Bisq, a prominent decentralized cryptocurrency exchange, has launched a major software update promising new features such as a new trade protocol that further reinforces the trustless nature of the system.
The Bisq developers announced this update via blog post on October 29, 2019, promising two major changes: a new trade protocol that removes the influence of third-party arbitrators and a way for new accounts to gain accreditation as a reputable trader of crypto assets without compromising user anonymity or site security. A leading Bisq developer (who wishes to remain anonymous) spoke with Bitcoin Magazine about this development.
According to this developer, throughout the development cycle of Bisq, the biggest challenge has been “attracting more developers who really care about privacy, security and freedom. Bisq is uncompromising in its approach to handling these principles, and it’s devised a slew of tools and approaches to accomplish its goal of becoming a maximally decentralized bitcoin exchange network that promotes these principles.”
Bisq is particularly noteworthy as a truly decentralized cryptocurrency exchange due to its DAO, or decentralized autonomous organization. Founder Manfred Karrer originally ran Bisq with a more traditional company structure when he founded the organization, but since May 2019 he has fully removed his unique privileges and access. In Bisq’s current state, the DAO infrastructure, first formalized in April 2019, now allows Bisq to be operated directly by its stakeholders and contributors, although longtime developers like Karrer still play a major role.
Resolving Disputes, Peer-to Peer on Bisq
This version 1.2 update to Bisq has removed the role of the third-party arbitrators as a key holder entirely. So its trade protocol now works by means of a 2-of-2 multisig escrow, rather than 2-of-3, as this third key was for the arbitrators.
Arbitration in the old versions of Bisq “was always considered an imperfect solution to the problem of dispute resolution,” said the Bisq source. “It required users to trust anonymous third parties, and legal advice from the early days of the project indicated arbitrators were in a grey area because of their key in the multisig escrow. So it wasn’t great for anyone, but it worked reasonably well while developers worked on the Bisq DAO and other elements of the software critical to trading. Furthermore, until the Bisq DAO actually launched, there just wasn’t a way to implement anything better.”
Additionally, this update has reworked the dispute resolution system into a three-layered version, with the express purpose of keeping the process streamlined. The first layer is an encrypted chat platform between the two parties conducting a trade, allowing both to privately hash out any minor discrepancies that may arise.
“We’ve received a lot of compliments about trader chat,” the source said. “As with many issues, there’s simply no reason for a third party to intervene.”
They went on to state that this change to protocol has “increased speed and privacy for solving a lot of issues. Otherwise, if things go well, the new trade protocol really shouldn’t affect a user’s daily experience.”
Third-Party Arbitration — But Without the Third Key
If direct communication between the two parties does not resolve the issue, a third party can be involved, first to mediate arguments between the two (the second layer of the three-layer dispute resolution system), and then as a last resort to act as a final arbiter themselves (the third layer). Dubbed “bonded contributors” in Bisq’s general trading rules, these special third-party actors can make suggestions and moderate discussion, but ultimately they do not have any control over funds. In the rare (emphasis Bisq’s) circumstance that neither of these methods of recourse still work, the rules claim that Bisq is able to award funds.
To avoid abuse, this final method of recourse works like this: After one or both parties reject the recommendations of the mediator or the session runs out a predetermined amount of time, all of the funds in question are forwarded to Bisq’s donation address. Since the system is based on either the deal timing out or the traders choosing to reject the bonded contributor’s official requests, no individual arbitrator at Bisq actually has the power to jettison the money like this; only the actions of the traders can trigger the failsafe. From there, it will take anywhere from one to three weeks for the arbitrators to resolve the situation. The expectation is that this process will discourage bad actors.
“Removing the third key should make Bisq more resistant to legal concerns,” the developer explained. “Because they no longer have a key, dispute agents (mediators and arbitrators) don’t need to be as highly trusted as before, so it will be easier to find dispute agents who can communicate in other languages as Bisq grows around the world.”
The source indicated hope that these new features will keep the dispute system easy to navigate, although they admitted that “the process may take a bit longer for those with rare issues.” Nevertheless, this will only affect “a small number of trades,” and the developers “expect mediation to handle the vast majority of issues that trader chat doesn’t solve.”
A Model for What’s Possible for Decentralized Exchanges
Trying to become acclimated to these tools and work environment can be very difficult for potential new developers at Bisq, but the source stated that “it’s rather thrilling to see how they come together to create a microcosm challenging conventions for everything from financial rules, to how free software can work, to how people collaborate for work, to what it means to be a company and so much more.”
In the immediate future, Bisq is planning to work first and foremost on fixing some bugs before getting to work on what our contact called “some serious quality-of-life upgrades” further down the line. Those interested in some of the technical specifications of these plans can find out more about them here.
“I think the possibility of any of this influencing the rest of the crypto space is wishful, but I would like to think it shows people what becomes possible with a separate microeconomy,” the Bisq source said. “Bitcoin is a great monetary tool, but it’s capable of so much more. I hope Bisq’s endeavors serve as a model to the space of what’s possible.”
The post Bisq Unveils New Trade Protocol Promoting Principles of Decentralization appeared first on Bitcoin Magazine.
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