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Justice As a Service - Kleros
Hey DEFI TIMES community,
There are approximately 38.5 billion eCommerce transactions per year. 3-5% of them end in a dispute. This means that at least 155 million disputes need to be resolved every year.
As the eCommerce industry continues to grow, this number is not likely to decrease. It's only going to grow in the next few years. However, existing resolution methods are slow, expensive, or complicated most of the time. Most disputes that need to be resolved involve only a few hundred dollars.
Resolving the conflicts doesn't make sense because the resolution costs are worth more than the money at stake.
The blockchain industry is likely to solve this. Today, we would like to introduce Kleros, which aims to solve this exact problem.
Let's dive into it!
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How Kleros works
Kleros is an online dispute resolution platform that uses blockchain technologies and crowdsourcing to build an efficient dispute resolution system. Several randomly selected jurors resolve disputes sent to Kleros. These jurors are incentivized to make the right decision, which ensures the integrity of the system.
The Ethereum Blockchain guarantees that no entity can manipulate the jury selection and that Ethereum smart contracts execute decisions.
Kleros also prevents fake news and hate speech, and oracle applications can secure many contracts in insurance and finance.
How is the number of jurors decided?
The parties decide the number of jurors. The people, who create the contract, can also determine the number of jurors: one, two, three, or more.
How are jurors selected?
Holding the Kleros token (PNK) represents to right to be drawn as a juror. Anyone who has it can participate.
How are jurors incentivized, to be honest?
Incentives rely on a game-theoretical concept, called the "Schelling Point," developed by Thomas Schelling. He won the Nobel Prize in Economics in 2005.
Jurors, who vote coherently with the majority, are considered right and should be rewarded. However, the jurors, who do not vote coherently with the majority, are punished.
This concept ensures that honest participants make money, dishonest people lose money.
The jurors do not need to reveal their identity. The incentivization process works just fine without KYC features. People are incentivized, to be honest without revealing their identity.
What happens when someone loses but doesn't accept the decision?
Kleros' justice system is voluntary, which means that people need to agree about the decision process making in the first place. Consider an eCommerce transaction that ends in a dispute.
When the buyer and seller decide to use Kleros, they deposit their funds in an escrow account. After that, the jurors decide. The funds are automatically transferred to the winner.
The process is trustless. No intermediary controls the funds during the dispute. The escrow account is located on the Ethereum blockchain and is designed to execute the jurors' decision.
What are the possible use cases for Kleros?
The potential use cases for Kleros justice as a service system are:
- Small Claims
- Token Listing
- Content Moderation
- Intellectual Property
- and many more
The Kleros platform has a native token, called PNK. PNK serves a variety of purposes; above all, it protects Kleros from malicious attacks.
Users need to stake PNK to be drawn as jurors. When they are drawn and judge honestly, they earn money. When they judge dishonestly, they lose parts of their PNK stake. Jurors are incentivized to buy PNK in the first place to participate.
PNK prevents malicious attacks, such as Sybil attacks. It's a crucial part of the Kleros ecosystem and ensures the integrity of actors.
First and foremost, PNK is protection against Sybil attacks. In order for an attacker to flood the juror pool, they need to buy enough PNK so that they are selected enough times to be a juror for the same case in order to change the outcome. Generally, this means that the attacks needs 51% of the total (staked) tokens.
PNK is used for voting on governance proposals on the Kleros platform. Anyone who owns PNK can decide on crucial protocol parameters, making Kleros decentralized in the long run.
Kleros aims to solve a widely underrated problem. Disputes are currently extremely difficult and costly to solve. With over 155 million transactions ending in a dispute every year, the overall legal costs involved are way too high.
Decentralized Finance will make it way easier to do transactions on the internet. Once crypto scales, we will see many more transactions on the internet than we do today. DeFi makes transactions cheaper than ever before, which means there will be much more demand for transactions.
As we can expect more transactions on the internet, we can also expect many more disputes to arise. Kleros is frontrunning this opportunity. With Kleros, we can solve not only problems that exist today but also problems arising tomorrow!
All in all, Kleros is the kind of futuristic project you want to learn more about!
All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.
Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.