Reduced Trust Bitcoin Escrow

Using Pay to Script Hash (BIP 0016) with M-of-N Signature Scripts (BIP 0011)

Introduction
Who am I? Steve Myers
from Los Angeles, California software development manager by day bitcoin enthusiast by night lead on bitcoin escrow project called bytabit

Motivation
pay to script hash (BIP 0016) and m-of-n transaction scripts (BIP 0011) are working today existing bitcoin escrow methods require full trust centralized bitcoin exchanges can be shut down OTC trading via IRC or live is difficult and inefficient experimenting with new bitcoin features is FUN!

Participants in Reduced Trust Bitcoin Escrow

Buyer
trades bitcoins for physical good or fiat currency

Seller
trades physical good or fiat currency for bitcoins

Escrow
matches buyer and seller documents terms of sale
(eg. type of good, method of delivery, deadline for delivery and payment hold time)

resolves disputes between buyers and sellers

Dispute Resolution with Reduced Trust Bitcoin Escrow

Escrow agent manually reviews evidence provided by seller and buyer
uses published standard contract terms validates evidence based on delivery method eg. if seller deposits cash to buyers bank account, evidence could be copy of the deposit slip

In case of dispute Escrow service signs disbursing transaction to transfer escrowed bitcoins to seller or refund them back to buyer

Create Escrow Funding Transaction

1
Escrow-Priv-1

2
Escrow-Pub-1

3
Redeem Script

Seller-Priv-1

Seller-Pub-1 Escrow Address

Buyer-Priv-1

Buyer-Pub-1

Buyer-Priv-2

Transaction Output(s)

Signed Escrow Funding Tx

Create Escrow Disburse Transaction when Buyer and Seller Agree

1 2 3
Buyer-Priv-1 Signed Escrow Disburse Tx Redeem Script

Seller-Priv-1

Signed Escrow Funding Tx

Seller Pay-To Address

Create Escrow Disburse Transaction when Escrow Resolves Dispute

1 2 3
Buyer-Priv-1 Signed Escrow Disburse Tx Redeem Script

Escrow-Priv-1

Signed Escrow Funding Tx

Buyer Refund-To Address

Q&A
steven.myers@gmail.com

Further Reading
TwoOfThree.sh, Gaven Andresen
https://gist.github.com/gavinandresen/3966071

2-of-2 escrow example

https://people.xiph.org/~greg/escrowexample.txt

What libbitcoin and SX are And Why They Matter, Vitalik Buterin, Bitcoin Magazine
http://bitcoinmagazine.com/6234/what-libbitcoin-and-sx-are-and-whythey-matter/

Example 2-of-3 Disburse Transaction on Blockchain

http://blockexplorer. com/rawtx/184463fd0f48994ba879e02219a3aa09d5a9be871d3a35ad 5cdf2895f4832b77

Related Projects
LocalBitcoins.com - Full Trust Escrow
https://localbitcoins.com/faq#howto_why_escrow

Blockchain.Info - Reduced Trust Escrow (Beta)

https://blockchain.info/wallet/escrow

Bitcoin.de - Full Trust Escrow

https://www.bitcoin.de/en/faq/what-does-bitcoin-de-do-to-offersecurity-to-buyers-and-sellers/39.html

Haskoin - Online Wallet (Launching Soon)

http://www.haskoin.com/