Ptrim: A Market-Based approach to Managing the Risk of Peer-to-Peer Transactions

Ptrim is a purely decentralised application for performing peer-to-peer transactions. Instead of relying on a typical trust/reputation management approach, Ptrim allows its users to manage and reduce the risk inherent in their transactions by including a transaction risk management layer on top of the main transaction processing system. This layer is based on the financial principles behind credit derivative markets and the instruments used for transferring and hedging risk therein. Peers can offer to undertake the risk of transactions between other peers, essentially insuring the transactions for the event that they default. A transaction default risk market is thus generated, in which the cost of insuring a transaction reflects the amount of risk involved. Ptrim has been implemented using the JXTA technology, and deployed in a contained environment. We present the Ptrim system design and first trial results. These validate our design decisions and indicate that our system converges towards transaction default insurance costs correlated with the actual transaction risk.