Kleros: The Blockchain Justice System for disputes

douglasflo (31)in #crypto • 6 years ago (edited)

What is Kleros?

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It is an application based on Ethereum that works as a solution protocol for disputes of all types of simple or complex smart contracts, based in incentive system for jurors that decide cases correctly, quickly, economically and decentralized.

The problem

All human activity or any interaction between people is subject to disputes and controversies, and the digital world does not escape this reality, it is also a sector in constant growth given by the trend to sustained increase the number of transactions by these ways. However, conventional methods of justice are insufficient, inefficient, slow and expensive mostly for people with small businesses which are the source of their income. There aren't institutions where they can resolve eventual conflicts quickly, economically and especially with fairness. Furthermore, with a constantly growing digital and global economy, it is evident that the number of disputes of this kind will grow exponentially.

Smart Contracts alone cannot resolve a dispute because they need the human intelligence to evaluate cases and make decisions, beyond interrupt or paralyzing the execution of the clauses of an agreement.

Kleros concept, how Kleros solves the problem of disputes?

Kleros tokenizes and automates all the activity of administration of justice in the case of a dispute between two parties, as one of Kleros's conditions is the signing of a smart contract between related parties. If one of these parties considers that the contractual conditions have been violated, the party activates the dispute resolution smart contract through the Kleros protocol. Then a randomly selected juror, integrated with specialists in the area, votes to solve de controversy. Klero's protocol operates under the logic of Game Theory and from the concept of Schelling Points.

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How does Kleros work?

Kleros is composed of sub-courts by category. When creating a contract, the parties would select:

Number of jurors
Category of the contract (sub-court)
Outcomes

When choosing a sub-court, they will have certainty that if a dispute arises, it will be treated by specialists in the subject. In case of a dispute, the jurors will receive a series of possible results to choose from. The options are defined by the contracting parties beforehand.

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General scheme of Kleros Process

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Kleros has launched a testing model system experiment called "Doges", in which exemplifies 3 possible roles for users:

Submitter: Send images and try to be accepted in the list. You must pay a deposit fee in ETH.

Prosecutor: Will challenge the presentations that you believe do not comply with the standard to be a Doge image. It will pay an ETH rate equivalent to that of the sender.

Jurors: Deposit at least 1000 PNK to participate in the court by area and decide the cases.

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What kind of disputes can be resolved through Kleros?

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The possibilities of Kleros application are very broad, however, it has a clear practical use for cases of:

Arbitration: A freelance contract is created between two people in different parts of the world. The service is not satisfactory and the court of experts analyzes the evidence, votes, and issues a verdict.

Social Networks: The content or comment on a social network may have violated the terms and conditions of a contract. The jurors in Kleros dictate a reduction of points of the reputation of the user.

Online Games: The online games market has professional gamers and they need a highly qualified court to arbitrate disputes between them.

Crowdfunding: A product is not made after being financed collectively. The funds are blocked by a smart contract managed by Kleros and returned to investors.

E-Commerce: "A product purchased online does not meet the announced characteristics. Kleros decides in favor of the buyer and the smart contract returns the funds. "

Oracles: "Earthquake in Rio?" An oracle is used to make decisions based on blockchain technology using real-world information in the execution of smart contracts.

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How can Kleros help reduce the costs associated with resolving disputes?

Currently trying to resolve a commercial dispute in ordinary courts is very costly in terms of time, money and effort, a case could last years in a court and the fees of a lawyer can be higher than if you decided to simply assume the losses. The Kleros solution reduces the dispute resolution time to only a few days, and its costs are already stipulated in the smart contract, so forget the surprises for additional expenses of a law firm or ordinary court. The system is fast, efficient and has reasonable monetary costs and managed by you.

All these advantages benefit all types of companies, but especially the small ones, since a personal firm or a small business that has negotiated a contract for a few hundred dollars will not spend thousands of dollars to claim a breach. Also, big corporations will save a lot of money and time since it takes even years for national or international courts to adjudicate a dispute, so they must hire full-time law firms, which can also affect the image and reputation of the company. This has happened with technological giants like Microsoft, Google, Yahoo, and Apple.

Also, huge companies usually must handle many disputes simultaneously. With Kleros, the times of legal proceedings and the costs associated are both greatly reduced. In the worst-case scenario, companies will always choose to lose a few hundred dollars for non-compliance on some smart contract clauses, instead losing thousands, perhaps hundreds of thousands of dollars in extensive, exhausting and costly legal proceedings filed in the ordinary courts, which can become serious problems even for giants like eBay, Etsy, Amazon, Paypal, AirTM, who handle thousands of daily operations and whose client-user base depends on their prestige and credibility.

How does Kleros ensure fairness through its incentivization system?

Kleros is based on economic incentives system for jurors. Since at the end of disputes, jurors that have incoherent votes will lose tokens and will limit their ability to participate in other disputes. Under this scheme, common sense and the opinion of majorities in a sub-court made up of experts in a certain area will have greater power. In addition, the Blockchain-based system randomly selects the jurors for a case, once the plaintiff makes the claim of noncompliance, the jurors' identity is hidden. Thus the possibility of a subjective criterion based on personal relationships altering the final decision is lowered.

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Use case

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The number of practical uses of Kleros is immense, these are some of them:

Joao Do Nacimento is a graphic designer from Brazil who needs an ideal laptop for high-gamma graphics applications and bought a $ 3,000 device from Clark in the US through Amazon.com and signs and Klero's Smart Contract to set quality clauses and to freeze the payment until the package is delivered and tested. The shipment arrived on time but Joao noticed that the device did not satisfy the specifications set out in the purchase-sale contract, and even worse, the device looked deteriorated. Joao actives the dispute resolution mechanism in Kleros. He submits the evidence required such as invoice, contract-sale agreed conditions, and some pictures. Then the system randomly selects the jury and after 3 days the final call is that the device did not meet the agreed conditions, so Kleros reimbursed the amount of the purchase to Joao. The jurors were fairly remunerated, and Joao was able to use his money to buy the equipment from another seller.

The Lee Hamilton Steak Grill Restaurant located in Santiago de Chile hired Robert from Costa Rica as his Social Media Manager to manage his social network accounts, adapt them to his corporate image, create content and manage his client community. The Restaurant Manager knows about Kleros and closes the deal with a Smart Contract on Kleros' platform in which Robert and the restaurant are bound to freeze a collateral fund. Two weeks have passed, the restaurant has paid 20% of the fee to Robert but he has not fulfilled the contract conditions, the managers of Lee Hamilton activates the smart contract and submit a non-compliance request to Kleros, the system automatically selects the jurors, who determine that Robert breached the agreement, and the collateral funds are transferred to Lee Hamilton.

Joseph, a young Reggae singer hires a small WEB design company called Digital Media 2.0 to design his personal portal and promote his image and sets the deal through Kleros platform. The company delivers the product at the agreed time and based on the demands of its customers, and even incorporates new parameters and elements not established in the original contract. Joseph thinks that he has an opportunity to game the system and cash out more profit from this deal and decides to activate the Kleros protocol. But the jury of marketing experts dictates that even when the extra features were not stipulated in the initial conditions of the Smart Contract, they don't harm the quality of the delivered product, so the compliance is rejected and as consequence, Joseph has to pay the fees for jurors, losing money for his dishonest behavior.

CONCLUSION

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Kleros represents an opportunity for many participants in digital economy to resolve their contractual and business differences with their counterparts, through a judicial mechanism based on the intelligent contract supported by a jurors to determine the fairest possible decision, which It is based on the common sense of its members who must also be experts in the subject matter of each case but who do not know each another, which guarantees a decision outside the interference of personal relationships or status of the contestants. Kleros will be an indispensable tool for commercial exchange in the blockchain ecosystem of the next 20 years.