At the heart of the Kleros project is the pursuit of Justice. Its goal is to provide fast, fair and affordable arbitration through the use of Ethereum blockchain technologies and collective intelligent decision making.
They are holding their IICO on May 15, 2018.
Arbitration is a commonly used procedure for settling commercial disputes, where involved parties will agree on who and where a dispute will be resolved should a problem arise during the exchange of goods or services.
At its heart is the escrow, and the escrow agent.
The escrow holds the payment of payer to the payee until the good or service provided is deemed satisfactory. Should problems arise, either party can instantiate a dispute, the escrow agent then is responsible for determining who should receive the fund.
This is not unlike the escrow system that is in place in Steem, and is currently used by BitAd to handle the BitAd futures contracts.
The escrow system on Steem is quite simple.
You would enter your username, the recipient's username, and an arbitration agent (which would dictate the fee).
In the old version, you would be required to input your private key but with the latest update, you would use SteemConnect.
You then would fill-out the amount of the payment along with the time-limit for recipient and agent to approval the escrow transaction and the warranty period which would determine how long this escrow transaction should be held until the transaction is returned to the payer.
And most importantly of all, the terms of the transaction.
It is based on these terms that the escrow agent will make his decision should disputes arise.
The problem with escrow services is that the payer chooses the escrow agent, which means there is an incentive for the agent to rule in favor of the payer if the agent expects repeat business from the payer.
Another problem is that should the account holder of the escrow agent choose to sell the account, it would comprise the integrity of the procedure.
What is needed is a neutral party playing the role of the escrow agent.
In Kleros, you are placing your trust in a DAO, or a Decentralized Autonomous Organization. Instead of a single person, you are placing your trust in multiple persons serving as the juror in their respective domain expertise.
Aligning economic incentive with telling the truth.
The Kleros project is based on a concept developed by Thomas Schelling and expounded by Vitalik Butterin.
"focal point[s] for each person’s expectation of what the other expects him to expect to be expected to do"
- Thomas Schelling
To demonstrate this, take for example this simple coordination game taken from Wikipedia:
Consider a simple example: two people unable to communicate with each other are each shown a panel of four squares and asked to select one; if and only if they both select the same one, they will each receive a prize. Three of the squares are blue and one is red. Assuming they each know nothing about the other player, but that they each do want to win the prize, then they will, reasonably, both choose the red square.
Ethereum founder Vitalik Buterin has proposed the
creation of the Schelling Coin, a token that aligns telling the truth with economic incentives. If
we wanted to know if it rained in Paris this morning, we could ask every owner of a Schelling Coin:
“Has it rained in Paris this morning? Yes or No”. Each coin holder votes by secret ballot and after
they have all voted, results are revealed. Parties who voted as the majority are rewarded. Parties who voted differently from the majority lose are punished.
- paraphrased from the Kleros whitepaper
When a person wants to dispute a case through Kleros, a arbitration fee must be deposited to start the process. This fee can be paid either by just one party or both, as long as there is enough to pay for the jurors, the process can begin.
In order to be selected to become a juror on Kleros, they must stake their Kleros tokens, called Pinakions, and cast their vote secretly.
Once the majority agreement is reached, the jurors who voted with the majority will be rewarded and those who voted in opposition with the majority will be penalized.
In the case where all jurors agree, then they will still be compensated for their time by the arbitration fees. Even without unanimity jurors get arbitration fees.
In Kleros, no one knows exactly how everyone is going to vote. It relies on the fact that most people will vote for the choice that others are likely going to vote for. And it rewards those who have voted for what the majority has voted for and punishes those who have not.
The benefit of this system over a single agent dispute system is that both parties to the agreement can trust the Kleros collective to be fair-minded and neutral. And do not need to rely on a single person to process the many thousands of disputes that might occur on a day-to-day basis.
They plan to support areas of commercial arbitration with a hierarchy of courts.
If the participants are not satisfied with the ruling of a lower court they can always appeal and get their case heard at a higher one.
one interesting use case is:
• Social networks:
Preventing spam, scams and other abuses is a challenge for decentralized social networks.
Parties can report violations of the network policies and put a security deposit.
If the violation is contested, a dispute resolution process ensues.
If it is ruled that no violation happened, the reporter loses his security deposit to the accused party.
If the violation is not contested or confirmed by Kleros various effects can be implemented:
the content can be removed, the content poster can lose a sign-up deposit and the
reach of his other posts can be lowered.
This is a problem that we here in the Steem community face daily. In a decentralized system, how do come into consensus about what behavior are allowed and which are not? And how do we enforce this?
A system like Kleros could be a solution to our problems.
Kelros is a project that aims to bring fast, transparent and inexpensive justice for all and in that ethos they have adopted industry standard and recommended best practices.
The goal of the public sale is to fairly distribute our token, the pinakion (PNK), to the community.
One of the guiding principles of the IICO model is that it eliminates favoritism and deep discounting. We have declined private sale offers, electing to proceed directly to a public sale in which everyone has an equal opportunity to acquire tokens at the same rate.
Using a new innovative token sale model called the IICO, proposed by Vitalik Buttrin, creator of Ethereum, Kleros ensures a fair distribution of tokens for all those who wishes to participate gets a chance to do so.
In demonstrating a working MVP, a clear roadmap and a fair token sale, our hope is to bring back some sort of sanity to a somewhat crazy ICO market and instill confidence in those that believe in what we’re doing.
Kleros already have a prototype working and is currently being tested on the Ethereum testnet.
Ultimately, our goal is to bring justice and arbitration to millions of people who have otherwise been marginalized and priced out of doing so by the current systems.
-Federico Ast, Founder of Kleros.io