KLEROS - Decentralized Court and blockchain dispute resolution

Introduction

"Whoever controls the court, controls the state". Aristotle. The world is accelerating the pace of globalization and digitalization. An exponentially increasing number of transactions are being made online between people who cross jurisdictional boundaries. If the promise of the blockchain becomes a reality, in the near future, most of the goods, labor and capital will be allocated through a decentralized global platform. Disputes will definitely increase. A decentralized eBay user will claim that the seller failed to deliver goods as specified in the agreement, guests on Airbnb decentralized will claim that the rental house is not "as shown in the picture" and supporters on the crowdfunding platform will claim a refund as the team fails to provide promised results.

Smart contracts are smart enough to automatically be executed as programmed, but not to make subjective judgments or to include elements from outside the blockchain. Resolving existing technology disputes is too slow, too expensive and too unreliable for a decentralized global economy that operates in real time. A fast, cheap, transparent, reliable and decentralized dispute resolution mechanism that makes the final assessment of the validity of smart contracts as the main institution for the blockchain era.

What is Kleros?

Kleros is a participating court system. The intelligent contract must appoint Kleros as their arbitrator. When they choose to participate, the contract creator chooses how many members of the jury and which court will terminate their contract in the event of a dispute1.

The idea is that they will choose the type of court that specializes in the topic of the contract. A software development contract will choose a software development court, an insurance contract will choose an insurance court, etc. Figure 2 shows an example of a court arborescence from which the user can choose. The Kleros Team has developed a number of standard contracts using Kleros as a dispute resolution mechanism. In addition, we have proposed a standard (21) (27) that will enable others to develop other contracts in a way that does not require anticipating which dispute resolution mechanisms will ultimately be used.

Options for judges

The contract will determine the options available for the judge to choose. In the introductory example, the options might be: "Alice compensation", "Give Bob an extra week to complete the website" and "Pay Bob".

Smart contracts will also determine contract behavior after the verdict is made. For example:

Examples of court arborescence from which smart contract creators must choose courts.

• "Reimburse Alice" transfers funds to Alice's address.
• "Give Bob an extra week to complete the website" advancing the timer for how long Bob has
  to complete the website for one week, which is to block Alice from creating new disputes during this time. Furthermore, smart contracts can be written so that if this option has been chosen once, it cannot be chosen in further disputes.
• "Pay Bob" transfers funds to Bob's address.

System Token: pinakion (PNK)

Users have an economic interest in serving as a judge in Kleros: collecting arbitration fees in return for their work. Candidates choose themselves to function as judges using tokens called pinakion (PNK) 2.

The probability of being drawn as a jury member for a particular dispute is proportional to the number of tokens at stake by the jury member. The higher the number of tokens he stakes, the more likely he will be withdrawn as a judge. Judges who do not have PNK do not have the opportunity to be withdrawn. This prevents inactive jurors from being selected.

PNK plays two key functions in Kleros design.
First, it protects the system against the sybil attack (14). If jurors were simply drawn randomly, a malicious party could create a high number of addresses to be drawn a high number of times in each dispute. By being drawn more times than all honest jurors, the malicious party would control the system. Second, PNK provides jurors the incentive to vote honestly3 by making incoherent jurors, i.e. jurors whose votes do not agree with the ultimate ruling, pay part of their stake to coherent ones.

Find a jury

After the candidates elect themselves to a certain court and risk their tokens, the final selection of the judges is random. The probability of being drawn as a jury member is proportional to the number of tokens at stake. Theoretically, a candidate can be withdrawn more than once for certain disputes (but in practice it is not possible). The number of times a user is withdrawn for a dispute (called its weight) determines the number of votes he will get in the dispute and the number of tokens he will win or lose during the redistribution of the token.

Imagine that 6 token owners signed up for the dispute and staked 10,000 in total with the following distribution:

Figure 3: Example of tokens staked and drawn jury members

For a dispute that requires 5 votes, 5 tokens are drawn out of the 10,000 that were staked. The drawn tokens (as represented in Figure 3) are number 2519, 4953, 2264, 3342 and 9531. Token owners B, C and F are drawn with a weight of 1. Token owner D is drawn with a weight of 2. Staked PNK (except those paid by incoherent jurors) can be taken back after the court reaches a final decision.

Incentive System

Once again, we say the jury members make a reasonable vote when choosing the option chosen by the majority. The jury made a dispute to collect arbitration fees. They are given an incentive to govern honestly because, after the dispute is over, judges whose voices are not coherent with the group will not receive their arbitration fees and furthermore they will lose some tokens. Then the arbitration fees they would receive if coherent and their lost bets were given to coherent jurors.

After Kleros reached a decision regarding a dispute, the tokens were not frozen and redistributed among the jury members. The redistribution mechanism is inspired by SchellingCoin8, where judges gain or lose tokens depending on whether their votes are consistent with other judges. Number of tokens lost per jury that is not clear is: α ⋅ min stake ⋅ weight. The α parameter determines the number of tokens that will be distributed after the decision. This is an endogenous variable that will be determined by governance mechanisms as a consequence of the internal dynamics of the electoral environment. The min stake parameter is the minimum number of tokens that can be wagered in the subregion.

Arbitration fees and lost tokens are shared between coherent parties proportionally to their weight9. An example of token redistribution is shown in Figure 4. Judges can fail to disclose

This requires post-dispute insurance companies for parties who do not have sufficient capital to deposit appeals and deposit shares.

The insurance company will pay the party deposit in exchange for part of the bet if the dispute is won. All of this can smart contracts are enforced.

See the Previous Work section: The SchellingCoin Mechanism

The voice redistribution mechanism is still in active research and we may end up with more sophisticated protocols in future work.

Figure 4: 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. The other deposits are refunded.

Application

Kleros is a general and multipurpose system that can be used in a large number of situations. We present several examples of possible use cases:

• Escrow: To pay for off-chain goods or services, funds can be entered into smart contracts. After receiving goods or services, the buyer can open funds to the seller. If there is a dispute, Kleros can be used to have a smart contract to either replace the buyer's money or pay the seller. The Kleros-based escrow system is available, see (18). Escrows can also be more complex. For example for a lease agreement, the tenant can be asked to pay a deposit. If the property is damaged and the tenant does not approve compensation, a dispute can be made by the owner to claim part of the security deposit.

• Micro-assignment: A decentralized platform can pay for microtasks (such as Amazon Mechanical Turk (1)). Taskers will provide security deposit and send answers to the proxy. The task will be replicated. If a task gets a different answer, the assignor can admit their mistake, this will transfer part of the security deposit to the assignor who does the job correctly. In the event that several assignments remain in their position, the dispute resolution process will occur and the losing assignment will have a part of their security deposit transferred to the winner.

• Insurance: The guarantor will pay a fee to the guarantor to get compensation if certain events will occur. The guarantor must deposit a security deposit that can be used by several insurers (respecting risk management rules). When an insured event occurs, the insurance company can validate it and compensate the insured. If the insurance company does not validate the event, the dispute resolution process will occur. If the insured wins the dispute resolution process, funds from the guarantor's security deposit will be transferred to the insured. In the event that a security deposit is associated with several insurers that claim more than the deposit, the dispute resolution process will also be needed to determine how the funds should be divided between the insurers.

• Oracle: Decentralized data feeds for use by smart contracts are one of the previously used cases of Ethereum (8). A party (which can be a smart contract) asks a question. Everyone can give a deposit and send answers. If everyone gives the same answer, it is returned by Oracle. If there are several answers, a dispute resolution procedure will occur. Oracle returns the answers given by the dispute resolution process and the parties that place the wrong answer lose their deposit given to an honest sender. Realitio provides Oracle services based on these principles, giving options to use Kleros for subsequent disputes (4). Moreover, other applications that use Oracle Realitio, such as CryptoUnlocked, (22), indirectly depend on the resolution of this dispute.

• Curated list: Curated list can be either a white list or a black list. For example, a whitelist can register smart contracts that have carried out appropriate audit procedures. A blacklist can include the name of the ENS (Ethereum Name Service (2)) registered by parties not related to that name (for example, an evil party can register "kleros-token-sale.eth", to deceive people into sending funds to that address). The parties can send goods to the list by placing a security deposit. If no one disputes that the item was included in the list for quite a long time, the name is added and the deposit is returned. If several parties compete by providing bail, a dispute resolution process occurs. If the item is considered to belong to the list, the item is added and the sender gets a deposit from the competing party. If not, a deposit from the surrender is given to the competing party. Kleros has been used to list curated tokens that fulfill various properties (for example, such as ERC20) (19).

• Social networking: Preventing spam, fraud and other abuse is a challenge for decentralized social networks. The parties can report violations of network policies and provide security deposits. If the violation is debated, a dispute resolution process occurs. If it is decided that no violations have occurred, the reporter loses his security deposit to the accused. If the violation is not debated or confirmed by Kleros, various effects can be applied: the content can be removed, the poster content can lose the registration deposit and the reach of other posts can be reduced.

Conclusion

We have introduced Kleros, a decentralized court system that allows arbitration of clever contracts by crowdsourced juries that rely on economic incentives. You can see a summary of how Kleros works in Figure 7.

The advent of the digital economy creates labor markets, capital and products that operate in real time across national boundaries. The P2P economy requires a fast, cheap, decentralized and 14 reliable dispute resolution mechanism. Kleros uses game theory and blockchain in a multipurpose arbitration protocol that is capable of supporting a large number of applications in ecommerce, finance, insurance, travel, international trade, consumer protection, intellectual property and academia among many others.

Cryptocurrency provides many possibilities of having their first bank account to send and receive money in a safe way. Cryptocurrency helps millions of people achieve financial inclusion. Kleros will do the same in access to justice by allowing arbitration in a large number of contracts that are too expensive to pursue in court. Just as Bitcoin brings "banking to those without bank accounts", Kleros has the potential to bring "justice to the unjust".

For more information see the link below:

WEBSITE: https://kleros.io/id
WHITEPAPER: https://kleros.io/whitepaper_en.pdf
OFFICIAL ANN: https://bitcointalk.org/index.php?topic=3214189.new
TELEGRAM: https://t.me/kleros
TWITTER: https://twitter.com/Kleros_io
COINMARKETCAP: https://coinmarketcap.com/currencies/kleros/
GITHUB: https://github.com/kleros
REDDIT: https://www.reddit.com/r/Kleros
MEDIUM: https://medium.com/kleros
BLOG: https://blog.kleros.io/

Author: Bidadari_surga
Bitcointalk Profile: https://bitcointalk.org/index.php?action=profile;u=1011291
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