Silk Road forums
Discussion => Silk Road discussion => Topic started by: wiggum on April 12, 2013, 07:44 pm
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Buyers should be required to put x% more money in escrow than the purchase price. x% could be set each day by SR admin based on current BTC volatility. The USD value of the product is locked in on the day the order is placed. When the order is finalized, the vendor receives the product's USD value out of escrow. Based on the current BTC/USD exchange rate on finalization date, the remaining BTC in escrow is distributed to both parties.
Example:
Day 1: SR admin has set a 50% premium on escrow deposits based on the current BTC volatility. Buyer places an order for a product that costs 10 BTC, and therefore deposits 15 BTC into escrow. On day 1, the BTC/USD exchange rate is 1BTC = 200USD, so the USD value of the product is 2000 USD.
Day 5: Product arrives and buyer finalizes. The exchange rate has now become 1 BTC = 150 USD, but the product is still worth 2000 USD. To receive 2000 USD out of escrow, the vendor is entitled to 13.33 BTC. The remaining 1.67 BTC is returned to the buyer, and the transaction is complete. Neither party has been screwed.
Now let's assume the same facts, except that on day 5 the exchange rate is 1 BTC = 250 USD. For the vendor to receive his 2000 USD, he gets 8 BTC out of escrow and the remaining 7 BTC is returned to buyer. Neither party has been screwed.
Buyers will complain that it's unfair to put more money in escrow than the product is worth, but tough cookies. You'll get back the same USD value of BTC after the transaction is over.
Also, sellers could entice buyers by taking the risk to require lower escrow premiums. For example, if SR admin sets an escrow premium of 50%, vendors looking to attract business (especially new vendors looking to build customer base) could set a 25% premium. The vendor is taking more exchange risk, but he will attract more customers to compensate.
Any flaws in this framework?
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Buyers should be required to put x% more money in escrow than the purchase price. x% could be set each day by SR admin based on current BTC volatility. The USD value of the product is locked in on the day the order is placed. When the order is finalized, the vendor receives the product's USD value out of escrow. Based on the current BTC/USD exchange rate on finalization date, the remaining BTC in escrow is distributed to both parties.
Example:
Day 1: SR admin has set a 50% premium on escrow deposits based on the current BTC volatility. Buyer places an order for a product that costs 10 BTC, and therefore deposits 15 BTC into escrow. On day 1, the BTC/USD exchange rate is 1BTC = 200USD, so the USD value of the product is 2000 USD.
Day 5: Product arrives and buyer finalizes. The exchange rate has now become 1 BTC = 150 USD, but the product is still worth 2000 USD. To receive 2000 USD out of escrow, the vendor is entitled to 13.33 BTC. The remaining 1.67 BTC is returned to the buyer, and the transaction is complete. Neither party has been screwed.
Now let's assume the same facts, except that on day 5 the exchange rate is 1 BTC = 250 USD. For the vendor to receive his 2000 USD, he gets 8 BTC out of escrow and the remaining 7 BTC is returned to buyer. Neither party has been screwed.
Buyers will complain that it's unfair to put more money in escrow than the product is worth, but tough cookies. You'll get back the same USD value of BTC after the transaction is over.
Also, sellers could entice buyers by taking the risk to require lower escrow premiums. For example, if SR admin sets an escrow premium of 50%, vendors looking to attract business (especially new vendors looking to build customer base) could set a 25% premium. The vendor is taking more exchange risk, but he will attract more customers to compensate.
Any flaws in this framework?
Are you familiar with SR's hedging system? I don't see how this is an improvement. It seems like more complexity with little gain.