Almost in every place in this world where society has a certain level of evolution and interaction between their members, wherein many different ways they settle down agreements, trades, collaboration, and so on, implicitly or formally, then it's brought to life what is called a contract, which pretend to define a legal and explicit frame to that interaction.
Now, once the contract is in progress or when it has finished, exist the possibility that one or some of the parts involved in that contract results in dissatisfaction whether the evolution or results obtained, so what then? Well, it occurs that if they cannot resolve the situation by themselves, at the present time, usually it has needed the intervention of centralized government institutions, officials at law, judges, lawyers, etc. to analyze and resolve the conflict. But, it happens that all that physical structures, officials, personnel, paperwork, almost everywhere, some places more or less, it's highly expensive when it's required to be used in legal resolutions, and also we could find many times that results are influenced by bribery, or whether you have a smart lawyer or not.
Consequently from the above, there are many cases when the contract isn't formally defined, or cases when the conflict appears and there is a high cost of arbitration, then sometimes the party that is affected doesn't found worthy to pursue the resolution and declines to proceed and claim their rights. Many times, even a potential business is dismissed because the contractor is very far away geographically from the client, and is not cost effective the legal resolution of a potential conflict, or is a freelancer o newcomer company without enough financial or credential support to consider.
Furthermore, contracts are sometimes very complex to construct, because we could have in one hand, quantitative propositions that are somewhat easier to objectively settle down the expected results, for example: if the contractor does not finish the work as stated in two weeks then the contract is canceled and the contractor must pay US$. 5.000 to the client as a penalty. But, on the other hand, we could find very frequently, some difficult propositions to define, for example: the client requires that the designer creates a beautiful and friendly web page, then in this type of cases, in order to determine some kind of accepted results, it's required the experienced judgement of an expert. Again, our current traditional legal system is very susceptible to bribery and negligence.
Wow … so what to do ? …
Is there any way we could meaningful improvements, at least in most of those cases mentioned above? …
And the answer is, thank God, Yessss ….
Society has been the witness of the development of advanced technology; also there are many clever people with the strong desire to improve human life quality and persistence over the world. And that improvement is spreading slowly but non-stopping and helping every time more and more people in the world.
Technologies such the Internet, to access worldwide information, e-commerce for virtual trading, blockchain model for decentralized public crypto assets trading, smart contracts for automating agreements, artificial intelligence letting systems to learn from their operation, serve as supports for a quantum leap vision on how to settle disputes in the new era that human society is living.
KLEROS, is a decentralized arbitration resolution platform, specially designed to address many of the obstacles mentioned above. "It is an Ethereum autonomous organization that works as a decentralized third party to arbitrate disputes in every kind of contract, from very simple to highly complex ones. Every step of the arbitration process (securing evidence, selecting jurors, etc.) is fully automated." Kleros whitepaper, page 1
As stated at Kleros whitepaper, page 3, "The Kleros resolution mechanism is made up of sub-courts defined by categories", each sub-court has a list of specialized jurors available in that category, and the operational procedure could be described as following:
- Once the parties agree in the business they would perform, they appoint Kleros as their arbitrator in case of conflict and work together to settle the contract (category, outcomes, etc.), selecting a convenient court (including a number of jurors required, etc.) and arranging the appropriate funds.
- If any dissatisfaction that could appear, is not resolved between the parties, then affected party could initiate the intervention of Kleros by submitting its claim.
- Kleros, therefore, send a notification message to the pool of suited jurors' candidates, and later on, the jurors are selected randomly among those that manifest accordingly their interest to participate in the arbitrage.
- The jurors' selected don't know each other, they don't even know who else could be participating as a juror in that case. Then they are authorized, in a fixed timeframe to access, analyze, and decide according to the evidence. After that time frame finish, they should send their vote selecting one of the possible choices according to their analysis, with appropriate justification.
- Then the parties are informed of the decision, the smart contract is executed, and the judges are paid according to an Incentive System.
- "If, after the jury has reached a decision, a party is not satisfied (because it thinks the result was unfair), it can appeal and have the dispute ruled again." Kleros whitepaper, page 8.
As described above in step 4) and 5), the jurors are expected to decide honestly accordingly to their knowledge and the evidence. In order to achieve that goal, "Kleros does not rely on the honesty of a few individuals but on game-theoretical economic incentives." Kleros whitepaper, page 1.
Kleros has developed a particular jury compensation system in order to maintain the low cost of the overall process and to compensate properly each juror for a sustained good work, this system is called Incentivization System.
The Incentivization System relies on the Focal Points concept (developed by Thomas Schelling) which is based on the game theory for economics which state as "a solution that people tend to use to coordinate their behavior in the absence of communication, because it seems natural or relevant to them.", and the derivate practical model called Schelling Coin. Kleros whitepaper, page 2.
What is the practical use of this ?, when we have a scenario with many parties, all of them isolated (no communication at all), and we expect every one of them to say the truth about a question. Then that will occurs if that party knows that will be punished if found that the majority (coherent jurors) say the truth and that party don't (incoherent jurors).
Based on that, Kleros Incentivization System is defined as an extra compensation for jurors voting coherently to the majority (because is supposed the majority is telling the truth because is what's expected). In the other side, jurors outside the majority are punished with an economic deduction.
Thus, this system enforces honesty when voting coherently with the majority, which is a desirable behavior. As the voting history of a juror its been recorded on Kleros, after several participation instances of certain juror then a statistic is created. There Kleros could decide whether it is a good juror (act coherently most the time, let say 90%+) or not, and take decisions according to that.
Kleros could be used to process a wide range of types of disputes, scaling from single and simples contracts and cases, through complex arbitration disputes. Took it from Kleros whitepaper, page 12, following we can see some examples of applications where Kleros perfectly fit for a disputes resolution mechanism support:
"Escrow: To pay for an off-chain good or service, the funds can be put in a smart contract.Micro tasking: Decentralized platforms could pay for microtasks.
Insurance: The insuree will pay a fee to the insurer to get a compensation in case a particular event would happen.
Oracle: A party (which can be a smart contract) asks a question. Everyone can give a deposit and submit an answer. If everyone gives the same answer, it is returned by the Oracle. If there are multiple answers, a dispute resolution procedure ensues. The Oracle returns the answer given by the dispute resolution process and parties who put wrong answers lose their deposits which are given to honest submitters.
Curated List: Curated lists can be whitelists or blacklists.
Social Networks: Preventing spam, scams and other abuses is a challenge for decentralized social networks."
There are many benefits when using Kleros platform for disputes resolution. The first one is the result of taking advantage of the omnipresence of the internet thus making it possible to gather disperse parties all around the globe using each one a single IP connection, therefore pairing the best-suited resources for businesses, yet being supported all parties for an eventual dispute.
Another benefit comes directly from the adoption of the cryptocurrencies ecosystem, which provides a very simple and transparent path to implement currency exchange. Even blockchain technology is still maturing; it's already proved, publicly, and efficiently, allowing trading transactions to be made secure and in a reasonable time frame.
Kleros platform is perfectly structured from robust conceptual definitions plus implementing clear an efficient algorithms, therefore providing transparency and rapidness starting from the creation of the smart contracts all the way until delivering resolution for the conflict.
All the benefits mentioned above, and considering the almost insignificant cost associated with those services, plus the fares of using Kleros platform (hedge funds, jury payments, etc.), will never ever compare to the highly expensive costs when using the classic legal industry (physical buildings, lawyers professional fees, personnel, taxes, transportation, regulations, paperwork, supplies, etc., etc., etc.) in any country you may ask.
Kleros platform put in place a new great paradigm for disputes resolution, which expands the scenario for considering a new set of participants, resources, business, etc., that for a long time were rejected due to unsuitable potential cost for a legal resolution support. But now, the game is open and very suitable for freelancers, newcomers, and small companies, with a low budget or scarce references.
Even for large corporations, will take advantage when managing a wide variety and quantities of cases just implementing smart contracts with their clients and hang it on Kleros platform, thus reducing cost, dispersion and time-consuming in resolutions of complains and demands.
Let describe some use cases to illustrate a practical application of this platform.
a) Maria recently began a new job, far from the downtown where she lives. She doesn't have a car so she has to take a cab to go daily from her house to her job place. Sadly, there are not too many options for a cab there but, she found one option, a new created Cab Association that is promoting their services for that area. She was ok with the price but she wasn't sure about the car models offered by the association and their punctuality at service. The Cab Association manager called back and proposed her a deal, they might sign an agreement in the form of a smart contract and then get secured with Kleros.
She analyzed the proposal and agree. They signed a contract managed by Kleros, where they decided to require the intervention of 3 jurors in case of conflict, and stating that 1) for every 5 services instances, if the association fail in punctuality more than 1 time, they will reimburse 25% total cost of the 5 services to the client, 2) for every 5 services instances, if the association fail to provide the correct car model offered more 1 time, they will reimburse 25% total cost of the 5 services to the client. Every time Maria was picked up by a cab, she has to send the hour and a picture of the car to the association so those data were recorded for potential evidence. Now Maria is confident about taking the service because she is supported by an honest, cost/effective platform for disputes resolution.
b) The e-Mercury company who sells and deliver furniture, 6 months ago was losing much money because clients reject to buy because they had complaints about delivering times and conditions of the merchandise once arrived at customer place, and the company continuously failed to recognize their mistakes or didn't prove clients was lying.
Then e-Mercury decided to use the Kleros’ disputes resolution platform, and now their customers feels more confident, and sales are growing faster. Why is that? Well, e-Mercury now signs with their customers an smart contract, supported by Kleros, which state that if they fail to deliver on time, or the merchandise is not in good conditions, they will change the affected merchandise for free plus a compensation fee; otherwise, e-Mercury would receive the invoice full payment. If a complaint arises, three jurors evaluate the case and decide within three days.
Source:
Kleros Website
Kleros WhitePaper
Kleros Medium
Kleros YouTube
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