Kleros

Kleros speaks to Gains, an interview with decentralized justice pioneers

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Kleros is a cryptocurrency project that uses blockchain technology, economics and game theory to resolve disputes in a completely decentralized way. Kleros is powering full stream ahead with product improvements and market research, aiming to not only facilitate the adoption of decentralized justice but also disrupt the LegalTech sector as a whole.

On Sunday April 12 Federico Ast, CEO of Kleros, Clément Lesaege, CTO of Kleros, were welcomed into the GainsChat Telegram group for an excellent interview, including questions about the product, token, business and more.


Introduction

Q — Alexandre R from GAINS: Federico and Clément, can you tell us what you did before crypto, how you got into crypto and if you’ve had any other venture in crypto previous to being involved with Kleros?

A — Federico Ast from Kleros: This is my story.

I’m from Buenos Aires. My background is in economics and philosophy. I started my career in online media. I got into crypto because I’m from Argentina, a country that had many problems with currency and government. And crypto can help with that.

While I was doing my Ph.D., I started researching how crypto could help with justice inclusion. How could crypto help reinvent our institutions to solve the problems of the internet age?

That question led to Kleros.

A — Clément Lesaege from Kleros: I grew up in the North of France and studied Computer Science in France (UTC) and the US (Georgia Tech).

I got into crypto in 2013 with Bitcoin. I was interested in basic smart contracts that were available at that time (simple multi signatures but actually enough to create non-custodians escrow systems). I played a bit with Bitcoin in university projects when I saw the promise of Ethereum I was quite excited.

Near the end of my studies was the time of the DAO hack and I had a significant part of my wealth in it, so I learned a lot about solidity and smart contract security at that time trying to recover it (finally they made the fork even if I had found out a way to get my ETH back).

After finishing my studies I started a hackathon project about decentralized courts. There Susanne of Bitnation put me in touch with Federico and that’s how Kleros was born.

Q — Alexandre R from GAINS: Can you tell us what your role is at Kleros and what the project is about in a few simple sentences?

A — Federico Ast from Kleros: I’m CEO at Kleros.

Kleros is a project building a decentralized court protocol using blockchain, crowdsourcing and game theory to adjudicate different types of disputes.


Product

Q — Twitter user @Adikaushik1995: How can anyone make sure that jurors will behave in an unbiased & honest way?

A — Clément Lesaege from Kleros: Jurors, like any system based on humans, will always have some bias as humans are biased. What we can do is lower those.

In Kleros, anyone can become a juror, thus we get a juror pool which is way more diverse than in classic courts. They will be from different countries, with different ages, ethnicity, etc. So even if some individuals are biased, the pool of individuals should be pretty representative of the general population.

In Kleros, we want to reward jurors for voting honestly, however, an automated system cannot evaluate honesty and if we give this task to some specific people, then we have the problem of verifying that those people are honest. So it seems to be a chicken and hen problem.

To overcome that, we take coherence as a proxy of honesty, jurors who tend to vote coherently with other jurors get rewarded (in ETH and PNK), jurors who tend to vote incoherently are penalized (they lose PNK).

For sure, sometimes by voting honestly you may give a different ruling than others, but overall if a juror is constantly voting differently than other jurors, that’s probably because something is wrong (he may just vote randomly, accept bribes, not take the time to assess the case, not be qualified to understand the case). Those “bad” jurors will lose their tokens across time which will lead to a loss of chances of being drawn. So the system self adjusts to reduce the influence of bad actors.

Q — Twitter user @JLEspertLA: One of the problems of private judges is the power to enforce the sentence. In the case of Kleros, to what extent does the network have the power to carry out the decisions made?

A — Federico Ast from Kleros: Blockchain is very handy for solving this problem since the enforcement can be done by smart contracts. If there’s some dispute about some funds in an escrow (for example, between a client and a contractor), Kleros decides who the winner is and the funds are immediately transferred.

Smart contract enforcement can solve the traditional problem of “how can you enforce rulings made by a private judge?”

Q — Twitter user @PowerPeCrypto: Would the Jurors need to have any specific experience depending on each case? Because people that are working in one area of business would mostly be unaware of standards/code of conduct of another different business.

How do you ensure that you reduce this bias over time?

A — Clément Lesaege from Kleros: Kleros has multiple courts, some requiring only common sense, some requiring specialized knowledge (smart contract programming for example for a court which is used to determine if a token is an ERC20 in tokens.kleros.io).

There is no prior verification of juror abilities (otherwise we’ll end up again in a chicken and hen problem, who verifies the verifiers?) but jurors have economic incentives to only stake in courts they are knowledgeable about.

If they stake in courts they don’t have the required skills, they’ll either take a lot of time to solve disputes or be incoherent quite often (leading to a loss PNK). So they will either acquire the required skills, unstake and choose another court or lose their PNK across time lowering their chance of being drawn as a juror.

Q — Telegram user Roger 🙌: How is Kleros responsible for judging a case between the two merchants with the permission of both?

Before starting a smart contract, should both people have contacted your services to ensure that the terms are followed?

A — Federico Ast from Kleros: Kleros is an opt-in system, which means that parties need to voluntarily want to use Kleros as dispute resolution.

Q — Alexandre R from GAINS: how many cases have there been total and what were the total fees paid?

A — Federico Ast from Kleros: 181 cases so far. You can follow this information in real-time in Kleroscan, an app built by a member of our community.

Q — Telegram user Ellkay: Justice is a regulated system. Which fundamental rules and government regulations do you follow in Kleros and base your judgments on?

A — Clément Lesaege from Kleros: Actually in most countries there is nothing preventing the offering of opt-in justice services, so contrary to what you may think, justice is not a heavily regulated sector.

As Kleros is only focusing on commercial disputes (that cost state justice systems money to adjudicate and is not as “interesting” for state as criminal matters), states entities are generally quite positive about Kleros (as it tends to be used for some disputes they’d rather not spend money solving).

Kleros does not follow government regulations, the source of law comes from the contract of the parties and court policies, not the law of any particular country.

Kleros does not rely on states to enforce its decisions but on the smart contracts. So it does not need the states (as even if providing justice is not regulated, you must follow some rules to have the states enforcing your arbitral decisions) to function properly.

Q — Telegram user Minh Quan: DeFi is one of the hottest topics in the blockchain space right now. Can you share your opinions on DeFi with us? What is Kleros’ approach towards the DeFi sector?

A — Federico Ast from Kleros: Kleros is already helping secure the DeFi sector. Our TCR Dapp is used by Ethfinex (now, Diversify) to have the community decide which tokens should be listed. Check tokens.kleros.io

This is another example of how Kleros is solving real problems today.

I see there are many questions about how Kleros interacts with existing regulation. In the end, you can see Kleros as an arbitration method. Arbitration typically is chosen by parties because of its flexibility for dispute resolution. The key condition is that parties voluntarily agree.

In 1958, the United Nations made the New York Convention, where some rules were created for arbitration.

In this article, lawyer Dmitry Narozhny argues that, in his opinion, Kleros complies with the conditions of the New York Convention.

Q — Telegram user Q T: What do I need to do to become a juror? How do jurors make money from Kleros?

A — Federico Ast from Kleros: You just need to stake PNK in a court. You make money by the arbitration fees you collect from every case in which you are drawn to adjudicate.

Q — Telegram user Alice: When a juror is voting the contract already specified the possible options. Who makes those options?

What is the minimal amount of voters for every contract?

A — Clément Lesaege from Kleros: Those options and their effects are specified by the parties creating the contract. Most of the time, dapp developers will provide those questions and options (like “Who should get the money?” “The buyer should be reimbursed.” “The seller should be paid” for an escrow contract). Dapp developers will also define what are the actions to be done by the smart contracts when a particular option wins (like “Send fund to 0x…. address” in case of an escrow system). Dapp developers are free to determine what options will be presented to jurors and each of their effects.

A — Federico Ast from Kleros: The options are specified in the contract made by the parties. Typically, the number of jurors in current cases is 3 or 5. But Kleros could work with only one juror, especially for very low-value disputes.

Q — Telegram user AlaDa: As I got it, anyone interested is able to become a juror in the Kleros system. A smart contract is just an executive and servicing mechanism in this case but there’s also a human factor. A question. How could Kleros avoid subjectiveness, prejudice and conspiracy in voting?

A — Federico Ast from Kleros: Human affairs always will have some subjectivity. If you hire someone to do some marketing job for you, you always have the potential for a dispute on whether the job that was done complies with the required quality.

And smart contracts cannot solve this alone. A smart contract cannot tell whether, say, an article was well written or not. Or whether a website was well developed or not.

This is why you need human jurors to make this evaluation. So, these jurors will resolve these problems where subjectivity exists, but they will do it within some specific rules.

This is a really important piece of infrastructure for seeing more adoption in Dapps.

Q — Telegram user Isam Mery: The language is a fundamental role, very very fundamental, in the resolution of the judgments, in this case, in the network was a language established by default? Or do you have translators?

A — Federico Ast from Kleros: Different courts can have different languages. So for example, you can have a “Marketing Court in English”, a “Marketing Court in Spanish”, etc.


Token

Q — Telegram user Keyko: Easy to start, what are the differences between the Schelling Coin concept and the incentivize model of Kleros? What is your personal adjustment?

Can a judge can be selected multiple times in a row just because he holds a lot more PNK in comparison to other users?

A — Clément Lesaege from Kleros: There is not a perfect consensus on the exact definition of a Schelling Coin system (for example the Augur team does not claim to be a Schelling Coin system by their definition while it would be according to mine). So from our definition Kleros is a Schelling Coin system according to this Vitalik article.

Now you may wonder what is the addition of Kleros to the basic Schelling Coin system. Here they are:

– It works by sortition, only a small amount of jurors are drawn initially (compared to all token holders in older systems) making it scalable.

– There is an appeal mechanism allowing to only consume work of a minority of jurors most of the time while providing economic security of a system with a high number of jurors in case of attack.

– There are multiple courts allowing people to self-select according to the type of disputes they want to rule on.

Previous Schelling Coin systems (like truth coin) proposed to handle scalability and specialization by splitting the system into 2 systems. However doing so would have resulted in smaller systems (thus easier to attack from an economic perspective) and difficulty to asses the reputation of each system. With Kleros, we have a unique system that is scalable and can handle a variety of use-cases.

Q — Telegram user Ong Ong: Why use PNK instead of ETH?

A — Clément Lesaege from Kleros: PNK serves as an economic defense against attackers.

A. It increases the budget (the amount of money you need to possess to do an attack).

To attack Kleros, you need to get 51% of the PNK used in Kleros.

If it was ETH, you would not need 51% of the ETH, but 51% of the ETH used in Kleros, so you could buy ETH not used in Kleros (as most ETH would not be used in Kleros) to do your attack and since Ethereum is a way higher market cap you would be able to buy those almost at market price.

Now with PNK, you need 51% of the PNK used in Kleros. The first PNK you buy may be at market price, but as you buy more and more, you’ll take up all sale orders which will increase the price. You’ll need to make public offers to PNK holders to try to buy more after you’ve exhausted all the exchange liquidity. If you manage to do that, you will have paid way more than 51% of the current market cap (due to the price increase because of you), so the budget you need to attack will need to be way higher than with ETH. Actually, even with really high price, you may not manage to buy 51% of the PNK as some jurors may decide not to sell no matter the price.

B. It increases the cost (the amount of money you lose when doing an attack).

To attack Kleros, you need to get 51% of the PNK used in Kleros.

If it was ETH, you would not need 51% if the ETH. Once your attack would have been completed, you will sit on a pile of valuable ETH you can sell back.

But now with PNK if your attack was successful you would have destroyed Kleros and no one would want to use it anymore. Because of a lack of users, jurors would not get arbitration fees from which the value of PNK is derived making PNK worthless. By attacking the system, you would have destroyed the value of an asset you own 51% off leading to a really high cost.

C. It allows us to recover from an attack.

If Kleros was using ETH and an attacker has 51% of the ETH which is used in Kleros, there is not really anything that we can do to recover from the attack (except getting more ETH than the attacker).

But now with a specific token, we can fork the system. Create a copy of all PNK balance except the ones of the attacker to create a New Kleros a new PNK (let’s call them NPNK).

Since the original Kleros doesn’t work anymore, PNK would crash, but people would start using new Kleros working with NPNK instead (as they will know that Kleros has failed due to an attack and New Kleros contains only honest people, so they’ll want their cases to be arbitrated by New Kleros). This would recover the system except for smart contracts made prior which would still reference Kleros.

The magic is that all those defenses do not necessarily need to happen to protect the system, the simple fact that they could happen means that attacking the system is not worth it providing system security.


Business Development

Q — Telegram user Rimjhim: Does Kleros have the support of any Government Or Semi-Government enterprises?

Currently, who are the main clients that you are dealing with?

Any focused group of clients that Kleros have?

A — Clément Lesaege from Kleros: Kleros has some financial support from the BPI (French Public Innovation bank). Currently, the main Kleros users are other crypto projects. In the short term, Kleros is focusing on the crypto project niche, but in the long term as blockchain is more used and integration is easier, we can expect a more traditional audience using Kleros.

Q — Telegram user dinh tan: Has Kleros come up with solutions to problems that arise today, next week, next month or in the next few years?

What obstacles are Kleros currently facing?

A — Federico Ast from Kleros: we currently use Kleros Escrow for agreements we do with service providers. So this solves a problem today.

If you are service providers to blockchain projects, I encourage you to also use Kleros Escrow, so you have a way to settle disputes in case something goes wrong.

Q — Telegram user King: what are the ways that Kleros generates profits/revenue to maintain your project and what is its revenue model? How can it make benefit win-win to both investors and your project?

A — Federico Ast from Kleros: Cooperative Kleros generates revenue from the sale of PNK tokens, which are required by jurors to be drawn in disputes and earn arbitration fees.

Some questions are also about our future plans. Our key goal now is to increase adoption. We already tested Kleros and it works. The goal is to integrate as many Dapps as possible in use cases such as e-commerce, DeFi, content moderation and all of them where you need some human layer to resolve situations where some subjectivity exist.

If you’re working on a project which requires this, please contact us and we will help you integrate.


Thank you Clément and Federico for coming in today and telling us more about Kleros, the decentralized court system! There’s already a vibrant community with 10+ dApps and close to 200 cases that have gone through the platform!I wish you all the best.

Alexandre R from GAINS

If you want a very quick intro to Kleros, I recommend this talk I gave a couple of months ago in Ethereum London.If you want a deep dive into Kleros, download our book. In the book, you will find answers to all of your questions.

Also, join Kleros Telegram and become part of the community.

If you have more questions, you can ask them in our Telegram and we can keep our conversation going there.

Thanks for having us!

Federico Ast from Kleros

Learn more about Kleros

*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.

Alex Aves
Alex is a crypto enthusiast that has been enthralled with the crypto space for over two years now.

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