An interesting topic has surfaced on the Bitcoin.com forums not too long ago, talking about how smart contracts can be used as a tool to anonymize certain services. While many people may feel that any anonymous activity is suspicious in its own right, there are plenty of valid reasons to desire a certain level of anonymity. The co-founder of the LZF exchange shares his thoughts on the concept – dubbed Death Note Incentive System – in this forum thread.
The Inherent Flaws of Decentralized Anonymous Marketplaces Today
When people think of decentralized, anonymous marketplaces, they automatically think of illegal goods and services; In the past, there have been various platforms – such as Silk Road and Silk Road 2.0 – where less-than-legitimate deals have taken place. However, that doesn’t mean the entire concept of anonymous marketplaces only revolves around illegal activities either.
Unfortunately, there are various flaws to be found within the current form of a decentralized, anonymous marketplace, as their privacy protection is far from perfect. Additionally, these marketplaces are subject to collusion, and Sybil attacks in some cases. Either of these three scenarios will put the buyer and seller at risk at some point, which is a situation that needs to be avoided at all costs.
A possible solution to address these problems would be to use digital currencies that offer better anonymity. ZeroCash would be a candidate, but the implementation is far from perfect and needs additional development. Another option is to use different trust systems, such as EigenTrust. Once again, that solution isn’t perfect either, and neither of these options is very practical in their current state, according to LZF co-founder Daniel Pusateri.
While both of these solutions have their own merits, the concept of protecting user privacy will fall apart once a shipping address has to be made available to the seller. Even by encrypting this address, there is guarantee the information will remain confidential between both parties. For the sender, they can still be identified based on the location where the package was sent from. Also, because the mail system in the US is government-owned, it wouldn’t take much effort to put two and two together.
As soon as there are multiple parties involved in a transaction, additional trust is required among all participants. For example, when using a third-party courier service to deliver a product, they can easily track the location of any package, and they have valuable information regarding the origin and recipient, including autographs. But what if the entire process of shipping items could be anonymized with smart contracts?
Death Note Incentive System
In the traditional anonymous online marketplace model, trust and reputation play a key role to verify the integrity of both buyer and seller. However, the Death Note Incentive System solution proposed by Daniel Pusateri removes any trust ratings or reputation system from the equation. While this may sound risky to some digital currency enthusiasts, the involvement of smart contracts as an integral cog in the machine should help put those concerns aside.
In fact, there would be at last two smart contracts involved in every transaction. Assuming there are three people involved in the process, the sender would create a smart contract between himself and the buyer, and there would be a second contract between the seller and another peer. As a seller, they would have a lot of money at stake, and there would be no incentive to scam the recipient.
For example, the seller uses a third peer to ship a package to the recipient. The seller creates a smart contract with the peer and puts up the package value as collateral. If the peer receives the package, the smart contract is fulfilled, and the value held by the smart contract is returned to the seller. Peer 0, as this third peer is called in the graph, would then receive a small commission for their efforts.
This same type of contract would exist between seller and recipient, where the seller puts up the package value a second time as collateral. As soon as the recipient confirms delivery of the item in the right condition, the funds are released to the seller. It is important to note that releasing the “bond” held in each smart contract does not require approval from the involved parties, but the execution will be confirmed by the next peer in the chain, releasing the previous contract’s bond.
In theory, this sounds like a viable – albeit complicated solution to increase overall online anonymity when conducting transactions and business deals. But there are several factors to take into consideration. For starters, anonymity is the top priority, especially in the world of decentralization. Secondly, the people participating in this solution will need to be incentivized to behave “well,” rather than be influenced by ulterior motives to do “bad” things.
Avoiding collusion is another important topic on the priority list to create a proper decentralized, anonymous solution. Last but not least, the concept has to be scalable, which is somewhat of an issue in the world of Bitcoin these days. As there will be at least three people involved in every transaction through this concept, the solution has to scale properly to accommodate as many peers as required. Death Note Incentive System, as this proposal is called, seems to check all the boxes.
The Death Note Incentive System solution can scale with as many peers as are needed to complete the transaction, and each additional peer results in an extra smart contract to complete the transaction. Whether or not Bitcoin-based smart contracts can accommodate for this concept, remains to be seen.
What makes Death Note Incentive System so intriguing is how various peers can be spread out over multiple jurisdictions, further decentralizing the concept beyond national borders. However, the peers involved in forwarding the package would still be facing a certain risk of being identified. Then again, the commission for executing the job can make it worth their while to get involved.
More information and discussions about the Death Note Incentive System can be found on the Bitcoin.com forum.
What are your thoughts on the Death Note Incentive System? Is this a feasible solution, or do you see any flaws in the system? Let us know in the comments below!
Source: Bitcoin.com Forum
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