# Exchange mechanism

{% stepper %}
{% step %}

### Listing period

A seller creates an offer, a buyer finds it and commits to it. Seller's and buyer's funds are encumbered by the protocol and the buyer receives a tradeable rNFT.
{% endstep %}

{% step %}

### Redemption period

The buyer can trade the rNFT or redeem it.

Both the seller and the buyer can withdraw from the exchange during this period, but they will be penalised if they do so. 
{% endstep %}

{% step %}

### Dispute period

The seller must deliver the item. If the item is not delivered or is faulty, the buyer raises a dispute.
{% endstep %}

{% step %}

### Resolution period

The seller and buyer try to mutually resolve the dispute. The final outcome is the decision on how the locked money is split between them. If they cannot do it, the buyer can escalate it, and the dispute resolver gets involved.
{% endstep %}

{% step %}

### Escalation period

The dispute resolver decides how the money, locked in the protocol, is distributed between the seller and the buyer.
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{% endstepper %}

### State transitions

| Phase             | Previous state | State     | Next state(s)                                                                                                          |
| ----------------- | -------------- | --------- | ---------------------------------------------------------------------------------------------------------------------- |
| Listing period    | /              | LISTED    | COMMITTED                                                                                                              |
| Redemption period | LISTED         | COMMITTED | <p><strong>REVOKED</strong><br><strong>CANCELED</strong><br>REDEEMED</p>                                               |
| Dispute period    | COMMITTED      | REDEEMED  | <p><strong>COMPLETED</strong><br>DISPUTED</p>                                                                          |
| Resolution period | REDEEMED       | DISPUTED  | <p><strong>RETRACTED</strong><br><strong>RESOLVED</strong><br>ESCALATED</p>                                            |
| Escalation period | DISPUTED       | ESCALATED | <p><strong>RETRACTED</strong><br><strong>RESOLVED</strong><br><strong>DECIDED</strong><br><strong>REFUSED</strong></p> |

End states are written in **bold***.* Each of the periods is described on the following pages. The final payouts for all states are listed on [Exchange payouts](/v2.4.2/using-the-protocol/dacp-tools/finances/exchange-payouts.md).

<figure><img src="/files/7N3XVd5JQJ8ZvpxU7enA" alt=""><figcaption></figcaption></figure>


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