Adding a Blockchain Arbitration Layer to our day-to-day Life.

A cohesive marketplace has many inhabitants and when disputes arise between them the processes surrounding the arbitration, resolution, and execution of agreements can be time consuming and counter-productive. What if there was a means of automating the process so that parties could benefit from a decentralized platform that used the magic of smart contracts to manage dispute resolution?

The answer to this question may come in the form of Kleros, a decentralized organization powered by the Ethereum blockchain. Upon it resides the foundation for a decision protocol supporting a multipurpose court system that can be custom deployed into smart contract code to arbitrate disputes.

Smart contracts that are built to integrate with Kleros will give parties who might have a conflict over the terms of off-chain contract fulfillment an opportunity to have impartial jurors from across the globe weigh evidence, vote, and select a resolution to be carried out by the contract.

Small example

A baker Joe agrees to provide director of marketing Sarah a dozen muffins for her office. Joe and Sarah use a Kleros enabled smart contract to manage their business relationship. When a dispute between the two over a missed delivery arises, Sarah has the option to fill out a claim form and send the issue to Kleros after failing to resolve things with Joe.

Bringing jurors to the Blockchain

Sarah’s case can be selected by prospective jurors who are randomly chosen using a sequential proof of work seed mechanism. These jurors are shown evidence that is kept private via a hash and asymmetrical encryption in order to protect the sensitive information of the users and provide a proof to the blockchain without revealing the data.

Jurors have a set time to look over the evidence, provide justification, vote, and decide on parameters set in the contract as to how to settle the conflict such as paying a refund to Sarah for the missed delivery, or giving Joe a chance to make good.

Accuracy through staking

To be selected jurors must stake a native token to the platform, pinakion, which makes them eligible to vote on active disputes; staking more pinakion increases the chances that a juror might be selected. If they are selected more than once in the spectrum of prospective jurors, which is unlikely but not unheard of, their vote will carry a corresponding weight as to the ultimate outcome of the case.

Pinakions act as a metric of reputation and are a key to the Schelling game theoretical model driving the voting mechanism for jurors.

The voting system works by having the jurors analyze the evidence of the case and commit their votes by submitting a hash of their vote and a secret value. In a second phase, jurors reveal their votes and secret values. The Kleros smart contract verifies that the values revealed corresponds to the commitment. Jurors who fail to reveal their votes are penalized. Votes are committed are unchangeable and are not revealed in the application layer to other jurors or parties to prevent influencing the votes of other jurors.

A juror might decide they want to reveal both their decision to vote in a certain way and the commitment hash, however they do so at a cost. Should another party be able to reveal to Kleros the commitment of a juror prior to the closure of the voting period, that party will be able to confiscate that juror’s staked pinakions as well as invalidate the juror’s vote. Pinakions are then redistributed from jurors who voted differently than the majority to jurors who voted like the majority.

Jurors are to be compensated by fee schedules which will be relative to the various sub court from which disputes arise as coded into the smart contract.

It is expected that these parameters will be hammered into the smart contracts governing the systems so that both parties will be responsible for making a deposit which will cover the fee. In the case of appeals, the party who covers the fee will be decided by the arbitrable smart contract.

The system is not designed to limit appeals, however each appeal increases the number of jurors necessary to conclude the case and thus causes the fee schedule to rise with each additional juror.

In theory, although it would become expensive, someone could continue to appeal a case indefinitely, although the costs would ostensively outweigh the benefits.

The speed that business travels at often makes demands upon modern systems that they simply fail to meet, and the outcome is costly to business owners who are trying to make a profit and consumers who need protection, and access to goods as services go remain unfettered.

The solution Kleros brings to the table answers this demand in a decentralized trust-less nature that gives smart contract developers a way to built conflict resolution into the very agreements they code.