In the rapidly developing public chain and dApp landscape, decentralized governance and dispute resolution has emerged as the key missing piece to protecting users’ rights and assets and driving user adoption.
In short, blockchain security should have two layers: (1) cybersecurity and (2) governance. Although the focus tends to be on cybersecurity, regular users encounter conflicts/disputes more often than security hacks in their day-to-day usage, making governance just as important as cybersecurity. This is even more true in decentralized ecosystems that do not (or should not) have centralized arbitration services.
In this article, I examine different approaches to blockchain governance and dispute resolution and compare them with what I am working on at Oath Protocol.
The EOSIO Core Arbitration Forum
The EOSIO Core Arbitration Forum, or ECAF, is established by the EOS Constitution. Here is the specific language that mentions ECAF:
All disputes arising out of or in connection with this Constitution shall be finally settled under the Rules of Dispute Resolution of the EOS Core Arbitration Forum by one or more arbitrators appointed in accordance with the said Rules.
The ECAF is comprised of vetted arbitrators, trained to consider the special context of blockchain disputes. The arbitrators have to meet certain criteria, including fluency in English and minimum education level, and complete an apprenticeship training process, in which they are mentored by a more experienced arbitrator, before being allowed to rule on a dispute in their own right. Currently, there are six arbitrators who have been cleared to arbitrate mostly complex cases, which are then executed by EOS block-producers (BPs).
By default, one arbitrator is appointed to decide the case. Appeals and disciplinary cases are heard by a panel of three, led by a senior arbitrator. In exceptional circumstances, the (single) arbitrator may request the appointment of two additional arbitrators.
To review and arbitrate a case, ECAF charges a nonrefundable filing fee, paid by the claimant. The minimum fee is 6 EOS, for disputes valued at 1–250 EOS, and goes up to 7,560 EOS for claims valued at 5,000,000+ EOS. At the current exchange rate of USD ~$2.40/EOS (historically, on the low end, per CoinMarketCap), the minimum filing fee equals USD ~$12. For cases with no immediately calculable monetary damages, the default filing fee is 150 EOS (USD $360). The final arbitration cost is decided by the arbitrator and takes into account the arbitrator’s fees and expenses, the costs of experts and translators, and any other costs related to the conduction of the case.
What is the difference between ECAF and Oath Protocol?
The Blockchain Dispute Resolution Layer
Kleros is a dispute resolution protocol, built on Ethereum, that works as a decentralized third party to arbitrate contract disputes. It “relies on game theoretic incentives to have jurors rule cases correctly.”
Kleros is an opt-in court system, comprised of the General Court and specialized courts and sub-courts. Each token holder (and potential juror) can register in at most one sub-court of each specialized court where they have activated their token during the sign-up. This ensures that jurors self-select the specialized courts they believe they are most skilled at.
The arbitration fees are determined by the sub-courts. Once the dispute is initiated, disputants deposit the fees in the smart contract, and failure to do so results in a default judgment in favor of the depositing party. At the conclusion of the case, the losing party pays the arbitration fees, and the other deposits are refunded.
Kleros implements a staking incentive as their juror reward mechanism. This means two things: (1) the more tokens a potential juror deposits in the sub-court, the more likely he is to be selected to decide cases, and (2) at the conclusion of the case, the losing jurors’ staked tokens are distributed to the winning jurors who correctly voted for the winning party. In addition to receiving the losing jurors’ tokens, the winning jurors also receive the arbitration fee.
The figure below demonstrates token redistribution after the vote with seven jurors. Tokens are redistributed from jurors who voted incoherently to jurors who voted coherently. Bob lost the dispute and pays the arbitration fees.
Kleros allows unlimited appeals, but disincentivizes them by automatically “doubling plus one” the number of jurors on each follow-up appeal, which exponentially increases the fees.
What is the difference between Kleros and Oath Protocol?
Aragon aims to “be the first community governed decentralized organization whose goal is to act as a digital jurisdiction, an online decentralized court system that isn’t bound by traditional artificial barriers such as national jurisdictions or the borders of a single country.”
The arbitration mechanism requires an individual that has a dispute to open a case and post a bond. The bond will be locked for the period of the arbitration process and returned if the case is resolved in the applicant’s favor. If not, the bond will be kept as a “network reserve.”
When the arbitration begins, five judges will be randomly selected from a pool of volunteers. Volunteers are individuals that have posted a bond indicating their interest in serving as a Judge. The five selected judges will vote on the outcome of the case.
If the applicant is unsatisfied with the ruling, he or she has the option to appeal by posting an even larger bond than before. For the appeal round, all the judges of the Aragon Network will be able to participate. If the applicant is still unsatisfied, there is the Supreme Court of the Aragon Network Jurisdiction, where the judges will be composed of the top 9 judges by ANJ payout. In other words, these are the individuals with the highest ranking in resolving Aragon Network Jurisdiction cases. The judges of the previous round will get rewarded or penalized according to the ruling of the Supreme Court. If they agree with the previous round’s judges, the judges from that round will be rewarded. And in the opposite decision, the judges of that round get penalized for a call that was overturned.
Currently, Aragon is still investigating the most efficient arbitration criteria for its platform, and the above framework is subject to change.
What is the difference between Aragon and Oath Protocol?
Justice as a Service on the Blockchain
Jur proposes a dispute resolution system that utilizes blockchain technology to instill transparency and immutability in the legal industry. Jur’s dispute resolution solution uses a series of smart contracts to provide an incorruptible decentralized oracle that delivers fair and fast dispute resolution at near zero cost.
To participate in dispute resolution, voters on the Jur platform will need to stake tokens in a smart contract. Voting is therefore restricted to JUR token-holders, which is meant to incentivize outsiders to purchase the token.
Jur provides two different models of voting: open votes or closed Hub votes. Users can choose to enter their contracts in the open dispute resolution or any closed Hub in the Jur ecosystem.
In open votes, any voter can choose to participate. Although there is no centralized barrier to entry, rational voters will only choose to vote when they are more than 50% confident that they can predict the majority position, or else they risk losing their staked tokens.
In closed Hubs, only certain voters are allowed to vote. Admins can establish Hubs with requirements that Oracles must meet in order to vote, creating an ecosystem in which Hubs with vetted oracles are in competition to provide the best service. Hubs do not charge fees directly. Hub administrators earn revenue by selling the contracts that are used on the Hub.
Built on Ethereum, Jur depends on the further development of the technology as it relates to scalability. Presently, Jur is considering the implementation of side-chains, modeled on Loom or Raiden Network, for example.
Jur is available to third parties via APIs for a monthly subscription fee, making it less likely to become the standard industry solution.
What is the difference between Jur and Oath Protocol?
Smart Contracts for the Real World
Mattereum is an “Internet of Agreements” project to manage legal rights over physical property, intellectual property, and eventually even real estate, on the blockchain. It combines smart contract engineering and legal expertise to enable legally enforceable digital agreements or, in other words, pair the smart contract code with a written legal contract. In parallel, part of this project is to build the ecosystem on the other side of this infrastructure, including mechanisms for ensuring that disputes are handled by suitably equipped dispute resolution professionals.
What is the difference between Mattereum and Oath Protocol?
Decentralized Governance and Dispute Resolution
Oath Protocol is a blockchain dispute resolution and governance protocol. Modeled on the common law jury system, it combines one of the most reliable legal systems from the real world with blockchain technology, cryptography, and other concepts to provide a layer 2 cross-chain infrastructure for a decentralized, standard, and extensible public chain-agnostic protocol that protects dApp users’ rights and assets.
What are some of the key features of Oath Protocol?
Each project takes different approaches to jury selection, voting, recording of transactions, and juror incentives. In all cases, the goal is to create a system that is fair to users and incentivizes good decisionmaking by the jurors.
Kleros, Aragon, and Jur all require their jurors to hold and stake tokens to be selected to decide cases, whereas anyone can be a juror on the Oath Protocol Platform, and our juror credit level system incentivizes good decisionmaking and inhibits bad actors. Both Oath and Kleros intend to be used as a layer 2 solution for other chains and dApps, and Aragon and Jur are working on independent, self-contained platforms. Only Oath Protocol offers a semi-decentralized solution, whereby only two transactions are recorded on-chain, which reduces gas fees and offers immediate scalability, not tied to the scalability limitations of the Ethereum network.
As with any protocol, the value will ultimately come from the users’ trust and use, and the ability to remain robust and relevant in an ever-evolving ecosystem.
With Oath Protocol, we have decided to uniquely focus on low-value/high-volume disputes in a semi-decentralized way that allows us to maintain scalability while preserving a fair and robust community decision making process.
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