An Incentive-Compatible Smart Contract for Decentralized Commerce

We propose a smart contract that allows two mutually distrusting parties to transact any non-digital goods or services on a blockchain. The contract acts as an escrow and settles disputes by letting parties wager that they can convince an arbiter they were the honest party. We prove that the contract is secure in a strong game-theoretic sense if and only if the arbiter is biased in favor of honest parties. The contract can be instantiated on any blockchain that supports smart contracts. In particular, it can be instantiated in a manner that complies with laws and regulations by using a blockchain with revocable anonymity.