[bisq-network/proposals] Cap max reimbursement from peers resucrity deposit (#292)

Sat Jan 2 17:58:47 CET 2021

> I also think Bisq should take some profit from arbitration, but not this way. Something like an arbitration fee of 3% of trading and security deposits amount if refund agent is the one who reimburses and a 5% DAO fee if the DAO does it would be the way to go.

I agree, my initial proposal was not much thought out and I agree to the concerns brought up.

## Here an overview about the whole process (I know most of your will know it anyway...)

### Mediation 
The mediator can only suggest a distribution of the funds. There is a min refund of 0.003 BTC to any party left as incentive to accept the suggested payout for the losing party, so a 100% move of the doposit is not possible.
I think we should not apply any fee to mediation.

Note also that the trader could do a manual payout at any time themself (using the new tool from @jmacxx). So that just makes more clear that mediators have not power at all about the funds and are only providing a suggestion. It is in the full power of the traders how to pay out the funds.

### Delayed payout tx
If one of the traders do not accept the mediated suggestion he can open arbitration after a certian period (10 days after trade started for altcoins, 20 days for fiat).
At opening arbitration the delayed payout tx will be created and all funds from the multisig address are sent to the burning mans address. Without that delayed payout tx no arbitration and refund must me made as otherwise the DAO could get scammed by self-trade (mimic a conflict and later once the refund has been done make the payout from the multisig to one self).

### Burningman
The burningman buys BSQ with the BTC he received from delayed payout txs on the market. He prioritizes trades with the refund agent to help him with liquididy. He uses the price of the best offer in the offer book at trade event. If refund agent trades with him the RA need to make offers with a better price as the first best offer. He trades on announced days (I think its each sunday), so anyone can benefit from a liquidity boost once refund agent has covered his expenses.

The BM is a problematic role we would like to get rid of. Its a security risk and a trusted role. There are some ideas how to get there but its not trivial and nothing we can achieve short term.

### Arbitration
The arbitrator/refund agent is a dual role. He is like a mediator and kind of "supreme court" for haveing a second view on the case. He can see the result from the mediation and will take that as basis. That "supreme court" role was not really exercised by the past arbitrator and I am not 100% sure if the new arbitrator is doing it but I think it would be the better model. It does not mean to start from scratch again, just do double check all and in case of real disputes (which wer the exception) to make a own judgement based on the arbuments of both parties. 
Most cases are bugs or not responding peers, so in those cases this effort is very low anyway.

The second role is the refunding for the loss so that the trader does not need to do the hassle with DAO reimbursement and does not lose more time. The refund agent (RA) can decide freely how much he pais either party. There is no min. payout. He pay from his own Bitcoin and it is conceptually important that it is not directly connected with the delayed payout tx but a voluntarily action. A trader has no "right" to get refunded. It is though in the interest of the DAO to have happy traders who continue to trade, so the incentives are aligned to refund in justified cases.

The RA carries volatility risk and liquidity risks as he need to pre-fund the payment from his pocket and later get it reimbursed by BSQ. In between that time the rates can change so it comes with risks and costs. To mitigate that we use that agreement with the BM so that the RA can convert faster the BSQ to BTC. 
There is a limit (I guess 0.5 BTC ?) to limit those risks/costs. If the amount is higher the trader need to do the DAO reimbursement themself.

So far we never charged a fee and gave 100% of the funds to the winning party (in case that was clear and the winning party acted correctly). 

I think for the refund agent service it is fully justified to charge a fee. He is taking over risk and effort and is doing also the secondary mediation work. 

Note also that the RA role should fade out similarily like the BM role. It was introduced only to lower the friction and burden and once we are at the goal to have close to zero arbitration cases per month we can drop that RA role.

### DAO reimbursement
For those cases the RA does not pay out from his pocket the trader has to go to the DAO reimbursement process.
In GH the trader need to post his details and the signed mediation result, so anyone can verify that the posted summary is really from the mediator. The mediator and RA should comment and ACK the request to make it easier for DAO voters.
I think for the BSQ rate for calculating the reimbursement amount we use the 30 day average (not 100% sure). This carries volatility risk again. 

## Main reasons for dispute cases
I am not very up to date with current statistics but I assume due the bugs around v1.5.0 quite a chunk of cases are due bugs. Hopefully that is history soon. Maybe mediators and arbitrator can add here more details how the current situation is. I would love to see those metrics in an easy to access way where we can see a trend if we are improving in that area... 

### Seller not responding cases
As mentioned before we get plenty of those cases and there is no economically ration explaination for those, specially when its high amounts like 2 BTC trades and the loss is 0.3 BTC. But those cases hurt the DAO most as those are the expensive ones and carry the higher risk. We increased the security deposit because of that but seems it did not had effect on that (on future trades it had effect).

## So should we introduce fees for RA and DAO reimbursement?
I think for the RA service a fee is clearly justified. If the user does not agree he can go to the DAO reimbursement himself.
Maybe 80% of the losers security deposit might be justified. This would have impact on lowering the costs for the RA role.
For altcoins its 10 days delay and a few days for RA resolution. So to get 20% of the deposit seems enough to compensate for the delay. Note that centralized exchanges do not compensate nothing in case they block transfers and it easily takes weeks until its resolved.

For the DAO reimbursement it should be then a lower amount as the trader is taking the risk and extra time. Maybe 50% of the losers deposit?

We could also discuss if the 15% min. deposit could be lowered again, as it has shown that it did not help against those not-responding seller cases (at least my impression, we should look at statistics more closely first).

No strong opinions about the numbers. Just have the feeling that the current model is not optimial. 

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