in a pseudonymous digital network, such mechanisms need to be established artificially. We start by exploring some approaches to the problem that do not meet our goal: Proof-of-donation and proof-to-miner. Subsequently, we introduce two mechanisms that solve the problem, proof-of-burn and proof-of-timelock, which are combined to form the global trust score.

In all schemes, the person wishing to create trust for a pseudonymous node pays a particular amount of money, which can be provably associated with the node in question. The differentiation comes from whom the payment is addressed to.

3.5.20 Proof-of-donation

In a proof-of-donation (also called "proof-of-charity" in the community) scheme, the pseudonym owner pays any desired amount to some organization, which is hopefully used for philanthropic or other non-profit purposes. The addresses of organizations that are allowed to receive donations would be hard-coded in the canonical OpenBazaar client and payments towards them would have been verified by direct bitcoin blockchain inspection by each client. A proof-of-donation first seems desirable, as money is transferred to organizations for good. One possible scenario could include funding the OpenBazaar project itself through this scheme.

The technical way to achieve proof-of-donation is to simply make a regular bitcoin transaction with a donation target as its output. The transaction must also include the GUID of the target OpenBazaar identity that the donation is used for.

Nevertheless, a proof-of-donation scheme is inadequate for our purposes, as it introduces an Achilles' heel. In particular, if a malicious agent is able to access the private cryptographic keys of one of the donation targets, they are able to game the system and manipulate trust arbitrarily. Compromising the private cryptographic keys can be achieved through various ways by powerful agents; for example, a secret warrant can be issued by a government ordering that the private keys are handed to the court.

This attack would work as follows: The malicious agent first generates a new OpenBazaar identity. Subsequently, they donate a small amount of bitcoin to the donation target organization they have compromised, including their OpenBazaar node as their target identity in the proof-of-donation, thereby gaining a certain amount of trust. They then use the private keys they control to give the money back to themselves, potentially through a certain number of intermediaries to avoid trackability. Finally, they repeat the process an arbitrary amount of times to gain any amount of trust desired, thereby gaming the system.

3.5.21 Proof-to-miner

In a proof-to-miner scheme, the payment to create trust for an identity is paid to the miner that first confirms the bitcoin transaction which is the proof. This scheme initially seems desirable, as there is no single entity which can be compromised, and it incentivizes the network to mine more, thereby making bitcoin more secure and, in turn, OpenBazaar more secure.

Technically, proof-to-miner can be achieved by including an OP_TRUE in the output script of the transaction. While anyone is, in principle, able to spend the output of the given transaction, a miner is incentivized to only include their own spending in their confirmation. Alternatively, a 0-output bitcoin transaction can be made, so that all the inputs are given to the next miner as fees. Again it is important to include the GUID of the OpenBazaar identity in the transaction.

Unfortunately, it is again possible to game this system. This attack would work as follows: The malicious agent first generates a new OpenBazaar identity. Subsequently, they make a proof-to-miner bitcoin transaction with any amount they desire, but they keep the transaction secret. They then perform regular bitcoin mining as usual, but include their secret proof-to-miner transaction in their block confirmation. Including an additional transaction does not increase the cost of mining; therefore this approach can be employed by existing rational miners. If they succeed in generating a block, they publish the secret transaction and they gain identity trust in the OpenBazaar network, and can use the money again in the same scheme to increase their trust arbitrarily. If they do not succeed in generating a block, they keep the transaction secret and double-spend the money in a future transaction in the same scheme, until they are able to generate a block.

3.5.22 Proof-of-burn

Proof-of-burn schemata have been in use by the cryptocurrency community in various settings [CounterParty]. In proof-of-burn, the payment to create trust for an identity is paid in a way that remains unspendable. Because it is unspendable, the system cannot be easily gamed as in the previous approaches.

Technically, proof-of-burn makes a regular bitcoin transaction including an OP_FALSE in the output script of the transaction. Again, the GUID of the OpenBazaar identity is included in the transaction to enable blockchain validation.

Proof-of-burn makes Sybil attacks infeasible, as it requires the attacker to create multiple high trust entities in the network, which is costly. In essence, this is equivalent to bitcoin's proof-of-work scheme and leverages the existing blockchain for the proof.

Global trust based on proof-of-burn is based on how much money was burned to establish a particular identity. We use g(x) to denote the global trust derived from the fact that an amount x has been spent to establish the trust of the identity. We notice that x is the sum of all the amounts that has been provably burned for this particular identity. In addition, we notice that when a particular transaction output is used to establish trust towards some identity, this output is necessarily only associated with one identity. Verification of this proof can be done by the canonical OpenBazaar client through direct bitcoin blockchain inspection. x(B) is a function of the person whose proof-of-burn is to be determined, B. For simplicity, we will for now denote it as x.

To determine the numerical trust for the global trust associated with a particular identity, we work as follows. First, we calculate x as the sum of verified proof-of-burn amounts, in bitcoin, associated with the target identity.

Next, we use the following function to evaluate the trust towards the identity:

g(x) = 1 - (1/2)^(x/c)

Where: x denotes the amount spent for the proof-of-burn g denotes the global trust associated with the identity c is the base trust cost* of the system

The base trust cost is a hard-coded value in the canonical client which is the amount of money required to establish basic trust in the system. The value can be determined based on the current exchange rate of bitcoin, and can be updated in the future depending on the network's needs. As the value of bitcoin is expected to rise, it is expected that the value for c will drop. This has the additional side benefit that historically older accounts accumulate more trust as time goes by, as long as the price of bitcoin rises.

To clarify the rationale of the above equation, note its following values: g(0) = 0. A pseudonymous identity that has not provably burned coins has no global trust. g(c) = 1/2. A pseudonymous identity that has spent the base trust cost easily establishes a 50% global trust. * lim g(x) = 1, as x approaches infinity. Notice that it takes exponentially more money to approach 100% global trust.

We recommend that the base trust cost is a very small affordable amount for any human user. This will make the cost to enter the network small, but still avoid Sybil attacks. Such schemes have long been used in the literature as proof-of-work to avoid denial of service attacks [Back]. Proof-of-burning has the same benefits as proof-of-working, as it delegates the proof-of-work to the bitcoin blockchain.

3.5.23 Proof-of-timelock

While proof-of-burn is equivalent to proof-of-work [CounterParty], we propose an additional mechanism that can be used separately or in combination with proof-of-burn. In proof-of-timelock, the proof-of-stake ability of a blockchain is leveraged to produce a system that eliminates Sybil attacks without having to resort to the destruction of money or, equivalently, CPU power.

In proof-of-timelock, the individual interested in establishing trust towards a pseudonymous identity provably locks a specific amount of money in a transaction that gives the money back to them. This transaction has the property that it remains unexecuted for a specific predefined amount of time. However, the fact that the transaction is going to take place in the future, the exact amount, and the amount of time of the lock are publicly verifiable.

While proof-of-burn allows identities to be created in a way that is costly to recreate, proof-of-timelock ensures it is impossible that an enormous amount of identities associated with one real-world individual can co-exist at a specific moment in time. Proof-of-timelock is a weaker insurance than proof-of-burn; proof-of-burn can be thought as proof-of-timelock, but for an infinite amount of time.

We predict that people will feel considerably more comfortable ensuring their identities through proof-of-timelock rather than proof of burn. The psychological burden associated with money destruction may not be an easy one to overcome.

Unfortunately, it is currently impossible to create a technical mechanism for proof-of-timelock on the bitcoin blockchain. Bitcoin supports the nLockTime value at the protocol level. However, this mechanism is not currently honoured by running nodes [nLockTime] and the transaction will not be broadcast in a way that is verifiable.

A Turing-complete blockchain such as Ethereum [Wood] allows an implementation of this mechanism. Nevertheless, we are reluctant in using this scheme, as Turing-complete blockchains are yet to be proven feasible in practice and may pose problems in terms of scalability, performance, and fees.

As such, we recommend proof-of-timelock as an alternative mechanism, but further research is needed to conclude whether it is feasible as an underlying mechanism for a decentralized anonymous market.

3.5.24 Total trust

Based on the projected and global trust metrics presented above, we propose the following measure as the total trust towards a network node:

s(A, B) = (1/2) * t(A, B) + (1/2) * g(x(B))

The projected and global trusts are added together to produce the total trust as seen from A to B. The weights used here are 50% for each, but it is advised to tweak these weights based on empirical evidence during development. For advanced users, the weights can be customizable.

The total trust can then be displayed in the user interface of the node of user A when she is viewing the profile of user B. Additional interface elements that are possible to include can be the exact amount of money spent in the proof-of-burn scheme, as well as the direct links yielding the cumulative projected trust for the particular target through induction.

3.5.24 Conclusion

We have introduced a new mechanism to allow for fully pseudonymous webs-of trust. The web-of-trust is developed in a way that allows conveying true trust and not simple identity verification. Furthermore, anonymity is preserved through only partial topological disclosure. The notion of graph distance is maintained through an attenuation factor. The web-of-trust is designed to be used in a commercial setting, where trust is an indispensable tool for trade.

The web-of-trust is bootstrapped through trust to a seed set of nodes, which requires the user to explicitly opt-in if they wish to trade illicitly.

Introduction to the trust system is obtained through global trust, which is weighted along with projected trust. Global trust is achieved through a proof-of-burn mechanism, and an alternative proof-of-timelock mechanism is explored. Together, these mechanisms allow a calculation of total trust between nodes.

In parallel with our proposals, we illustrated security concerns on mechanisms that are not appropriate for such an implementation, such as proof-of-donation and proof-to-miner, and we developed an attack on the web-of-trust through graph separator control.

Overall, this pseudonymous trust system can be used in a commercial setting such as OpenBazaar. It is strengthened when supported by Ricardian contracts to create binding agreements between parties through the security of the Bitcoin blockchain and should not be used alone.

3.5.25 Notes

  1. It may be meaningful to distinguish trustworthiness of a pseudonymous individual in different roles; for example, a person who is a trustworthy merchant may not be a trustworthy judge. Hence, trust to buy from a person may be different from trust to mediate. However, for now, we are assuming that this trust is the same under our projection mechanism.

  2. GPG distinguishes between trusting the identity binding between a real-world individual and a key and the trust directly given to an individual as far as they are concerned about signing other keys. In a similar setting as blurring the trust between different roles, we consider these to be the same. In the OpenBazaar web-of-trust, trust is an intuitive concept and there need to be no formal rules followed when trust is given to others. The every-day statement "I trust this person" corresponds to actually giving trust to an individual. This is in contrast to the GPG web-of-trust in which signing keys requires a certain procedure of identity verification with which individuals may not be familiar with, and hence this differentiation is in order.

  3. The use of the word "pseudonymous" as a qualifier of the web-of-trust is mistaken. The web-of-trust itself is not pseudonymous, nor are the edges, in the sense that there is no pseudonym associated with the web-of-trust or the edges themselves. The web-of-trust and edges are "pseudonymious"; that is, related to the concept of pseudonymity. However, the word pseudonymous is more understood in the literature, and we are opting for its use in this context, while understanding this subtle distinction.

  4. We do not distinguish between uncertainty of trust and certainty in neutral trust as other authors [Jøsang]. It may be helpful to employ such distinction in future versions of the web-of-trust.

  5. This algorithm is a draft. Please leave your comment on potential attacks and vulnerabilities it may have. It seems too simplistic to be able to work in the real world and may need considerable tweaks.

  6. The author strongly advises against such interconnections. The threat model of the OpenBazaar network is completely forfeited if such trust relationships are used. Centralized, non-anonymous services for trade such as eBay are widespread and can be used in OpenBazaar's stead if these assurances are of no concern to the user.

  7. This simple transitivity scheme is flawed and it must be reworked. Currently, trust is impossible to calculate if cycles exist in the network graph. As the topology is only partially known, it is not trivial to detect cycles. Furthermore, basic cycle detection mechanisms used in routing protocols may easily compromise the anonymity of the network by revealing non-local topological information. The formulae to deduce trust must be reworked to take this important issue into consideration. It may be possible to avoid cycle detection and employ a mechanism which converges to the actual trust with good probability if some randomness factor is used to decide responding to queries whose answer is not known.

3.5.26 References

3.6 Dispute Resolution

Multisignature escrow addresses are the key to managing risk for trades between peers on OpenBazaar. These addresses mathematically ensure that a single agent is incapable of stealing funds from an address using their private key alone. Furthermore, multisignature addresses can be designed to accommodate several parties within a voting pool as previously discussed.

In a typical 2-of-3 multisignature transaction in OpenBazaar, the first two signers are the buyer and seller. The third signature is a 'trusted' third party who has the power to sign a transaction in combination with the buyer or seller in the event of an accident, key theft, or dispute. The third party signer, a notary, in OpenBazaar also acts as the third signer of Ricardian contracts for the sale of goods and services, to leverage the many strengths of triple-entry accounting particularly for settling disputes.

Dispute resolution is a fundamental component to success of OpenBazaar. As the goal of OpenBazaar is to create a decentralised and censorship-resistant marketplace, State-mediated dispute resolution is out of the question. Thus, our model should follow non-State services, also known as alternative dispute resolution (ADR).

Many forms of ADR exist in the legacy marketplace. ADR aims to avoid final adjudication by the State in order to reduce overall costs, save time, and potentially prevent an adversarial outcome between the contending parties after the dispute has been resolved. Rather, OpenBazaar aims to create a marketplace for ADR, alongside goods and services, to settle disputes between peers.

3.6.1 Dispute Resolution

3.6.1.1 Notaries

Thus far the proposals for various market implementations within OpenBazaar (and other decentralised marketplace proposals) have assumed that a third party in a transaction (i.e. the third signer in a 2-of-3 multisignature escrow address) performs two roles:

  1. Notarising contracts and transactions
  2. Arbitrating disputes between two or more in parties

The notary aspect of their service includes digitally signing contracts and transactions in the event of a dispute between the buyer and seller. The arbitration aspect of their role is to decide who the winning side is in a dispute between the buyer and seller. However, this overlapping notary-arbiter model is prone to several weaknesses:

A possible solution is to divide these services, to be provided by separate agents:

  1. A notary, to focus exclusively on signing Ricardian contracts and creating/signing multisignature transactions
  2. An arbiter, dispute resolution as an independent and exclusive service on OpenBazaar

Pamela Morgan expands on this concept:

The ideal third party will be professional, knowledgeable about the technology and security protocols, and independent of business operations. Why are these characteristics important? Professionalism is important because the third party will be your backup to access funds in the event a signer becomes unavailable.

The third party should be reliable, available upon short notice, communicative, and responsive. The third party must be knowledgeable in the technology, have a thorough understanding of how to use multi-signature accounts, and best practices for security – such as offline key generation and storage.

They should understand principles of conflict of interest and be able to maintain a distance from operations, so that they will not be subject to coercion or other undue influence. A disinterested third party also provides investors, employees, and the community with an increased level of protection thereby justifying an increased confidence in operations as evidence of good corporate governance.

Source: Multisignature accounts for corporate governance

3.6.1.2 Notary Responsibilities

A notary's responsibilities include:

  1. Digitally signing the Ricardian contract between two or more parties
    • The notary serves as a witness to the contract and independent auditor as per triple-entry accounting
    • The notary offers the final bitcoin pubkey for the creation of the multisignature escrow address
  2. Releasing funds from a multisignature escrow address as a result of:
  3. A late-signing buyer (lazy transactions)
  4. A dispute between the buyer and seller, releasing funds according to the arbiter's judgement
  5. Selecting a tie-breaking arbiter for an arbiter pool
  6. 'Hand-holding' new users in using OpenBazaar for the first time

Given the role that notaries will play in exchanges in OpenBazaar, their services would need to be available essentially 24/7. Of the responsibilities listed above, the first can be entirely automated and capped according to the notary's preference. The second responsibility requires the attention of the notary in order to sign the transactions. After successfully receiving the good, the buyer may be delayed in signing a transaction to release funds from the multisignature escrow address to the seller. In this case, the notary is involved to release these funds. In the event of a dispute, the notary prepares a transaction according to the arbiter's judgement for signing in combination with the 'winning' party. Of course, the notary doesn't need to fulfill this role if both the buyer and seller perform this function themselves. If a dispute arises where an arbitration pool is requested from the buyer and seller, the notary can be called upon to choose a tie-breaking arbiter according to their preference prior to the hearing of the dispute. Finally, the notary can offer to supervise new users through a transaction, explaining each step of the process and troubleshooting potential issues.

3.6.1.2 Notary Fees

While the market will ultimately determine the fee structure, we assume that automated services such as contract signing (role #1 above) would be offered freely, subsidised by other services requiring the notary's directly involvement. As for the appropriate value of the fee, we expect it to be equal to or lesser than a typical bitcoin transaction fee. This fee can either be paid as a refundable deposit from both parties, or deducted from the price of the good being sold.

3.6.1.3 Advantages and Challenges

There are several advantages to using a dedicated notary service for 3rd party contract and transaction signing. Firstly, and perhaps most importantly, there is an effective separation between the power to release funds from a multisignature escrow address, and dispute resolution between two parties. As a result, notary and arbitration services can be independently assessed and rated for their efficiency.

Secondly, there is a market created for notary services for the timely fulfilment of their obligations in a trade, especially triple-signing Ricardian contracts. In the event of a dispute, the final cost in fees and time is slightly higher than in a role where notary and arbitration services overlap within a single agent. However, the increase in dispute costs may incentivise greater care in arranging exchanges within OpenBazaar to specifically avoid these fees.

3.6.1.4 Practical Implementation into OpenBazaar

How will the separation of notary and arbitration services into separate agents affect the end-user experience and overall mechanics of a transactions? Firstly, similar to the original model, the end-user begins their OpenBazaar experience by selecting preferred notary service providers for all future transactions. In selecting a notary, a user should prefer services that are automated with 24 hour response time when 'human interaction' is required.

Ideally, the client will select a notary service provider that is present on both the buyer and seller's 'preferred list', or an overlapping notary up to X degrees of freedom from the buyer and seller's Web of trust. For example, the buyer has a friend who shares a preference for a notary with the seller's friend of a friend (2 degrees of freedom). Failing this, the client can either randomly select a notary agent based on their reputation metrics.

Finally, while it is the recommendation of this author for users to separate notaries from arbiters, the client will not impose this model. As the notary/arbitration market is a specialised service for OpenBazaar, users will be able to browse through various users offering notary and/or arbitration services. Ultimately the market will pick an approach that seems to be the most efficient.

3.6.1.5 Notary Inclusion into Contracts

We predict that there will be two ways notaries will be included into the contract formation process. The first way is offline, which requires the contract to be digitally signed and passed along to the next party after inclusion of new information (demonstrated below):

This process is somewhat tedious, but necessary to establish the proper authentication chain to avoid possible attacks/disputes. Alternatively, online contract formation requires all parties to be online simulatneously to rapidly establish the terms of the contract and attach their digital signatures only once:

It is important to note that the client isn't required to create these contracts, which can be made externally and imported into the client to streamline the digital signing and notary/arbitration process.

3.6.2 Negotiation

For dispute resolution between peers on OpenBazaar, the two major forms of ADR to be implemented are:

  1. Negotiation: where both parties directly arrive at a resolution of a dispute.
  2. Arbitration: where a third party is invited to resolve a dispute

Negotiation is a preferable approach to dispute resolution as it does not involve intervention by a third party, not even the notary of the transaction. Negotiation between the buyer and seller seeks to resolve the conflict by discourse between the parties. The transfer of bitcoins from the multisignature address can be accomplished by both parties after a successful negotiation.

Negotiation on OpenBazaar can take place over any communication platform inside or outside of the client software. The client currently supports encrypted communication from node to node, and also integrates BitMessage. For real-time negotiation, platforms such as CryptoCat may be an easy to use messaging platform that supports off-the-record encryption. In addition, the DarkWallet client also supports private communication channels.

The details and outcome of a negotiation do not need to be written down or formalised in any way. Every effort should be made by both parties to resolve disputes between themselves to preserve favorable reputations and avoid arbitration fees. However, not every dispute can be resolved peer to peer negotiation; an outside party is required to arbitrate.

3.6.3 Arbitration

Arbitration involves an independent party, made up of a single or multiple agents, reviewing the details of a dispute and deciding where the fair allocation of property titles should be awarded to. As explored previously, the arbitrating agent shouldn't be the third signer in a multisignature escrow address. Rather, the tgiry signer (a notary) should be a neutral party that can be contractually subject to the outcome of the arbiter's decision.

3.6.3.1 Arbiter Selection

In the event of a dispute between a buyer and seller, if negotiation has failed to resolve the dispute, an arbiter must be employed. To begin the process, both parties inform the notary that a dispute has arisen. The notary's primary role in the event of a dispute is to create and sign a transaction according to the judgement of the arbiter(s). However, this function can be performed by the disputing parties in order to avoid notary fees.

There are three possible ways for an appropriate arbiter to be selected:

  1. Client matching
  2. As with notaries, the client attempts to select an arbiter automatically based upon the 'preferred arbiter' list from both parties.
  3. An extention of this concept is to the use the web of trust to find overlapping preferred arbiters from the buyer/seller's trusted and/or positively rates peers
  4. Consensus selection
  5. The buyer and seller agree upon an arbiter based on their examination of the arbitration market
  6. In the event that the buyer or seller is inactive in making a decision within a reasonable amount of time (which may need to be stated in the contract), the notary and the other active party can select an arbiter.
  7. If the buyer and seller cannot agree on a single arbiter that they both prefer, they can form an arbitration pool make up of the buyer, seller, and notary's preferred arbiter.
  8. Notary-Arbiter servicing
  9. Here, the notary and the arbiter are the same agent. As this agent is selected before the exchange takes place, the notary-arbiter simple proceeds to judge the dispute immediately.
  10. While this is the most efficient approach in terms of time, there are drawbacks to this approach we are explained above. However, users will not be restricted from excercising this option.

3.6.3.2 Arbitration Contracts

As arbitration is fundamentally a service, a service contract can be drawn up between all interested parties that will need to include:

  1. Arbiter's details
    • GUID
    • Bitcoin pubkey
    • PGP key
    • Fee
  2. Dispute details
    • Nonce of the contract in dispute
    • Hash of the contract
    • Estimate arbitration time
  3. Dispute claims from both parties
  4. Decision conditions (applicable only to multiple arbiters, indicating if a majority or consensus decision is required)

Formatted correctly, the arbitration contract may look something like this:

{
        "arbiter": {
            "arbiter_GUID": "drwasho_abc123",
            "arbiter_BTCuncompressedpubkey": "04d09c05c84a73344ee3b03d03fdf4a6bff2b1c4e15ffeb7403b91b0815be8b03ee50ade6b28d27aabc7c56cf679f74acec3d8e760595f5878caec12edd32938ea",
            "arbiter_pgp": [
                "mQENBFMKYTUBCADD6kIAjBlJ2Q0NEd97aia0BSBibO1C2lVemWig5cNATeob1McWoEo3QznZ",
                "f9LaRsuo+ryyqEeXx4p9m9FG/TDeeZvOaiSo2Pg5MtgAdxwJK3ZQ+6b6DjrfYRZplD4qVsQd",
                "/GhxDr733NBdTpfvE8rYrAttNeU8P9vZpJuU+ESSRNb8Sbgfrym2i7xeMP6/xnyfTunXti7x",
                "sJzFkGIoF1dc+HntP2b9oSy1y0P5n0FdGt7IaEEtN1AZwAfFJ0obSlXiVdWdPwyambAzj93V",
                "XD//KxXyxAHjqFD+sdqDzqxBTZ/MC/YCMU1UQ5hvWsx7FRqubLhyMB1p1ycvdnX6nqdTABEB",
                "AAG0KFNhbSBQYXR0ZXJzb24gPHNhbUBzYW11ZWxycGF0dGVyc29uLmNvbT6JATkEEwECACMF",
                "AlMKYTUCGwMHCwkIBwMCAQYVCAIJCgsEFgIDAQIeAQIXgAAKCRCI0UoG/7KgjtsoCACaiEO1",
                "0u22dGDSuBLvFV2UIhyh2Cj9+KEGe7qHlohwbFHqwT+/6B7P5CmBggqL0abMqEqkUCOxk7g4",
                "rBdCSMeqGe+7VdsXVnNAlEYGd6AqQxfcIPV/r/E0qCUQcJbBxjO8rr7il2o4b98AeU8GB6qU",
                "8YFblsCv0KlFRYhDngHVfRMpvsTm9NMcm99P6n/UVn2mrhk50EqJMHB7T+b4n0fWQj5M9340",
                "lmVWnn1i1w3+yDC0v4yLS9UuSuL3UsnC6CP7XPA2z5iVqoTH+i0WguGgGgyUpPIQexGm/IKx",
                "b5Bb/rRsKpcXtdIT7Vr5US4XtCBe9zWvSWyEAz3llYA/OGx+uQENBFMKYTUBCACToWiWhjWI",
                "aJM1pD0TXTk/IbNWZPhJpfAiYy3EsYwckvAY1Q6yOSWydakimpr+93oBpJpY9y6Aj8GDBNyv",
                "eaAomK2jYV0cqxhOzAH2UgSLptFQawxwR/8+rLz5KDZQGT8SNNDwV7FtFT4ubzeH+ILugnJp",
                "Jo83IjoU5Vg3g1d75Tc38KLd8VbwZ52QcxNaoxoEHQoF8Q+2rRNPwRRr5NX71jQPA6Pxuzpd",
                "mTogQ5gIA3Zr4cDrxAAPCZAo/bDJF3jhd9lpZXFudlyCwbRNF3qfG9L0S7ES+zIfXFWmryQb",
                "CUg4pcRfbaN9OY6GWzjOLOzXzEehd7sNbNCKEP3tWqbjABEBAAGJAR8EGAECAAkFAlMKYTUC",
                "GwwACgkQiNFKBv+yoI4kHQgAiz6mQz0GeOfB60ILe1R/9fkYtejFTTb5P8H/w19S2WM+gFyb",
                "R4BTg0OSN0YhcmzIzgy1zF1/J+noxEVUS5zbGLytVgLFECyOinFZUc0A/b0nuermvKFuF7GJ",
                "QcV3Gz1HCNrfaWK7LW5hGTdQZtaFtEmla6Wk+v1MHWWW2K9Ez0KXCqrK5b0Oji2MUh8LRh2p",
                "mmciki/R0pXXMYMJpeb9IPwOlbIqm8xT4Z93rPYyOwmgii1Dy3Gop/Ofq4yU7GGxjjALR+JM",
                "yebij7AblNTCSgWXm/QV+ejZH0bR91FbtjdVKoFo6qrL04zuRbBFm2wHv+CYNKwRR2PPcCB/",
                "dQaGpQ==",
                "=IB1U"
            ],
            "arbiter_fee": "0.01 BTC"
        },
        "arbitration": {
            "contract_nonce": "01",
            "contract_hash": "f22fee51c64dd36afb158769d6dacf95a982777997f96f5e9a25b97da64d9457",
            "contract_arbitration_time": "7 days"
        },
        "buyer_claim": [
            "The seller never sent me the turtles!"
        ],
        "seller+claim": [
            "The buyer hasn't paid for the wee turtles even though I sent them."
        ]
}

The digital signatures of the buyer, seller, and notary are appended to the contract and sent to the arbiter for their approval. If the arbiter agrees to hear the case, he/she appends their details and digital signature to the contract, sending back to the interested parties. The case can now be considered open, with the format and presentation of the evidence to be arranged between them.

3.6.3.3 Arbitration Market and Precedents

The arbitration market is a dedicated marketplace featured in the client listing agents offering notary and/or arbitration services in OpenBazaar. These agents will list the duties they perform, the estimated response-time for their services, and fees. In addition to these, arbitration service providers can also display a list precedents that they themselves have established or other arbiters have published in order to give an expectation of service process and quality.

Precedents, the legal standards formed due the application of consistent rulings on similar cases, will become a key performance predictor and indicator of an arbiter's capacity to fairly administer justice on OpenBazaar. It is difficult to predict how precents will be formatted, but some considerations are most likely:

  1. Consent
  2. Both parties must consent to their case being published as a precedent for the arbiter
  3. Anonymisation of disputing parties
  4. All traces of the identities (pseudonyms, bitcoin addresses etc) of the disputing parties is removed
  5. Dispute cateogrisation
  6. What type of dispute is claimed (i.e. failure to deliver physical good, failure to perform service etc)
  7. Process
  8. The objective of a precedent is to demonstrate to potential clients the process they can expect from the arbiter (i.e. what evidence needs to be provided, timeframes, what the outcomes are if a party fails to demonstrate necessary evidence, what consitutes as evidence)
  9. Process for strictly anonymous transactions will be important for certain types of sensitive transactions
  10. Resolution
  11. If the arbiter rules in favor of the buyer or seller (a specific claim), what was the outcome of the resolution in terms of payment
  12. Fees
  13. What were the fees for resolving this type of dispute?
  14. If the dispute took extra time than expected, what was charged?

Arbiters may offer their services pro-bono in order to build up a case history of precedents to market themselves for future employment. Alternatively, new arbiters may cite precedents from other well-known and highly rated arbiters to indicate a pattern arbitration for similar cases. Ultimately, through the use of precedents and an arbitration market, a polycentric merchant law is expected to arise in OpenBazaar.

3.6.3.4 Appeals

A later innovation of market arbitration can be the formation of an appeals process to resolving disputes. Prior to the initial round of arbitration, both parties can agree to establish a 3-tier appeal process. Each arbitration tier may consist of arbiters of increasing quality and/or quantity, and therefore price. In the outcome of a first-tier arbitration decision that leaves the losing party dissatisfied, the losing party may appeal to the second-tier arbiter. The contract and dispute records are all forwarded to the second-tier arbiter who first determines whether the case should be heard. Consideration of the case may attract a fee, which could be paid by the appealer. If the case is heard, a second round of arbitration begins; if not, the standing judgement of the first arbiter remains and the notary prepare and signs a transaction accordingly.