Security deposit
Security deposit
A security deposit is an amount of BTC that buyer and seller send to a multisig address together with trade funds when an offer is taken, to guarantee that both parts follow the trading protocol. Security deposits are fully reimbursed automatically to each of the trading peers when the trade ends without disputes.
In the strange case that a trade protocol violation occurs, and depending on the severity of the violation, a certain amount of the trading deposit will be lost from the part who did not follow the trading protocol and will be used to compensate the aggravated part. For example, it's considered a protocol violation when buyer doesn't pay to seller, when seller doesn't confirm the payment from the buyer or if the account details provided are incorrect.
Bisq doesn't keep your funds, and avoids those reputation mechanisms that would deteriorate your privacy (to obtain reputation, information must be revealed) and would give a false sensation of security due to sybil attacks. Security deposits are the most important tool that Bisq offers you to protect from dishonest traders and, at the same time, show you're willing to cooperate because if you don't, you'll risk losing your security deposit.
Recommended amounts
Bisq allows users to choose a security deposit ranged from a minimum of 15% of trading amount or 0.006 BTC, to a maximum of 50%. Both buyer and seller should put the same security deposit amount.
When creating an offer, Bisq recommends a security deposit depending on the recent volatility of the traded asset: the higher the volatility, the higher the recommended security deposit. Using the recommended amount helps to prevent that a Bisq exchange becomes a future trading contract where the BTC buyer only settles the trade paying fiat or altcoin if BTC price has not fallen enough to compensate losing the security deposit.
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If you create an offer to sell 1 BTC and you use the recommended security deposit which at that moment is 25%, Bisq will ask you to reserve 1.25 for this offer. The buyer, when taking the offer, will have to put 0.25 BTC as security deposit. At this moment, a deposit transaction will be broadcasted, sending 1.5 BTC in total to a 2of2 multisig address. |
When taking a buy or sell offer, the security deposit set by the maker can be seen at the "BTC deposit" column.
Note for new users
The security deposit generates an inconvenient, specially to new users: As Bisq acts like a Bitcoin second layer, bitcoin is required to buy bitcoin. To lift the 0.01 BTC buying limit for new accounts, they must have at least 0.0065 BTC, in order to pay for the security deposit and fees. This amount has to be acquired from an ATM, a friend, by working for it or at a traditional exchange.
