Kleros is a decentralized arbitration platform

Most of the world of cryptocurrency technology such as Bitcoin relies on database forms with the advantage of being able to track large and secure transaction volumes. The technology used by many digital currencies is Blockchain.

Blockchain was first implemented in 2009, and was revolutionized with Blockchain 2.0 in 2014. Blockchain technology consists of blocks that hold transactions, where each block is interconnected via cryptography, thus forming a network.

Along with the development of the digital universe, cryptocurreny in the future has become an increasingly attractive proposition in the market and may not have traditional banking infrastructure. Some developing countries in the world have even implemented Blockchain-based national currencies, such as Bitcoin, and the technology is also used by several large charity projects to help those without bank accounts.

Blockchain also has the potential to be used outside the scope of digital currency, and attracts the interest of many traditional financial institutions for adoption.

Arbitration is one of various methods that can be used in dispute resolution. With arbitration later will provide an alternative to file a lawsuit and go to court. Arbitration is basically designed to be an option that can be chosen to handle legal issues.

In order to be able to arbitrate, an agreement is reached between the two parties to the dispute. Arbitration only occurs when two parties agree, both before or after a legal dispute arises. For this reason, a written agreement must be entered into by both parties before the arbitration.

The Purpose of Arbitration
Arbitration is the process of resolving a dispute in the presence of an unauthorized third party having an interest. A third party, an arbitrator, listens to the evidence brought by both parties and makes a decision. Arbitrators can act as spectators, witnesses, or listeners.

Arbitration is an alternative form of dispute resolution (ADR), which is used as a substitute for litigation in the hope of resolving a dispute without the cost and time to go to court. Litigation is a court process that involves decisions that are binding on both parties.

The meaning of arbitration is often equated with mediation, which is an informal process in which a third party will mediate the parties in dispute to help them resolve the dispute. The mediator meets with the parties to discuss. The mediator tries to unite the parties through discussion. So litigation, arbitration and mediation are all involved in resolving disputes.

What is KLEROS?
Kleros is a decentralized arbitration platform built on Ethereum that functions as a decentralized third party in any type of contract dispute. The Kleros justice system consists of an epistemic (court) machine - a tool for finding truth about events from a series of confusing clues and agents (jurors) - who follow a procedure in which input (evidence) is used to send outputs (decisions). The whole adjudication process is automatic, less time consuming, efficient and reliable. With Kleros, supporters in the crowdfunding platform can claim a refund when the team fails to deliver the promised results, the customer can claim a refund if the quality of work delivered is far from agreement by both parties.

Kleros justice system

PRIVACY: In the dispute resolution process, the parties involved may be required to share sensitive information with judges who are safe, protected and inaccessible to the general public. After making a contract, the creator submits a contract in this format; hash {contract_text, option_list, salt}, where contract_text is the simple English text of the contract, option_list is an option label that can be chosen by the judge and salt is a random number chosen to avoid using rainbow tables. Both parties send each other contracts through asymmetric encryption. In case of a dispute, each party must disclose {contract_text, option_list, salt} to the judge who can verify that the correspondence with the hash has been submitted.

JURY SELECTION: Individuals who have an interest in serving as judges in Kleros are required to pay fees using a token called Pinakion (PNK). The probability of being drawn as a judge for a particular dispute is proportional to the number of tokens stored. In other words, the higher the number of tokens stored, the higher the likelihood of being drawn as a jury member. Judges who fail to deposit Pinakions will not have the opportunity to be withdrawn as jury members and this is to ensure that inactive jury members are not selected. The final selection of judges is carried out by Kleross randomly after the candidates choose a particular court and store their tokens. The number of times a user is withdrawn for a dispute (known as weight) determines the number of votes he will receive in the dispute and the number of tokens that will be won or defeated during the redistribution of the token.

VOTE: After evaluating the evidence, the jury sends their votes in this format; hash {vote, salt, address}, where the vote is the judge's decision, salt is a random number chosen to avoid the use of the rainbow table, the address is the Ethereum address of the judge. Because two users cannot have the same Ethereum address, it makes each jury's commitment different and prevents jury members from copying other people's commitments. After the vote, a jury revealed the {vote, salt} and Kleros smart contract will verify that it is in accordance with the commitment. After a judge makes a commitment, his voice cannot be changed and is not visible to others. Judges who fail to express their votes will be punished.

ARBITRATION FEE: Judges are paid arbitration fees for the good work they do and this is determined by the subregion in which the dispute is played. Arbitration fees can be paid by the party making the dispute or the party who filed the appeal. Before settling the dispute, both parties will pay the arbitration fee and if one party fails to comply, the smart contract will decide in favor of the party making the arbitration fee without even attempting a dispute in court. If both parties make deposits, the winning party will be replaced after the dispute is resolved. In the case of an appeal, both parties will be asked to pay the arbitration fee but the appellant will pay an additional deposit equal to the arbitration fee. If the jury decides to support the appellant, the arbitration fee will be returned, but if the applicant loses,

APPEAL: If a party is not satisfied with the jury's decision, he can submit an appeal. Each new appeal will have twice the number of previous jury members plus one. Parties requesting appeals from the verdict must pay increased appeals due to the increasing number of jurors. It is important to note that judges at the appellate level are not paid and this gives the jury an incentive to provide an explanation of their decision.

Kleros is an opt-in court system that can be chosen by parties who have entered into agreements as their arbitrators to resolve disagreements in the event of a dispute.

During contract construction, they must choose Kleros integration details such as:

The sub-page: The special court that deals with the topic of the contract.
Number of jurors: When a dispute arises, it will be handled by knowledgeable people in the room.
The result: When a dispute arises, the judges will be faced with a number of possible outcomes from which will be chosen.

All of these were chosen beforehand and in the event of a dispute, these chosen parameters will be used to adjudicate justice.

Kleros can be used in a number of situations such as escrow to settle disputes, Kleros can be used to get smart contracts to reimburse buyers' fees or pay sellers. Other applications are micro assignments, insurance, fortune tellers, curation lists, social networking etc.

TYPES OF DISTANCE
Kleros handles all types of arbitration disputes such as disputes relating to car insurance, home insurance, commercial insurance, freelance, package delivery, international shipping, air transportation, sea transportation, land transportation etc.

BENEFITS FOR SMALL BUSINESS
Let's look at John, who runs a small-scale freelance business. He was hired by a company to design a website. Both parties agree a service fee of $ 400 and $ 200 is payable in advance and the remainder must be paid after completing work. John provided quality work on time as promised, but the company refused to pay the rest. All attempts to get the balance proved to fail. John would have no choice but to accept his loss and move because taking the company to court with a very small amount of $ 200 would be completely nonsense because the arbitration fees were very expensive and the justice system was slow. But if Klerost had been included in a previous business agreement, no matter what amount of money involved, John would be guaranteed to have a balance paid in full when the matter was seen by the Kleros jury.
No doubt it will be an impetus for small businesses that lack or cannot afford the expensive arbitration fees charged by lawyers and other similar platforms. Kleros is fast, cheaper, transparent and reliable and will indeed help strengthen the growth of small businesses.

BENEFITS FOR BIG COMPANIES
Big companies like Amazon, eBay, Etsy etc. Most of the time spent valuable time and resources tracking goods, answering all questions in an effort to resolve the problem with the customer. With Kleros, their "headaches" can be a thing of the past because the time spent tracking items, answering questions can be used productively. Kleros' smart jury will ensure that goods are tracked properly and an honest vote is given during dispute resolution to ensure that the right party wins.

Why do Kleros Need Their Own Tokens?
First and foremost, PNK is protection against Sybil attacks. In order for the attackers to flood the jury pool, they need to buy enough PNK so that they are selected enough time to be judges for the same case to change the outcome. In general, this means that attacks require 51% of the total tokens (at stake).

Attackers may be lucky in rare circumstances and be chosen for two of the three jury venues with only a small fraction of PNK. However, to defend an attack through an appeals process, it is necessary to select a majority of jurors in a larger and larger jury, which will only be possible if the attacker really has a majority PNK. Therefore, substantial economic resources are needed to carry out 51% attacks.
So far, this is still true if we have prospective judges who risk ETH and not PNK. However, using native tokens offers several key benefits to minimize the risk of 51% attack compared to using external cryptocurrency.

PNK made a hard attack
If prospective judges are taken based on how much ETH they are betting on (rather than PNK), it would be far more feasible for the attacker to try to buy enough ETH to spend the rest of the market. If an attacker wants to get 51% of PNK, market liquidity will dry up. When an attacker buys a PNK, it will start to become scarce and each additional PNK will be more expensive. Attackers might not even be able to find 51% of PNK to sell on the open market at any given time.

Instead, consider the situation of an attacker who wants to buy enough ETH to make a bet greater than anything that will be wagered at the Kleros court at a certain time. There is a lot of ETH in circulation, and Kleros will probably only represent part of the wider Ethereum ecosystem.

The current 24-hour market volume for ETH hovers around 2-3 billion USD with an all-time high nearing 10 billion. If someone wants to buy enough ETH to flood anything at stake in Kleros, it might not take long. In addition, the market for ETH is much deeper than the market for PNK. So, while a large ETH purchase might slightly move the ETH price, the effect of market liquidity will not come to the Kleros defense in the same way as they do with owning the original token.

Why do users want PNK?
Many models that try to price cryptocurrency see the speed of the token - that is, the average amount of time the token is held before someone is used or spent. Then, this model draws the exchange equation from classical monetary theory to try to get the value for the token. This is a valid way to analyze media exchange tokens, which are tokens which are the basic currencies of a market.
However, it must be pointed out, PNK is not a media token of exchange. This is not a market currency as is needed to apply the exchange equation. Specifically, PNK is not spent on purchasing arbitration services.

Instead, PNK holders can risk their tokens, give them an opportunity to be withdrawn as judges and decide on disputes. They lose this bet if they rule incoherently with other members of the jury, but if they rule coherently, they can get a prize from a lost token from an incoherent jury member. In addition, users are compensated for their time and effort to mediate cases from fees paid by the parties to the dispute. (Because costs are returned to the winning party, these payments ultimately come from the loser due to a dispute.)
The PNK mechanism in Kleros is very similar to the Augur REP token. (As such, PNK falls clearly in the "work token" category in this classification of utility tokens.)
Let's investigate what is the use for honest users (USR) to risk PNK.

We show the following variables:

• f - fees charged to mediate a case
• C - number of PNK withdrawn to decide cases in a certain period
• r - the interest rate applicable per the arbitration period, i.e. the average interest rate that a person can get, for example in a bank, during the time required to mediate a dispute
• N - number of PNK at stake
• w - fees for users to arbitrate disputes in time and effort

Commenting that while f, K, r, and N are the same for all users, w varies from user to user.

We make several simplifying assumptions:
Note that f, K, r, N, and w can all vary from period to period, and in the case of w, even from case to case in a period. For now, we assume these variables change slowly enough so that they are estimated to be constant.
Sometimes jury members will govern honestly and remain in the minority. When this happens, they will lose PNK as punishment. On the other hand, in other cases the jury will get PNK from a minority jury, whether the jury is a failed attacker or an honest jury who gets unlucky. We expect PNK's advantages and disadvantages to be mostly average for honest jurors. For the following calculations, we assume these gains and losses are exactly out on average, and that honest judges maintain the same PNK from one period to the next.

If it is w> f, it is not worth the time and effort of the user to become a jury member and he will not risk his PNK.
If f> w, USR basically receives the value of fw every time it is described as a jury member. Because K tokens from N are chosen by replacement, the number of times USR is chosen as a judge per period X is distributed as X ~ Binomial (K, 1 / N).

Then, adjusting these values ​​for interests, we calculate:

The interest rate r is an external variable for Kleros. Likewise, how much effort is needed to mediate a case, w, will depend on the user itself and cannot be directly controlled by the system. On the other hand, costs f will be adjusted through governance. Specifically, we intend to use liquid votes, where PNK holders can vote directly on governance decisions or delegate their votes to other parties. See our whitepaper for more details.

When costs increase, it is better to decide on a given case, but if the costs increase too high, the platform will be a less attractive platform for arbitration and K will decrease. The liquid voting mechanism will be assigned to find a balance between these effects.

K is a measure of how much arbitration should be carried out, both in terms of the total number of disputes and how often they appeal. Everything is the same (if the costs do not change, etc.), when K increases or decreases - meaning PNK holders have the opportunity to mediate more or fewer cases - PNK values ​​must increase or decrease. That is, the PNK value must reflect how much the platform is actually used to provide dispute resolution.

HOW KLEROS CAN REDUCE ARBITRATION FEE
People do say that justice is for the rich. For some things, I would say this statement is true because not everyone has the financial capacity to pay for expensive lawyer services. With different Kleros, this imposes lower arbitration costs that are affordable to all social classes. When a dispute arises between the parties, both parties are required to pay the costs of arbitration and after the final verdict is approved by the Kleros jury, if the party seeking justice wins, the arbitration fee will be returned to him along with whatever amount he is undergoing. held.

This arbitration fee charging system is cheap, innovative and amazing. Soon when Kleros starts fast, it will help bring competition in the justice system and other similar platforms that charge a favorable fee and will have no choice but to reduce their service costs.

TEAM

ADVISORY

PARTNER

ROAD MAP

CONCLUSION
Kleros will have a large impact and will undoubtedly cause a revolution in the justice system, which will ensure the implementation of contracts, reduce the cost of arbitration, and speed up judicial decisions. This can be a missing piece of the puzzle that will help spark the era of the blockchain and take it to the next level.

More Information:

Kleros Website: https://kleros.io/en/
Kleros WhitePaper: https://kleros.io/whitepaper_en.pdf
Kleros Medium: https://medium.com/kleros
YouTube Cleric: https://www.youtube.com/channel/UCEjwygFVVrSXhPNEKfweypA
Kleros Telegram: https://t.me/kleros
Kleros Twitter: https://twitter.com/kleros_io
Kleros Github: https://github.com/kleros
Kleros Forums: https://forum.kleros.io/

Author: Mikdad1018
Bitcointalk: https://bitcointalk.org/index.php?action=profile;u=2343017