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INTRODUCTION

Digitalization has improved globally with the introduction of more cutting edge technology. In a world that is full of online merchants and individual users, it is no news to meet a total stranger online and strike up a deal with him. These deals might come up in terms of goods and services, which sometimes involves cash exchanging hands. Now trust is a relative issue, but when it comes to an agreement that involves money, time is of the essence.
What happens in a situation where one of the agreeing parties fails to meet up to his own end of the bargain? Obviously disputes are bound to happen in such case which necessarily does not rule out lawsuit action which might come in the form of lawyers at the initial stage, or in extreme cases, court trials which may drag on for months or even years.

Now let me tell you something about lawyers. All the legal calls are being paid by the hour and it gets much more expensive if you go to court and the cheque keeps increasing with each court session. Now, if the dispute amount involves a lot of money, then it's really worth it because eventually, justice will prevail. But what if the amount involved is little like say $100-$2000, which when you review it, it will only take the aggrieved party a lot more to settle his lawyer.
Does the aggrieved party now give up his money and have a big loss because he can't afford to pay for legal fees? That's a very wrong approach in business because what a billion dollars is worth to Google is the same thing a mere $100 is worth to an individual entrepreneur or user with a small scale business. It's not rocket science, it's just the significance of the value of goods and services.

Therefore in order to take advantage of blockchain technology to settle such disputes, the Kleros project was initiated.

The Kleros Solution

Kleros is a decentralized third party platform that settles disputes based on an already agreed conditions by both parties that are bound by a smart contract. The platform is built on the Ethereum blockchain for an efficient, risk-free and smooth settlement on the blockchain. Kleros has the tag of an opt - in agreement, which means that it's an added clause by contracting parties. The Kleros process involves both parties choosing jurors to rule a decision on what the final outcome of their dispute will be.

The Kleros Framework

Arbitrated Contracts

The Kleros platform is based on an agreement from the parties involved in a contract to bring in the Kleros solution as an arbitrator of their contract, hence it's tag as an opt-in service. This allows the parties to choose the number of jurors and the nature of court in which their case will be ruled. Often times, the nature of the court has everything to do with the contact specifications. For instance, an engineering related contract will choose an engineering court and vice versa. This makes the decision making to be easy. For instance, a medical related court will not understand the ethics of the engineering profession and hence will not be a proper place to judge engineering contracts.

The Juror Options

This is introduced into the Kleros system to give the jurors the available options for them to vote on. Let's take for an instance an agreement between Mike and Emerald which dictates Mike building a bird cage for Emerald's poultry farm for a period of 2 weeks, with Emerald paying $200 for the job with $100 upfront. A dispute in the smart contract will surely contain the following options:

• A: "Reimburse Emerald" transfers funds to Emerald's address.
• B: "Extend Mike's work time frame for one more week" eliminates further dispute for another and therefore removes the option from the contract.
• C: "Pay Mike" transfers funds to Mike's address.

Privacy Drill

As always, privacy is always important in any third party settlement proceeding especially when sharing important information to jurors who are total strangers. To make sure this is maintained, Kleros makes use of the contract masking mechanism by excluding the language contract and the juror voting options from the ones uploaded on the blockchain. The creator originally creates and submits a hash encoding this optionand then encrypts it asymmetrically , before sending it to both parties who can verify that this was the original hash submitted. If this is disputed, the parties can leave verification of the hash to the view of the jurors.

Drawing of A Juror And Selection

In the Kleros system, individual users make themselves available to be drawn through the possession of the pinakion token. This token empowers the juror selection as the probability of being drawn as jurors lies with users who deposits the highest number of tokens. This separates the active members from the inactive ones.
The pinakion token acts as shield to the Kleros platform by preventing malicious cloning by dishonest jurors who might try to take advantage of the majority stake of the system through Sybil attacks.
The Pinakion token also keeps the jurors honest through a reward system. This implies that jurors are graded based on their correct decisions. A dishonest juror who always makes the wrong decisions by being the black sheep majority of times in an option vote will lose his deposited tokens to the competent ones.

The final selection of jurors are based on the fact that the drawing of a juror is directly proportional to the number of tokens they deposited. The candidates first of all selects by themselves the courts they wish to be a part of and they are selected randomly.

Final Votes

After the jurors completes the assessment all the evidence that have been submitted therein, they can now go ahead and vote for a particular option. They then go ahead and submit their hash which includes their vote, the salt(a random value selected to prevent use of rainbow table) and the Ethereum address of the individual juror. This is done to prevent colluding of the jurors whose judgment should be above influence. A Kleros contract does the verification of the hash submitted to make sure the revealed vote matches the commitment. After all verifications, votes are aggregated and the smart contract is executed accordingly.

Arbitration Fee

Every juror brings out their time to do the work of arbitration. Arbitration fees are used to compensate jurors for their time and commitment. It is necessary to avoid abuse of the juror system through unnecessary and pointless disputes and appeals. The figure to be paid to the jurors are at the decisions of the sub courts where the case was treated. The smart contract of the cases determines the person that pays the arbitrary fees.

Appeals

Just like in a centralized government, appeal courts also exist in the Kleros platform. A dissatisfied party can appeal the decision of the juror votes allowing the dispute to be ruled again. This will immediately trigger a double increase in the number of jurors and the appeal fees are paid accordingly. A juror arbitrating over an appeal does not get paid but is affected by the token distribution incentive. This drives proper explanations of their decisions by jurors as this convinces both parties of the fairness of their decisions and reduces further appeal.

Incentive System

Despite the facts that jurors earn arbitration fees from ruling over a dispute, being honest in judgement is a top priority of the Kleros platform. Therefore a token redistribution incentive was introduced to reward coherent jurors and as well sanction incoherent jurors. The ones with incoherent decisions will lose their tokens to the coherent ones. The Kleros process involves the unfreezing of the submitted tokens after making its decision and redistribute it to the jurors. The redistribution decision is modeled after the Schelling coin method where jurors can lose or gain tokens based on how consistent their decisions are with other jurors. A juror is adjudged to be coherent if his decision tallies with the decision of the majority of the jurors. A track record of being incoherent will accrue huge loses for the juror involved, hence, honesty is always encouraged by the Kleros system for the jurors.

Who Benefits Hugely From Kleros

Small Business owners

This comprises of small scale entrepreneurs who cannot afford the big shark price of legal fees from expensive lawyers. Signing up with Kleros secures all their future investments through its smart contract.

Escrow Services

In order to ensure trust and equity, parties employ an escrow that executes funds once both parties' agreements are reached. The addition of a Kleros smart contract makes the process self executing and in situations of dispute, settles it amicably and fairly.

Exchangers

Cryptocurrency exchanges can gain a lot from Kleros' smart contract. This settles various disputes of exchanging parties which varies from exchange rate to prompt execution of goods and services. The process becomes automated and easy to run.

Insurance Companies

An insurance agreement is between an insuree and an insurer when the insuree pays the insurer a certain amount of money to the insurer compensate him in cases of unexpected event. This process can gain heavily through Kleros smart contract that can execute the insured event when certain clauses are triggered by events in the contract. Insurance disputes normally cost both the insurance company and the aggrieved party millions in court resolutions. The Kleros dispute resolution system can take care of this for a far lesser amount and keep the system honest.

Individual Users

Normal users can also use the Kleros system for refined smart contracts with others. Disputes are settled amicably and grievances soothed at a much cheaper cost.

Use case of Kleros

Johnson, a local farmer employs the services of Tony, an exterminator with Terry Extermination Services PLC, a pest extermination company.
The contract involves Tony helping Johnson with his farm's pest issues which is gradually ravaging his crops. The agreement was for $600 for a period of 1 month using Kleros smart contract. Johnson paid Tony an upfront bill of $300 with aim of paying the remaining balance once the extermination job is over. Tony stays in the urban area of the state while Johnson's farm is in a sub urban settlement and Tony finds it hard to navigate his exterminating van through the bad roads leading to Johnson's farm. He requests Johnson for an extra week to get his vehicle down to his farm but Johnson chooses to activate the dispute clause in their Kleros smart contract. The jurors has 3 options to vote from and Option A will require Tony to return the money already paid to him.
Option B will require Johnson to give Tony more time while Option C will require Johnson to balance Tony with the remaining money. The jurors made their individual decisions after both men presented their case. Votes were taken by the jurors and from the verdict, 5 out of 5 of the jurors choose option B which requires Johnson to grant Tony an extension of a week at the end of which Tony reimburses Johnson the money with him if he fails to execute the contract by then. The matter was accepted by both parties and a major crises averted.

Meet the Team

Credible Advisors

Kleros' Partners

CONCLUSION

With the advance in blockchain technology and research, the Kleros platform is offering us a fast and efficient way of smart contract agreement through their sleek dispute settlement platform. I love the Kleros solution and the transparency it brings to today's digitalization. This will surely support adoption of cryptocurrency on a wider scale. Thanks for reading.

Intro Video

For More information and details please click

• Kleros Website
• Kleros Whitepaper
• Kleros Medium
• Kleros YouTube
• Kleros Telegram
• Kleros Twitter
• Kleros Github
• Kleros Forums

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