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arXiv:2110.09857cs.CR

Irrationality, Extortion, or Trusted Third-parties: Why it is Impossible to Buy and Sell Physical Goods Securely on the Blockchain

Amir Kafshdar Goharshady

Early discovery. Linked by one identifiable commenter. This paper is outside the main ranking; a mention is not an endorsement.

Abstract

Suppose that Alice plans to buy a physical good from Bob over a programmable Blockchain. Alice does not trust Bob, so she is not willing to pay before the good is delivered off-chain. Similarly, Bob does not trust Alice, so he is not willing to deliver the good before getting paid on-chain. Moreover, they are not inclined to use the services of a trusted third-party. Traditionally, such scenarios are handled by game-theoretic escrow smart contracts, such as BitHalo. In this work, we first show that the common method for this problem suffers from a major flaw which can be exploited by Bob in order to extort Alice. We also show that, unlike the case of auctions, this flaw cannot be addressed by a commitment-scheme-based approach. We then provide a much more general result: assuming that the two sides are rational actors and the smart contract language is Turing-complete, there is no escrow smart contract that can facilitate this exchange without either relying on third parties or enabling at least one side to extort the other.

arXiv comments
To appear in the IEEE International Conference on Blockchain (Blockchain 2021), Melbourne, Australia
Journal reference
DOI
Subjects
cs.CRCryptography and Security cs.DMDiscrete Mathematics cs.GTComputer Science and Game Theory

On Hacker News

Linked by 1 identifiable commenter in 5 comments across 4 threads, from Jun 2023 to Dec 2025. Found in 1 HN submission from Oct 2021 to Oct 2021. Open submission discussions.

Comments linking this paper, per year.

Discussed in comments4 threads

  1. I wasted years of my life in crypto 2 comments

    • > Spending money usually involves getting a good or service in return, which inherently requires "trust" Indeed. Good paper driving the point home: Irrationality, Extortion, or Trusted Third-parties: Why it is Impossible to Buy and Sell Physical Goods Securely on the Blockchain…

      FabHKView on HNParent context

    • Read Irrationality, Extortion, or Trusted Third-parties: Why it is Impossible to Buy and Sell Physical Goods Securely on the Blockchain. Or just read the title, it has the main point. http://arxiv.org/abs/2110.09857

      FabHKView on HNParent context

  2. Bank of Thailand freezes 3M accounts, sets daily transfer limits to curb fraud 1 comment

    • Of course, if the sender can cancel transactions at their discretion, that enables another class of frauds. The solution has to lie in some trusted centralized party outside the payment system [0]. Chia can't solve this. A banking system and legal system can. [0] Goharshady, A.…

      FabHKView on HNParent context

  3. Sleeping beauty Bitcoin wallets wake up after 14 years to the tune of $2B 1 comment

    • Not to mention the fact that you can hold Bitcoin trustlessly, and you can transfer it to someone else trustlessly, but then you have to trust that they send to you in return what they promised. See Goharshady, Amir Kafshdar: Irrationality, Extortion, or Trusted Third-Parties…

      FabHKView on HNParent context

  4. Proposed SEC order to freeze, repatriate Binance.US assets 1 comment

    • There’s a neat paper showing that you can have trustless decentralised exchanges only for on-chain assets, ie exchanging one crypto for another. Real world assets (including fiat) cannot be securely bought on blockchains. Irrationality, Extortion, or Trusted Third-parties: Why…

      FabHKView on HNParent context

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