This is just a simple solution to one age old problem - stopping the party with most power (usually the seller) from using deposits as a way to gain leverage the weaker one. It removes the unfairness and flaws the the way deposits normally work.

Deposits are usually asymmetrical. They are charged by one party to give it leverage over the other, in the event that something falls through. For example if a hotel guest cancels a booking he loses the deposit, but if the hotel cancels it it pays nothing. So there is an asymmetry of power. It’s unfair.

In well-regulated areas, deposits are held by a trust. For example in the UK a deposit paid by a tenant does not go to the landlord. It goes to a “deposit protection scheme”. This helps resolve all sorts of disputes. An uninterested party will judge whether the tenant has forfeited his deposit.

Combining these two ideas yields the solution to the problem. The best way to deal with deposits is this: Both parties pay the same amount to a trust as a deposit. If either party breaks the agreement, he receives the other party’s deposit plus his own.

There is one additional benefits, made possible by this innovation: The deposit amount should be set not by one of the parties, but by regulation. For example it could be 10% of the transaction price. When entering the scheme, both parties can state if they prefer a different amount. The final deposit amount will be the median of the three amounts (the buyer’s preference, the seller’s preference, and the regulated amount).