How Payment Disputes Work
When two parties engaged in an open trade on the LocalCryptos platform cannot reach an agreement regarding the trade outcome, either party can initiate a dispute.
Disputes can only be initiated after the seller has deposited cryptocurrency into the on-chain escrow and can be done by clicking on the "Open Dispute" button inside the trade window.
When either party decides to raise a dispute, an arbitrator will step in and help the parties resolve the issue. In this situation, because all messages on LocalCryptos are end-to-end encrypted and the escrow is decentralized, the arbitrator is given two keys: one to decrypt the messages between the two parties and another to resolve the escrow.
Once the arbitrator steps in, they will probe further into the issue's specifics by separately contacting both parties. When an arbitrator reaches one of the parties on the platform, this chat is only between them and the arbitrator, meaning it's invisible to the other party in the dispute.
The arbitrator will then ask the parties to provide evidence, such as proof of payment from the buyer, confirmation e-mails regarding payments, proof of not having received the funds from the seller, or anything else needed to help the arbitrator make a fair judgment.
The dispute resolution process usually takes less than 24 hours. However, depending on each case's specific circumstances, it can sometimes take the arbitrator up to several days to reach a decision.
Once the arbitrator is satisfied one way or another, they can allow the cryptocurrency to be unlocked from the on-chain escrow by one of the parties. It's critical to understand here that the arbitrator cannot, under any circumstance, access any of the party's wallets and cannot direct the escrow smart contract to do anything else but assist one of the parties engaged in the dispute.
Stefan is a full-time crypto writer and a part-time podcast addict. He holds a master's degree in Commercial Law with a graduate thesis in cryptocurrency regulation. He spends his free time lawyering around the block and lifting heavy objects off the ground. With his mind.
Faculty of Law ”Iustinianus Primus“ - Skopje, LL.M Business Law