Rule of DeDeal
Rule of DeDeal
DeDeal is a protocol aimed at curbing "win-lose" outcomes due to fraud of the seller by giving the buyer an option to force "lose-lose" outcomes through sanctions, thereby encouraging "win-win" outcomes.
Definition of Terms
Protocol:The smart contracts that make up a DeDeal.
Seller: The seller of the goods.
Buyer: The buyer of the goods.
Seller Deposit: The deposit paid by the seller and the product price paid by the buyer are stored as the seller deposit. After the deal deadline, the protocol transfers the contents of the seller deposit to the seller.
Buyer Deposit: The deposit paid by the buyer is kept as the buyer deposit. After the deal deadline, the protocol transfers the contents of the buyer deposit to the buyer.
Sanction Button: The button where if pressed by either player, the other player’s deposit is burned.
Deadline: The time limit for the deal. After the deadline, the deal is over and neither player can no longer press the sanction button. The initial deadline is set by the seller before the deal begins.
Deadline Interval: Each time either player makes a deposit into the protocol, the deadline is extended by the deadline interval. The value of the deadline interval is set by the seller before the deal begins.
Examples of a Deal Using DeDeal
Let's take the following deal between a seller and buyer as an example.
Seller's Goal: To sell their Pokémon cards for 1 ETH.
Buyer's Goal: To buy the Pokémon cards for 1 ETH.
Basic Deal Flow
The seller sends 1 ETH to the protocol as a deposit, and the protocol adds 1 ETH to the seller deposit.
The buyer sends 1 ETH to the protocol as payment for the goods, and the protocol adds 1 ETH to the seller deposit.
The seller ships the Pokémon cards to the buyer.
If the buyer does not sanction (i.e. press the sanction button) by the deadline, the deal is closed and the protocol sends 2 ETH in the seller deposit to the seller.
If the Seller Commits Fraud
If in step 3 above, the seller does not send the Pokémon cards to the buyer, the buyer has the following two options:
<Option 1-1> Bow to fate
Accept the bad deal. If the sanction button is not pressed before the deadline, the protocol will send 2 ETH in the seller deposit to the seller.
As a result, the seller gets 1 ETH and the buyer loses 1 ETH.
<Option 1-2> Sanction the Seller
By pressing the sanction button, the 2 ETH in the seller deposit is burned. However, in order for the buyer to press the sanction button, the buyer must first send 2 more ETH to the protocol as a buyer deposit. Each time the sanction button is pressed, the deadline will be extended by the deadline interval set before the deal was initiated.
If the buyer chooses <Option 1-2>, the seller now has the following two options:
<Option 2-1> Accept the Sanction
If the sanction button is not pressed back by the seller before the deadline, the protocol will send 2 ETH in the buyer deposit back to the buyer.
As a result, the seller and the buyer will have lost 1 ETH each.
<Option 2-2> Sanction the Buyer Back
By pressing the sanction button, the 2 ETH in the buyer deposit is burned. However, in order for the seller to press the sanction button, the seller must first send 2 more ETH to the protocol as a seller deposit.
This option is chosen as a sanction against a sanction when the seller feels that the sanction by the buyer was unjustified.
If the seller chooses <Option 2-2>, the buyer is once again given the option to choose <Option 1-1> or <Option 1-2>.
In this way, the sanctions continue indefinitely until the seller chooses <Option 1-1> or the buyer chooses <Option 2-1>, resulting in both players losing an amount of ETH corresponding to the number of sanctions.
It is important to note that sanctioning someone who has caused damages to you does not recover the damages. Moreover, there is no short-term economic rationality in either sanctioning or retaliating against the sanctioned player because of the risk that the sanction will be retaliated against by the other player.
In other words, rational players who commit fraud are less likely to sanctions back, and irrational players with a desire for retribution are more likely to sanction.
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