How Nector Works

Nector enables safe transactions between strangers by combining chat-based interaction, non-custodial escrow, and deterministic dispute resolution. Each transaction follows a structured lifecycle where funds are locked in a smart contract and released based on predefined rules, deadlines, and user actions.

1. Order Creation

A transaction begins when the seller creates an escrow order.

The seller must define:

  • Product type (Physical or Digital)
  • Product details (Images, Description and Name)
  • Price (In $ dollars)
  • Shipping date (for physical Maximum: 30 Days) or Shipping time (for digital Maximum: 48 Hours)
  • Draw Dispute mode (BTR: Buyer Take Risk or STR: Seller Take Risk)

Before funding the escrow, the buyer is shown a clear breakdown of:

  • Total payment required
  • Bond amounts for both parties
  • Platform fees (1%)
  • Draw dispute warning based on the selected mode

For example:

  • Buyer Take Risk (BTR): Buyer loses more if a dispute ends in a draw
  • Seller Take Risk (STR): Seller loses more if a dispute ends in a draw

This ensures both parties understand the economic consequences before entering the deal.

2. Escrow Funding (Smart Contract Deposit Process)

The escrow is funded in two steps:

  1. The buyer deposits:
    • Product price (in dollars)
    • Buyer bond (20% of product price)
  2. The seller deposits:
    • Seller bond (depends on draw dispute mode)

Draw dispute mode determines bond structure:

  • BTR:
    • Buyer bond = 20% of product price
    • Seller bond = 20% of product price
  • STR:
    • Buyer bond = 20% of product price
    • Seller bond = 120% of product price

If the seller does not fund the escrow, the buyer can withdraw all funds. Once both parties have funded, the escrow becomes active and the shipping timer begins.

3. Shipping / Delivery

Physical Products

The seller must mark the item as shipped within the defined shipping time.

The seller can also cancel the order at any time during the shipment, in which case the order is terminated and all funds are fully refunded to both parties.

If the seller fails to do so:

  • The seller loses 20% of the product price. half of that is given to the buyer and the other half goes to the platform’s wallet.
  • All remaining funds are refunded

No proof is required at this stage. The system relies on economic incentives and penalties.

Digital Products

The seller uploads the digital file after funding the escrow.

The buyer can access the file before confirming the order.

4. Review Phase

Physical Products

After the item is marked as shipped (or delivered digitally), the buyer enters the review phase.

The buyer must respond within 24 hours.

The buyer is asked two questions:

  • Have you received the item?
  • Is the item as described?

Outcomes:

If the buyer confirms both:

  • The seller receives the payment
  • Both parties receive their bonds back

If the buyer does nothing:

  • The payment is automatically released to the seller
  • Bonds are returned

If the buyer reports an issue:

  • A dispute is opened

5. Dispute System

When a dispute is opened, the seller must act within 24 hours.

The seller has three options:

Refund

  • All funds are returned to both parties
  • No penalties are applied

Respond

  • The dispute enters a discussion phase
  • Both parties can negotiate

During this phase:

  • The buyer can release payment manually
  • The seller can still choose to refund

No Response

If the seller does not respond:

  • The dispute is automatically resolved in favor of the buyer
  • The seller loses their bond
  • A portion of the bond is transferred to the buyer and platform

6. Discussion Phase

If the seller responds, both parties enter a timed discussion window.

During this phase:

  • Buyer and seller can resolve the issue manually
  • Either party can finalize the deal (payment or refund)

7. Draw Resolution

If the discussion period expires without resolution:

The dispute results in a draw

In a draw:

  • All funds in escrow are transfer to platform's wallet
  • Both parties lose their entire locked balance

This mechanism ensures that:

Prolonging disputes without resolution is economically irrational.

8. Timeout System

Nector enforces deadlines at every stage to prevent stalling:

  • Shipping timeout : seller must ship within time
  • Review timeout : buyer must review within 24h
  • Response timeout : seller must respond to disputes within 24h
  • Discussion timeout : dispute must resolve within 24h

All timeouts are enforced by the smart contract and can be triggered automatically.

9. Final Outcomes

Every transaction ends in one of three outcomes:

Complete

  • Buyer confirms the order
  • Seller receives payment
  • Bonds are returned

Buyer Wins

  • Seller fails to respond
  • Buyer receives refund + compensation

Draw

  • Both parties fail to resolve the dispute
  • All funds are burned

10. Digital vs Physical Flow

The core flow remains the same, with one key difference:

  • Physical products: require shipping confirmation
  • Digital products: are delivered instantly via file upload

For digital goods, the system cannot verify correctness directly.

Instead, Nector relies on economic incentives:

  • Attempting to cheat leads to financial loss, making fraud irrational.