Secondary Sales with Sequential Commit

Overview

Sequential Commit enables full "Boson Protocol protection" for secondary buyers, that is, buyers not buying directly from sellers, but from other buyers (resellers) via secondary sales.

During each sequential commit (there can be any number of secondary sales), additional funds get locked in escrow, in a capital-efficient way: a minimal amount to cover all possible outcomes is kept in the escrow and the remainder is released to the reseller immediately. When an exchange is finalized, resellers get fully paid out as per the final exchange state, or the buyers are compensated in case the item is not delivered in the expected fashion.

Even if the voucher is revoked or cancelled, the system ensures that resellers don't incur a loss (they don't profit either) apart from the potential fee they paid on an external marketplace.

This additional protection provides a strong incentive for secondary sales to be performed in-protocol, rather than externally.

For sequential commit details, please see SequentialCommitHandlerFacet.

Benefits of making secondary sales through Boson Protocol

• All buyers (incl. intermediary "resellers") are ensured fair-exchange protection of Boson Protocol (receive the item in good qualiy or get your money back).
• Item prices can be dynamic: full compatibility with price discovery mechanisms. See BPIP-4.
• Perpetual royalties are enforced in-protocol and granular per each (secondary) sale. See BPIP-5.

The support for sequential commit was introduced by BPIP-7. There you can find detailed formalization on the principles and calculations.

Steps

1. Seller creates an offer, with potential price discovery mechanism.
2. In case the offer is not using a fixed price:
   • the Seller pre-mints the rNFT vouchers
   • if Seller deposit is set to be greater than 0, the Seller must have sufficient funds for all these in the Seller pool the latest at the commit time)
   • in due time, price discovery completes (Buyer called commitToPriceDiscoveryOffer)
3. Secondary Buyer purchases a rNFT voucher from the original Buyer by calling sequentialCommitToOffer, providing the funds requested (which might increase the amount in escrow and/or allocate additional royalties to be paid).

Note that secondary sales via sequential commit functionality, by design, do not affect other actions, such as redeeming, canceling or revoking the voucher, or even raising the dispute. It does affect however how the funds are released to parties at finalization time, as detailed below.

Payout matrix

This matrix describes what each participant gets in either of the final states.

Final state	Seller	Intermediary Buyer	Last Buyer
Completed	original price seller deposit royalties from all sales	their difference in price, reduced by royalties	item
Revoked	loses seller deposit	their price back	their price back seller deposit
Cancelled	seller deposit buyer penalty	their price back	their price back, reduced by buyer penalty
Retracted	original price seller deposit royalties from all sales	their difference in price, reduced by royalties	item
Resolved/Decided	split of original price split of seller deposit royalties from all sales, adjusted for the split	their difference in price, reduced by royalties, adjusted for the split	potentially item split of their price split of seller deposit
Refused	seller deposit	their price back	their price back

Known drawbacks

Seller and last buyer collaboration

This is not a vulnerability, but is listed here as a record that it can happen and that the protocol cannot prevent it.

If the last price on the secondary market is higher than the original item price, the original seller and the current voucher owner can collaborate to both gain financially. They can agree on the price between original price and last price and then cancel/revoke the voucher. They then settle their transaction outside of the protocol. Resellers gain nothing, the last buyer is better off since they paid less and the original seller got more for the item. The only thing that the original seller gave up was royalties, but the agreed price can be high enough to compensate for it.

Seller buyback and Revoke

If the seller wants to revoke a voucher, and the voucher is available on a secondary market, this gives the seller an opportunity to purchase it and potentially not lose the seller deposit. If the exchange is finalized in any unhappy path, intermediate buyers get back what they paid, but they don’t realize any profits. The remainder in escrow (seller deposit + last price on secondary market) is then split between the seller and the last buyer (which in this case is the seller). So it doesn’t matter which action the seller takes (revoke, cancel, mutual resolution), they always get the total pot back. Different actions only technically affect how the split is done in the protocol, but at the endit all comes back to the seller.

This is viable as soon as costs of doing this are lower than the loss in case of revocation.

• Revocation costs: seller deposit + sunk royalties
• Buyback costs: sunk royalties + capital costs

Capital costs in buyback are the costs associated with having enough capital to purchase the voucher back, incl. tx gas costs and potential credit costs.

Since both cases are unhappy paths, no protocol or marketplace fees are charged, so they aren't relevant here.

So as soon as the seller's deposit is greater than buyback capital costs, the seller is incentivized to do buyback instead of revocation. However, this is a completely valid scenario and can be reduced to seller's costs optimization (buyback vs. revocation). First note that it can happen only if the voucher is listed on the secondary market. If it’s not, the seller's only option is to revoke (or simply not deliver and a dispute is raised) and losing their seller deposit. On the other hand, if the current voucher owner lists the item on the secondary market, they always expose themselves to the risk that at some point the voucher will be revoked and they will not realise any profit from secondary sale.