We recently sat down with Kleros, a game-changing decentralized arbitration system. Read on to find out more about Kleros and why this project is piquing the interest of so many crypto enthusiasts.
Please introduce yourself and provide a quick summary of Kleros
My name’s Stuart James and I’ve been with Kleros for two years now. I began as a Community Manager and currently function in the role of COO or Operations Manager. I discovered Bitcoin in 2012 and went on to build mining rigs, trade and create a blockchain based digital marketing company.
Kleros is a decentralized arbitration system built using crypto incentives. Now if that sounds like a bit of a mouthful, we basically resolve disputes on the blockchain and our jurors get paid for doing so.
These disputes can range from deeply rooted smart contract auditing cases, to an oracle question, price prediction, freelancer dispute or just about anything really. The key fact is that users stake our native token (PNK) in order to have the chance to rule on cases. If they are chosen and subsequently vote ‘coherently’ they’ll be rewarded with ETH and depending on the case, more PNK too.
These economic incentives (and some key other mechanisms we’ll get to) drive honest engagement from arbitrators without contact with one and another.
So far, there have been over 150 cases resolved using our protocol and jurors have been paid over $15k in arbitration rewards for doing so.
This crazy, unorthodox method of resolving conflict is actually working. It’s gaining interest from entities outside the blockchain space including government and large business.
How important is the vetting of jurors to ensure they are suitable to rule on cases?
Jurors aren’t vetted in the traditional sense of the word. Kleros is built on Ethereum and employs the same underlying ethos of openness and transparency.
Jurors are essentially vetting themselves when staking their PNK. If for example, they wanted to stake in a highly technical court they have no skills for, that court will likely give a higher reward due to the complexity of the skills needed. Juror stakes also increase for these higher value courts. If a juror staked in such a court with no relevant skills they are far more likely to lose that stake to other jurors who do have the relevant skills.
What does this process look like?
Jurors just need to stake the minimum amount of PNK for the court of their choice. The more they stake, the more chance they have of selection. If they vote with the majority (coherently) they will then be rewarded with ETH and PNK from those that were in the minority. Before we get into Keynesian beauty contests, I should mention there is a very robust appeal mechanism which includes incentivized crowdsourcing allowing for even further access to a correct ruling.
Can you explain the mechanics in place that prevent collusion and unfair ruling?
There are a number of mechanics in place to secure the system with two key parts being a forking mechanism and our appeal system.
In the event of what’s perceived as an unfair ruling, the aggrieved party can appeal that ruling. An example of a full case with appeal could be the following:
AmazingMarketingLTD have offered their services to TopICO, a new blockchain platform. The CEO of TopICO isn’t so sure about paying the invoice of $12000 before services are rendered so they decide to use Kleros Escrow as a means of offering trust and security to both parties.
Bob, the CEO, pays the $12k invoice in ETH sending it into the Escrow. Under those terms, the payout can be made to AmazingMarketingLTD 30 days from this date on the basis that they complete all the services they promised. One of those included writing a number of articles within the given timeframe. If all goes well, Bob can release the payment and all is well.
In this case, the quality of the articles was not up to standard and only 4 were delivered in the alloted time frame. Using the Kleros Escrow interface, Bob offers to make a part payment of $10500. The offer is declined and the case is passed to Kleros jurors to rule on. Bob and AmazingMarketingLTD both now need to pay an ETH arbitration fee. If one side negates to pay, the other will automatically win the dispute. The fee in this case is 1ETH from each side and this arbitration fee is used to pay jurors for their time resolving the dispute.
Jurors who have staked in the ‘Marketing, PR and Services’ court are now selected to review the evidence and cast their vote. Five jurors are drawn and they each have a potential reward of 0.2ETH for resolving the case.
Bob provides evidence by uploading proof of sloppy articles with only three of five completed. AmazingMarketingLTD cannot produce evidence of these two articles and all five jurors vote in favour of TopICO CEO Bob.
Now, in this hypothetical case, there is little chance of an appeal however for the purpose of the explainer, let’s say AmazingMarketingLTD appeal.
This time, the arbitration fee for both sides to appeal rises to 2ETH but this time eleven new jurors are drawn. (The mechanism is n*2+1 so 3 jurors become 7, 7 become 15, 15 becomes 31 and so on).
Both parties are now free to upload and provide any further evidence and jurors once again vote.
The jurors vote the same way as before and the case is no further appealed. Of the 15 jurors, 13 voted for TopICO CEO Bob and two for AmazingMarketingLTD. In this case, the 13 jurors who voted for Bob all receive an ETH reward and a large part of the PNK of the two jurors who did not. Those who voted ‘incoherently’ (against Bob) receive nothing.
Read part 2 here.
Alex Aves
The Daily Chain
*Disclaimer – Kleros are our Media Partners and therefore this content is sponsored by them. The fees paid by this project are used to pay for The Daily Chain salaries, dev work, hosting services, travel expenses etc.. that are required to make this company a success and continue to provide the community with great content on a daily basis.
