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The non-KYC, peer-to-peer, decentralized exchange has upgraded its multi-signature trade protocol and account reputation system, with the aim of reducing the trust required to safely use the exchange.
Bisq has been building out its platform since 2016. The decentralized exchange allows its users to trade both crypto and fiat pairs, using a combination of multisig escrows and an arbitration process to govern honest trading on its open-source and Tor-enabled, peer-to-peer platform.
According to statistics from CoinDance, volumes on the Bisq exchange have significantly stepped up in 2019—with a record $10.7 million traded on the platform during a single week in June. Since then, weekly volumes have cooled to around $1 million a month.
In a blog post accompanying the platforms v1.2 launch, Bisq explained “that arbitration with the new trade protocol is vastly different from arbitration from before.” The new protocol moves from a prior “2-of-3” to a revised “2-of-2 multisig escrow,” with the third key that was previously used by arbitrators now being removed.
The new process works by having traders now sign a “time-locked transaction that pays out all multisig escrow funds” to a new “donation address.” The signature for the transaction can then published on the network (by either of the traders) if things end up going sour. Bisq said that “now that arbitrators have lost the third key in the multisig escrow, their power is greatly reduced—and the network can more easily recruit dispute resolution agents (mediators and arbitrators) as it grows around the world.”
As for improving the trustworthiness of account holders on the exchange, Bisq has plans for that too. The exchange revealed that following “a handful of stolen bank account scams earlier this year,” it had to impose “a 0.01 BTC restriction on fiat trades” while it looked into reevaluating its account aging conventions. The solution they came up with is called “account signing.”
“Essentially, account aging for payment accounts that require account signing does not kick in until a user’s payment account has been signed by another trusted user,” Bisq explained in its announcement.
This only happens when an “untrusted peer proves their intention to trade honestly.” However, once a user with an unsigned payment account buys Bitcoin from users with “signed” payment accounts—and there are no issues, and trade limits are lifted.