The Decentralized Bargaining Chips (B-Chips) Protocol

A concrete use of a blockchain based decentralized network to help discover rational prices in bilateral negotiations in a retail marketplace.

Present day e-commerce has dozens of buyer-seller auction/negotiation protocols for use, majority of which are merchant driven, i.e., they focus on the methods and processes available to the merchant allowing them to determine price or package the products more efficiently. Many e-commerce platforms, however, do not have a two-sided negotiation process which helps both the merchant and the customer in an honest broker kind of way.

Due to the fact that platforms like Amazon and Uber charge a significant product and price dependent margin over the price offered by the merchant, one can easily argue that the platforms have a vested self-interest to offer higher prices, which may not always be the best possible option for either the merchant or the customer.

There is enough anecdotal evidence on the Internet to believe that Amazon, Uber, AirBnB et al., care more about making profits for themselves rather than help to discover mutually acceptable prices for both the customer and the merchant.

What is needed is an honest broker for e-commerce that easily enables pure bilateral negotiations between buyer and seller.

Samuelson and Chatterjee (1983) “Bargaining under Incomplete Information”, discusses optimal bargaining solutions available to the buyer and seller when they submit sealed offers to the “neutral” bargaining mechanism (emphasised words added here).

We seek to implement the “neutral bargaining mechanism” as a decentralized network protocol on a blockchain with some privacy protections. We believe this is one of the most natural uses of the blockchain as a payment intermediary.

The Decentralized Bargaining Chips (B-Chips) Protocol

The key features of the B-Chips Protocol are as follows:

1. Buyers and sellers form a cooperative commerce network
2. Sellers issue and accept bargaining chips to/from customers
3. For a given product, sellers post the same price for all buyers
4. Sellers secretly reveal their reserve price to the network at various points of time
5. Sellers issue chips to buyers when they are selling at a “premium” (or at the posted price)
6. Sellers accept chips from buyers in lieu of discounts applicable to that buyer (the difference between the final price and the posted price)
7. The history of B-Chips transactions is used to calculate the price sensitivity of both the buyer and the seller, which is private to the buyer, seller respectively and to the smart contract
8. The B-Chips smart contract calculates an equilibrium valuation or the final price for a given product using the price sensitivity index of the buyer and the seller. This price lies between the reserve price and the posted price of the seller.

The equilibrium price calculated by the smart contract is in line with the calculations described in the (‘83) paper above, where the network does not impose additional margins higher than (low) payment transaction costs.

It is to be noted that the B-Chips are a type of utility tokens in the crypto ecosystem.

So we have presented here a concept for a bargaining method which can be an honest broker between buyers and sellers in the global e-commerce marketplace, using a blockchain based decentralized network.

I intend to build this platform and completely opensource it at some point when I have sufficient resources to do so.

— Cheers! (Rajesh Bhaskar — rajesh@trilloc.com)

(*) The B-Chips Automated Bargaining Method is now International Patent Pending.

Note to Investors: If you would like to invest in B-Chips, we are open to a small investment.

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