Dispute Resolution

The Protocol is designed to minimize unnecessary data disclosure during disputes. If a user files a dispute, the counterparty can submit evidence of the transaction without exposing additional personal data. In the current contract implementation, disputes are resolved on-chain by authorized admins based on submitted evidence and protocol fault rules. Privacy-preserving bank transaction verification and deeper automated settlement are part of the roadmap (see Section 4.2).

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Windows & Burdens

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Time Windows

Each order type and payment rail has specific dispute windows: Standard Windows:

• T_dispute for low-risk rails: 1 hour after merchant confirmation
• T_dispute for medium-risk rails: 6 hours after merchant confirmation
• T_dispute for high-risk rails: 24-48 hours after merchant confirmation

Evidence Submission:

• Parties have 24-48 hours to submit evidence after dispute is raised
• Extensions may be granted for complex cases requiring off-chain proof generation

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Burden of Proof

On-Ramp (Fiat → USDC):

• Merchant claims: “I received fiat payment”
• Merchant must prove: Bank notification, transaction ID, matching amount and reference
• User can contest: Show their bank statement proving no transfer occurred

Off-Ramp (USDC → Fiat):

• Merchant claims: “I sent fiat payment”
• Merchant must prove: Transfer confirmation, recipient details match order
• User can contest: Bank statement showing no receipt within time window

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Penalty for False Claims

In the event a buyer attempts to proceed without actually making the fiat transfer first, they risk losing Reputation Points—creating strong economic disincentives for fraudulent behavior.

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Slashing Schedule

Penalties scale with severity and repetition:

First False Dispute

• -50 RP
• 50% bond slashed
• Warning issued
• Transaction limits reduced by 50% for 30 days

Second False Dispute

• -200 RP
• 100% bond slashed
• Transaction limits reduced to minimum for 90 days
• Matching priority set to lowest

Third False Dispute

• Permanent ban from protocol
• All bonds forfeited
• Reputation reduced to zero
• Address blacklisted

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Privacy-Preserving Evidence

The protocol minimizes data exposure during disputes:

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Current Evidence Types

Merchant Evidence (On-Ramp):

• Redacted bank notification showing: amount, date, reference number
• Transaction ID from payment rail
• Timestamp of receipt

Personal details redacted: Account numbers, full names, addresses User Evidence (On-Ramp Dispute):

• Bank statement excerpt showing: no matching transaction
• Account balance proof (amount sufficient to make payment)
• Transaction history for relevant time period

Personal details redacted: Account numbers, other transactions, full identity Merchant Evidence (Off-Ramp):

• Payment confirmation from sending bank
• Transaction ID and reference
• Recipient details matching order (encrypted to admin only)

User Evidence (Off-Ramp Dispute):

• Bank statement showing no receipt
• Account activity log for time window

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Future: ZK-Proof Evidence (Roadmap)

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Dispute Resolution Flow

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Admin Role (Current Implementation)

In the current implementation, disputes are resolved by authorized admins:

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Admin Responsibilities

• Review submitted evidence within 24-48 hours
• Verify evidence authenticity (check transaction IDs with rail providers)
• Apply protocol rules consistently
• Issue on-chain verdict with reasoning
• Execute settlement (release funds, slash bonds, update reputation)

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Admin Constraints

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Transition to Decentralization

The roadmap includes transitioning to more automated and decentralized dispute resolution: Phase 1 (Current):

• Admin/multisig resolution
• Manual evidence review
• On-chain verdict execution

Phase 2 (Near-term):

• ZK-proof evidence submission
• Automated verification for clear cases
• Admin review only for complex disputes

Phase 3 (Long-term):

• Fully automated ZK-proof verification
• Decentralized arbitrator pool
• Governance-driven rule updates
• On-chain settlement without admin intervention

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Appeal Process

Users who disagree with a dispute verdict can appeal:

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Dispute Statistics and Transparency

The protocol maintains public statistics on dispute resolution:

• Dispute rate: Percentage of orders resulting in disputes
• Resolution time: Average time to resolve disputes
• Verdict distribution: Percentage resolved in favor of each party
• Appeal rate: Percentage of verdicts appealed
• Appeal success rate: Percentage of appeals that change verdict

These statistics provide transparency and accountability, helping users understand the dispute process and trust in fair resolution.