COST: A Consensus-Based Oracle Protocol for the Secure Trade of Digital Goods

Abstract

In e-commerce, buyers and sellers trade digital products without knowing each other personally. Due to the lack of trust, a buyer prefers to pay for a product upon receipt. Also, the seller prefers to send a product after receiving the payment. With trusted escrows as intermediaries, the payment can be processed and independent parties can confirm the authenticity of a digital product before completing the trade. However, concerning the trade of digital goods, current escrow-based solutions for the buyer-seller dilemma are prone to digital theft because they require the intermediary to validate the complete digital product. Moreover, buyers and sellers rely on the judgment of a single intermediary that they have to trust fully. This work presents a consensus-based oracle protocol for the secure and transparent trade of digital goods using a decentralized escrow service. It protects the seller and buyer against digital theft by splitting the digital product into fragments. Independent parties confirm the authenticity of each of these fragments via a distributed ledger. The protocol is designed to ensure non-fraudulent behavior among all participants and to compensate validators for their work. Compensations are distributed to the validators according to their stake, their confidence and the overall outcome of the validity check.