Why did users switch from traditional mail to email? Because they saw it was a faster and cheaper way to deliver a message. Why are people switching from international bank transfers to cryptocurrencies? Because they are seeing that it’s a faster and cheaper way to transfer money – says Federico Ast, Ph.D., Blockchain Entrepreneur and Founder at Crowdjury/Kleros in Bithub.pl’s #SundayInterview.
You claim to deliver affordable and transparent justice services for all, based on decentralized autonomous organization model. How exactly does this work? Is it dedicated to companies only or individuals as well?
Federico Ast: I think the easiest way to understand this is with an example of a type of dispute which happens every day.
Imagine that Giselle is an entrepreneur based in France. She hires Miguel, an independent programmer from Guatemala, on a freelancing platform to build a new website for her company. After they agree on a fee, terms and conditions, Miguel gets to work.
A couple of weeks later, he delivers the product. But Giselle is not satisfied. She claims that the quality of Miguel’s work is considerably lower than expected. Miguel replies that he met all the specifications. Giselle is frustrated. She cannot hire a lawyer for a claim of just a couple hundred dollars with someone who is halfway around the world.
Now, imagine that, at the moment of their agreement, Giselle and Miguel decide to use Kleros as arbitration mechanism. Instead of paying Miguel directly, Giselle sends the money to a smart contract controlled by Kleros. When the dispute starts, Giselle taps a button that says SEND TO ARBITRATION and fills a simple form explaining her claim. She also uploads the product that Miguel delivered and the messages sent back and forth with Miguel during the process.
Chief activates 2 pinakion, the token used in Kleros to select jurors for disputes. The more tokens he activates, the more likely it is that he will be drawn as juror.
About an hour later, an email hits Chief’s inbox:
“You have been selected as a juror for a website quality dispute. You can access the evidence here. You have three days to analyze the evidence and submit your decision”.
Similar email are received by Benito, a programmer from Cusco and Alexandru, from Romania, who had also activated their pinakion for the dispute. They were randomly selected from a pool of almost 3,000 candidates. They will never know each other, but they will collaborate in settling the dispute between Giselle and Miguel. On the bus back home, Chief analyzes the evidence and votes who is right.
Two days later, after all jurors have voted, Giselle receives an email that says: “Jurors have ruled in your favor on the dispute”. The money in the contract is automatically transferred to Giselle. Jurors are rewarded for their work and the case is closed.
This is a simple use case involving software. But there are many other potential use cases. Especially, now that a larger part of our commerce and life are moving only, so do conflicts. Kleros is a multi-purpose system that could be also used to solve disputes in e-commerce such as eBay, sharing economy platforms such as Airbnb and Uber, crowdfunding, e-sports among many others.
Decentralized justice – that sounds disruptive indeed. People associate justice and legal system with state power and government supervision. How are you going to convince them and companies to using your system?
FA: Whenever there is innovation, there is friction. As humans, we usually fear what we don’t know. But this goes away as people see that new technologies can improve our lives. When Uber and Airbnb started, people said: “This is never going to work. People won’t accept jumping onto a stranger’s car or sleeping in a stranger’s house”
But then users start to see that there’s an economic incentive to adopt the new technology. Why did users switch from traditional mail to email? Because they saw it was a faster and cheaper way to deliver a message. Why are people switching from international bank transfers to cryptocurrencies? Because they are seeing that it’s a faster and cheaper way to transfer money.
Why would people switch to Kleros for dispute resolution? Because it’s a faster and cheaper way of arbitration. It just solves real world problems in a better way than alternative solutions.
What if one party is not satisfied with the verdict and takes it to the court?
FA: The use of Kleros is voluntary and both parties have to agree to use Kleros as arbitration system before the dispute happens. When they agree to use Kleros, they should automatically give up their choice of going to court. But this is nothing new. Arbitration has worked like this for decades. This is how it works in every other alternative dispute resolution system (ADR).
Kleros has an appeal system. If a party is not satisfied with the verdict, it can still appeal within Kleros many times.
But if the party is still unsatisfied and want to go to court, there’s an economic disincentive for doing that. At least in the first times, Kleros will be targeted at small claims, such as the website dispute. What’s the point of spending $50,000 going to court for a $1,000 dispute over a website? If courts could solve the disputes in a fast and affordable way, Kleros wouldn’t exist in the first place.
How are you going to recruit the experts and what kind of compensation are you going to offer them for their work?
FA: Experts will come from different communities of practice. For example, in the case of Giselle vs. Miguel on the software dispute, jurors are going to be recruited from communities of software developers. Thousands of people discuss every day in user groups of Facebook or Reddit about different topics such as software development, games, real estate law, etc. These are experts who could lend their expertise for solving disputes.
Jurors lending their time and expertise for solving disputes will get arbitration fees. Who will pay the arbitration fee depends on what was agreed in the contract. It could be the losing party, the cost could be shared by both parties, or any other arrangement.
It is important to note that these experts are not employees of Kleros. They don’t have any formal relationship with Kleros. They are experts who self-select into disputes by using a token called pinakion (based on an ID token that the Ancient Greek had). Kleros draws jurors randomly from all the users who activated their tokens.
Do you think your solution poses a challenge to the current legal system or is it rather complementary with it and will cover only limited areas?
FA: It is definitely complementary. Kleros is the best thing that could happen to existing legal systems, because it will solve a big number of disputes where traditional judicial systems don’t work.
It’s just too expensive for taxpayers to have courts ruling small disputes. It doesn’t make any sense to have courts ruling cases such as a $400 car crash, a $100 claim between a user and a telecommunications provider, and also the software dispute case. There many other use cases where traditional courts can’t provide solutions.
This is going to get much worse before it gets better. The world is experiencing an accelerated pace of globalization and digitalization. A growing number of transactions are conducted online between people from all over the world. It is estimated that disputes arise in 3 to 5% of online transactions, totaling over seven hundred million in 2015 alone (Katsh and Rabinovich-Einy 2017: p. 67).
Kleros has to solve this disputes, so judges can use their time to adjudicate more complex disputes. Citizens will benefit greatly, by having faster and cheaper access to justice. As cryptocurrencies are enabling banking for the unbanked, Kleros will enable “justice for the unjusticed”.
Interviewed by Przemyslaw Cwik