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Service Contracts: buying and selling services on OpenBazaar

Service Contracts in OpenBazaar

Introduction

A service contract in OpenBazaar replaces a physical good to be sold with the terms and conditions of a service to be performed by one party. The distinction between a good and service within a Ricardian contract is minimal, as will be described in this article. Morever, the combination of pseudonym (nym) reputation management (proof of burn nyms, web of trust) and surety bonds can ensure a robust service industry within OpenBazaar.

Service Contracts

The final format of a service contract is of course comparable to that of a physical good. Similar to physical goods, there are several discovery mechanisms for services on OpenBazaar. For the sake of simplicity, we will examine two types of service contracts that can be supported in OpenBazaar, following the Ricardian contract model:

  1. Invitation to Tender (ITT)
  2. Service Listing

Invitation to Tender (ITT)

A call for bids, call for tenders, or invitation to tender (ITT) (often called tender for short) is a special procedure for generating competing offers from different bidders looking to obtain an award of business activity in works, supply, or service contracts... Open tenders, open calls for tenders, or advertised tenders are open to all vendors or contractors who can guarantee performance. (Wikipedia)

The first type of contract is an invitation to tender (ITT), whereby a client publishes their list of requirements for a desired good or service. In the context of a service, these details are specified within a Ricardian contract and distributed to potential service providers in the OpenBazaar network. Relevant ITT contract details include:

  1. Name and category of the service
    • Chosen from a list of pre-determined categories and sub-cateogories
    • This list will be frequently updated to reflect market needs, and include custom categories to support new markets on OpenBazaar
  2. Price range
    • The price that the buyer is prepared to pay for the service
    • This can be left blank
  3. Estimated time of completion
    • The maximum time that a buyer expects the service to be performed
  4. Comments and special considerations
    • Any comments or special details that the service provider needs to be aware of

The details of the contract can be further negotiated between the parties before a contract is double-signed (i.e. a contract signed by both the buyer and service provider indicating consensus on the final version of the contract)

For example, if Alice wanted to deliver some cupcakes to a co-worker on the other side of the city, she writes the following Ricardian-contract as an ITT:

Contract Hash: 5a13604e59b03c3b34f830c53919e176aa4cdc59

-----BEGIN PGP SIGNED MESSAGE-----
Hash: SHA1

<?xml version="1.0"?>

<!-- Contract Properties -->
<contract_type> Service: ITT </contract_type>
<contract_nonce> 12345asdfjkl </contract_nonce>
<contract_exp> YYYY-MM-DD TIME UTC </contract_exp>

<!-- Service Details -->
<service_name> Cupcake delivery </service_name>
<service_category> Courier </service_category>
<service_subcategory> Small item (< 5 kg) </service_subcategory>
<service_price> 0-20 mBTC </service_price>
<service_time> 2014-06-04 07:00-09:00 am </service_time>
<service_comments> Hi, I'd like to deliver the cupcakes to my co-worker before she
 gets into work, which is around 9.30 am. Thanks. </service_comments>

<!-- Category/Sub-category Details -->
<package_name> Cupcakes </package_name>
<package_units> 3 </package_units>
<package_perishable> Yes </package_perishable>
<package_pickupaddr> 1060 W Addison St, Chicago, IL 60613, United States </package_pickupaddr>
<package_dropoffaddr> 900 W Eddy St, Chicago, IL 60613, United States </package_dropoffaddr>

<!-- Client NYM -->
<nym_id> ALICE-NYM-ID-HASH </nym_id>

<!-- Bitcoin Pubkey -->
<btc_addr> 03d728ad6757d4784effea04d47baafa216cf474866c2d4dc99b1e8e3eb936e730 </btc_addr>

<!-- Client PGP Key -->
<PGP_Public_Key>
- -----BEGIN PGP PUBLIC KEY BLOCK-----
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</PGP_Public_Key>
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Alice publishes the unencrypted contract to the OpenBazaar network, where service providers can scan for contracts that match the category/sub-category fields that they are interested in.

Bob, owner of 'Raven Drone Courier', is interested in securing the contract. In order for a service provider to place a bid on a contract, they prepare a 'bid contract' that will include:

  1. Fee for the service
  2. Terms and conditions for providing the service

For example:

Contract hash: 5921a669dcd217e3286711e77911b54865d15702

<?xml version="1.0"?>

<!-- Contract Properties -->
<contract_type> Service: ITT </contract_type>
<contract_nonce> 12345asdfjkl </contract_nonce>
<contract_exp> YYYY-MM-DD TIME UTC </contract_exp>

<!-- Service Details -->
<service_name> Cupcake delivery </service_name>
<service_category> Courier </service_category>
<service_subcategory> Small item (< 5 kg) </service_subcategory>
<service_price> 0-20 mBTC </service_price>
<service_time> 2014-06-04 07:00-09:00 am </service_time>
<service_comments> Hi, I'd like to deliver the cupcakes to my co-worker before she
 gets into work, which is around 9.30 am. Thanks. </service_comments>

<!-- Category/Sub-category Details -->
<package_name> Cupcakes </package_name>
<package_units> 3 </package_units>
<package_perishable> Yes </package_perishable>
<package_pickupaddr> 1060 W Addison St, Chicago, IL 60613, United States </package_pickupaddr>
<package_dropoffaddr> 900 W Eddy St, Chicago, IL 60613, United States </package_dropoffaddr>

<!-- Client NYM -->
<nym_id> ALICE-NYM-ID-HASH </nym_id>

<!-- Bitcoin Pubkey -->
<btc_addr> 03d728ad6757d4784effea04d47baafa216cf474866c2d4dc99b1e8e3eb936e730 </btc_addr>

<!-- Client PGP Key -->
<PGP_Public_Key>
-----BEGIN PGP PUBLIC KEY BLOCK-----
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-----END PGP PUBLIC KEY BLOCK-----
</PGP_Public_Key>
-----BEGIN PGP SIGNATURE-----
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The bidding contract can public or private, which is to say it can be broadcast back to Alice from Bob in plaintext or encrypted with Alice's private key.

Alice may receive tens or hundreds of bidding contracts to her ITT and can filter the bidding contracts according to their price, delivery time, nym reputation etc. Once Alice chooses the winning bid contract, and provided she has not finer details to negotiate, she digitally signs contract and sends copies to the bidder and an arbiter to setup the multisignature address.

The TradeNet

A long term outcome of supporting ITT contracts within OpenBazaar is the potential for it to become a 'TradeNet', as descibed by Mike Hearn (slide 25). The original proposal imagined the TradeNet to be a market infrastructure for applications, potentially distributed autonomous corporations/businesses, to interface with in order to purchase goods and services according to their programmed goals and profit motives. These applications would issue tenders for goods or services on the TradeNet, receive bids and automatically purchase contracts based on algorithmically-determined conditions (factoring in price, proximity, time etc).

A much more attractive alternative is for OpenBazaar to potentially faciliate ITT contracts for both individuals and distributed consensus/autonomous organisations for peer-to-peer exchanges of goods and services. This is achievable using Ricardian contracts as they are both human and application readable, permitting human-application exchanges without either party known the true identity of each other if so desired.

Service Listing

The second type of service contract is called a service listing, where service providers can advertise their services to potential clients in the hope of receiving a quotation request. Contrary to an ITT, where service providers seek out contracts to bid on, a service listing will be 'Yellow Pages' of individuals/organisations filtered according to the category/sub-category of services they provide. The service listing will be formatted as a Ricardian contract including the following fields:

  1. Category and sub-category of service provision
  2. Estimated prices
  3. Estimated time to complete certain services
  4. Availability
  5. Comments and special considerations
  6. Quotation response time

A potential client can request a quote from the a service provider by drawing up a fresh service contract (according their requirements) that includes a hash of the service listing. The inclusion of the hash indicates that the client is requesting a quote based off the specifications advertised by the service provider's service listing. From here, the contract is negotiated between both parties as described above prior to double and triple digital signing to initate the contract.

Good Performance Bonds

A surety bond can be created to cover a failed contract, which either partially or fully remediates the costs of the failed contract for the damaged party. However, as some conditions of the contract can fail without damaging the final outcome of the contract, smaller value surety bonds can be created to incentivise 100% contract fidelity. These smaller surety bonds can be called 'good performance bonds' (GPB).

For example, GPB may be written to penalise a service provider or supplier for failing to meet a contractually obligated deadline. Another example is a GPB for the client to follow the terms and conditions of the service specified in the contract (i.e. be at a certain place by a certain time).

The GPB can be factored as a deduction for the service provider's fee for the sake of simplicity, which can be carefully monitored by the arbiter. Within the contract, a GPB can be formatted within the following fields (using the example above):

<!-- Surety/Good Performance Bonds -->
<GPB01_desc> Goods failed to be delivered by courier before 09:00 am </GPB01_desc>
<GPB01_penalty> 7 mBTC </GBP01_penalty>

<GPB02_desc> Failure to sign for delivered goods within 7 minutes of the drone's
 arrival at the specified drop-off address. </GPB02_desc>
<GPB02_penalty> 5 mBTC </GPB02_penalty>

<GPB03_desc> Failure to respond to enquires within 24 hours. </GPB03_desc>
<GPB03_penalty> 2 mBTC/24 hours until contract cancelled </GPB03_penalty>

The inclusion of GPBs would occur from the outset of the contract's formation, requiring both parties to digitially sign to indicate their agreement. The arbiter can verify the authenticity and integrity of these terms by both party's digital signatures and contract hashes, as per a normal Ricardian contract.

Conclusion

In addition to the sale of physical goods, OpenBazaar supports a true free market for services within a censorship-resistant platform. Service contracts leverage the benefits of Ricardian contracts, used for physical goods and P2P lending, to form a tamper-proof chain of authenticity for contractual consensus between two parties and an arbitrating third party. Finally, the potential for Invitation to Tender contracts to form a TradeNet effect is an exciting long-term possibility for distributed autonomous corporations/organisations to rapdily obtain goods and services.

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