Kleros - A Decentralized Arbitration Platform

Hello Steemians! @originalworks is running yet another sponsored writing contest and this time it is on Kleros. On the first instance I read about Kleros, it reminded me about another project which I previously followed, Ethearnal. These 2 projects have very different focus though. Ethearnal focuses on being a freelancing platform with built-in decentralized arbitration mechanism. While Kleros focuses on being an arbitration platform for any disputes.

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What is Kleros?

For a quick understanding of what Kleros is, I recommend you to watch the 90s video below,

The video explained the core purpose of Kleros pretty well. To put it in words, let me quote the description of Kleros by the project team themselves,

Kleros connects users who need to solve disputes with jurors who have the skills to fairly settle them. Our resolution layer uses blockchain technology and crowdsourced jurors to adjudicate disputes in a fast, secure, and affordable manner.

If you stay in a country with common use of jury trials (e.g. USA), then the concept of Kleros should be rather straightforward. In Singapore, however, we no longer have jury trials since 1969. Hence, it might be a little unfamiliar to us. Basically, instead of having a judge in a court with the final say, in a jury trial, the jurors will have to vote for the outcome. Essentially, Kleros is creating a platform to crowdsource jurors from the public and provide a decentralized arbitration service.

There is value in doing so because many smaller disputes are often not worth the cost and effort to be brought to courts. Therefore, many of such disputes ended with an unfair outcome. With Kleros, such small disputes can be resolved as the platform can bring the cost for arbitration to a low level.

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How Kleros works?

Let me breakdown the Kleros platform into a few key components and explain them individually. Without any of them, the platform would not work.

Funds Escrow

Source

Imagine you enter into a contract with a freelance graphics designer to provide a logo for your company. You provided the specifications and agreed to a price. The designer requested for a deposit and you gave it. At the end of the contract schedule, you found that the logo isn't really what you want. In fact it is very much off from the original specifications. Even if the designer agree not to collect the remaining payment, you will still end up losing the deposit.

If you used Kleros platform, instead of providing a deposit directly to the counterparty, you can choose to lockup the deposit in Kleros's escrow smart contract. This way, if there is dispute, you will still be able to get your deposit refunded based on the arbitration outcome.

Crowd-Sourced Jurors with Relevant Expertise

Source

It is critical that the jurors are sourced from the public randomly but at the same time having expertise on the topic of dispute. Why? Choosing the jurors randomly reduces the chance for collusion. Imagine you have a dispute to be resolve, and most of the jurors are affiliated to one of the parties. It will lead to an unfair judgment.

Next, the jurors need to be competent in the related topic of dispute so that a fair judgment can be passed. You cannot expect some one who has zero knowledge on web development to determine if a developer has short-changed his/her client by doing a sloppy job. Hence, it is important that the jurors know what they are doing.

Incentive System

People do not work for free. Thus, it is important that there is some kind of incentive for jurors to spend time and effort to provide the arbitration service. Kleros incentive system is deeper than you think. The platform does not simply reward you just because you voted but instead, it rewards jurors who voted for the Schelling Point. The Schelling Point or Focal Point is a solution that people will tend to use in the absence of communication, because it makes the most sense and is the most relevant.

In an arbitration, the Schelling Point is likely to be the most honest judgement. Considering that the jurors do not know each other and also do not know each other's vote. It is therefore logical for each of them to give their honest opinion, which is exactly what Kleros' incentive system is designed to reward. Quoted from the whitepaper,

Jurors rule disputes in order to collect arbitration fees. They are incentivized to rule honestly because, after a dispute is over, jurors whose vote is not coherent with the group will lose some tokens which will be given to coherent jurors.

As you might have noticed, if a juror is not coherent, he/she will not only not get rewards, he/she will also get penalized by losing some tokens. This system is very effective to coordinate a group of strangers to achieve a common and honest outcome without the need for communications.

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The Main Use Case

While Kleros have the potential to be applied in many circumstances, I think the main use case for Kleros will be small disputes involving buyers and sellers of products. I can imagine that many existing platforms might want to leverage on Kleros platform. Imagine Kickstarter using the escrow service and the funds will only be released when the backers (jurors) agree to. Also consider when Fiverr start to use Kleros for dispute resolution, it will be a much fairer platform that we can use. Finally, think of how great it will be if eBay can use Kleros to ensure that buyers get what they paid for and sellers do not game the system. All these done in a crowd-sourced and cost efficient manner.

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Conclusion

Escrow system, crowd-sourced jurors and incentive system formed the foundation of Kleros and the platform will not be feasible if any of the three is missing. Overall, I think Kleros is an interesting project to watch. As they are trying to solve real-world problems and bring value to the economy as a whole. Thanks for reading and let me know what you think!

Projects/Services I am working on:

• Steem-Oracle Project
• Byteball to Steem conversion service

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You can find me in these communities:

kleros2018

Link to my Twitter entry:
https://twitter.com/CryptoCulgin/status/1031566735323754498

klerostwitter