Kleros: Providing fast, secure and affordable arbitration for virtually everything.

1.0 INTRODUCTION: CHALLENGES ON THE BLOCKCHAIN
As the decentralised sector continues to grow, the need of a means of settling disputes amicably and fast will be on the rise.
A reliable means of arbitration would be very essential to the continued growth and survival of the blockchain.
Smart contracts can't handle arbitration on their own and this creates a vacuum, which needs to be filled.

2.0 KLEROS: FIXING THE PROBLEM ADEQUATELY
Kleros is an arbitration system (dispute resolution) that makes use of smart contracts to settle disputes between two parties, taking factors such as prior agreements these parties had into consideration.
It makes use of a jurors system, who are the decision makers.

After a decision is made and arbitration charges have been deducted, funds are then sent to the party they feel has been wronged.
Kleros brings fairness to the blockchain via its efficient and transparent system.

It's also fast, secure and doesn't cost a fortune.

3.0 CRITICAL LOOK AT THE KLEROS SOLUTION
Schelling Coin are used to encourage people to give their honest opinions on the Ethereum blockchain.
Here, users get a reward or a deduction for decisions made.
Kleros works in a similar fashion.

3.1 PROJECT DESCRIPTION
3.1.1 ARBITRATED CONTRACTS
To make use of Kleros, users have to opt-in, and decide on the number of jurors to make use of, as well as what subcourt will settle their dispute, in the scenario it arises. Subcourt chosen needs to be related to the industry the service being rendered, is based in. Eg, an insurance contract will be based in an insurance subcourt.

3.1.1.1 VERDICT OPTIONS FOR JURORS
Jurors will have a number of options made available, to aid voting.
Smart contracts are used to ensure that the outcome is carried out immediately.

3.1.1.2 PRIVACY
Kleros maintains privacy by ensuring voting options are not available on the blockchain.

The creator of the contract is able to send hash (contract text, option list,salt) to everyone, with the aid of asymmetric encryption.
Submitted hash can also be verified.

3.1.2 SELECTING JURORS
3.1.2.1 ECOSYSTEM'S TOKEN
Users are paid arbitration fees, for work conducted. Before they can be selected, these users make use of the pinakion token (PNK) to show interest. The probability of being selected increases with the number of PNK used to stake interest.
The two main functions of PNK are to prevent a Sybill attack(forestall a situation, where one user can control the outcome) and to incentivise jurors, to ensure they vote honestly.

Fun fact: A pinakion was used in ancient times by Athenians to draw lots to become jurors in famous trials.

3.1.2.2 PICKING JURY
Jurors for any case are selected randomly.
The number of times a juror is picked, signifies the number of times he/she can vote. This also has a bearing on the number of tokens the said user will win or lose, depending on the outcome of the case.

3.1.2.3 GENERATION OF RANDOM NUMBERS.
Kleros makes use of a sequential proof of work, which is similar to Bünz et al. It's adapted to also work with a proof of stake.

3.1.3 VOTES
Jurors will need to submit hash after reviewing. This will also contain their ethereum address(to prevent them from copying each other) and salt (random number).
Votes and salt need to be shown for verification. Failure to reveal votes leads to penalties.

Votes cant be changed after voting, and it's also not visible to other jurors at this point, in order to prevent other jurors from being influenced by what they see-rendering the purpose of the Schelling Point useless.

3.1.4 ARBITRATION FEES
Arbitration fees are used to avoid spamming of the system, to settle disputes, and to pay jurors. The subcourt handling the case decides what each juror is paid and the arbitrable smart contract decides who pays the arbitration fees. Ideally, the winning party will be absolved of arbitration fees, but it's not always so straight forward.

Seeing Kleros arbitration fees are a tiny fraction users pay to settle disputes, huge savings are made, when this is used. Not only does it save financially, it also saves time, seeing the verdict is delivered in a matter of days, unlike in traditional courts.
Time it takes to file cases, get legal representatives and the cost involved in hiring them are all done away with, seeing jurors are used to settle disputes.

This is beneficial to small businesses, because every penny usually counts. Small businesses have to absorb losses that sometimes put them out of business, because they can't afford legal fees. Their businesses also suffer from the time it takes to settle businesses, because most of these businesses have few staff involved in their operations.
In some other cases, the legal fees involved in the case is greater than the amount involved in the dispute. This forces small businesses to write them off as losses, and their businesses suffer. With Kleros, this no longer has to be the case, as long as they do what's right.

3.1.5 APPEALS
Decisions can be appealed on Kleros.
For appeals, the number of jurors used in the case is doubled and then one extra is added. Appeal fees are collected as a result of this.

Jurors are not paid when a case they reviewed is appealed. This is a way jurors are motivated to give explanations of their rulings. When reasons are explained and parties go through reasons provided, they are more likely to accept verdicts. Arbitration fees increase exponentially, as the number of appeals increase. This will help to reduce the number of appeals being made.

3.1.6 INCENTIVES
Inspired by the SchellingCoin, jurors gain or lose PKT, based on the outcome.
After voting has been concluded, funds are unfrozen and redistributed among eligible voters according to voting weight.

Kleros ensures fairness through its incentivisation system by ensuring that jurors are rewarded according to the weight of pinakion staked.
By incentivising jurors that vote correctly, they have a reason to participate. Also, knowing that they could lose tokens if they vote wrongly, ensures that jurors vote fairly and also give reasons for votes cast in all cases.

3.1.7 ATTACK RESISTANCE
3.1.7.1 Buying half of the Tokens
Buying half or more of the tokens, could lead to the results in the general court being controlled/influenced. If the tokens are fairly distributed, then this is highly unlikely. Tokens will be dynamically priced on exchanges. Purchases ensure that the prices of tokens will moon, ensuring that this will be more difficult to achieve.

3.1.7.2 Bribe Resistance
When the number of jurors involved in a case is small, bribing them is easy. As the party that loses continues to appeal, the cost increases greatly and this is hard to achieve. For this to be successful, then more than 50% of PNK holders need to be compromised.
Assuming a dishonest attack was successfully conducted, the system can still withstand such an attack in specific conditions.

3.1.8 COURT ARBORESCENCE
Jurors can only register in one subcourt in which they have tokens activated, that best fit their skills.
This ensures that they only stick to areas they are skilled in, and not just being incentive motivated.

3.1.9 GOVERNANCE MECHANISM
As the ecosystem gains popularity and grows, the need of more subcourts will arise. Token holders will be responsible for deciding about such, by making use of a liquid voting mechanism. Number of votes will be proportional to number of PNK held.
This can be used to set policies, modify subcourts and parameters such as arbitration fees, and also make changes to Kleros smart contracts. This comes in handy, in emergency cases.

4.0 USE CASES
4.1 General Use Cases.
General use of industries are:
Freelancing, gaming, e-commerce, crowdfunding, curated lists, insurance, oracles, and escrow services.

4.2. Use Case
Keeks is a startup in the footwear industry, with a focus on millennials. Needing funds to begin mass production of a new line, they hope to raise funds via crowdfunding.
Their roadmap shows that the prototypes for the new line will be ready on 8/8/18, in order to raise funds from investors, to mass produce and go to the market on 10/10/18.
The funds are held up by Kleros smart contract, seeing the use of Kleros is agreed in case of a dispute.
The stipulated date arrives, and no prototypes are ready.

A class action by the investors is taken, and the case with evidence is sent to Kleros.
Somewhere in Dominica, Vickie is browsing through the Kleros website, and comes across the case. She is a quality assurance manager in a footwear production company, and usually works on cases in the footwear/apparel subcourt. Same goes for Manu in Buenos Aires, who has spent more than a decade disturbing footwears across Argentina, and also for Shane in Auckland. They and the other jurors involved in the case were selected from an autonomous pool of 2758 jurors, after depositing pinions at varying weights.
45mins later, they all get a mail containing evidence of the case, and are given a timeframe to give feedback. They all vote on the case, and few days later, the investors and Keeks get feedback, stating that the funds should be returned to the investors and why. The smart contract releases the funds to the investors. The case is closed and the jurors that voted in favour of the investors are rewarded, while those that voted against them are penalised.
If Keeks feel unsatisfied by the ruling, then they can appeal the decision.

5.0 SUMMARY
Kleros ensures that disputes can be settled amicably between individuals and also businesses. It also ensures that less is spent on legal fees and users are kept on their toes. Seeing not all cases can be taken to traditional courts, users are left in limbo, when trying to get refunds or justice. In many instances, the other party could be thousands of miles away.
With Kleros, the world becomes truly global, and justice is always a click away.

Large businesses can also reduce their overhead, by making use of Kleros. They can delegate some disputes to be handled by Kleros, leading to quicker judgements and huge savings.
This will also mean that the fewer hands will be needed in the legal department, and such organisations will be able to save a lot and reduce overhead.
They will also have time to focus on more pressing legal issues.

The blockchain opened a new realm of possibilities for us all; Kleros is about to do that for justice on the blockchain, and perhaps, save the blockchain from itself.

ADDENDUM
Notes

• Kleros makes use of game theory, cryptography and the blockchain for picking jurors, incentivising them to vote fairly and for securing evidence.
• Total number of pinakions in circulation will be 1,000,000,000
• Only members of the jury need to have pinakions to use the platform.

Kleros in the News
VentureBeat: Kleros builds justice protocol for the internet

Nasdaq: Predicting the emergence of common law through the blockchain

Forbes: Solving real world problems on the blockchain

Ibtimes: Meet ancient Greek legal democracy.

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Introduction Video

MORE INFORMATION & RESOURCES:
More Information & Resources:
Kleros Website
Kleros WhitePaper
Kleros Medium
Kleros YouTube
Kleros Telegram
Kleros Twitter
Kleros Github
Kleros Forums

Entry to @originalworks contest that can be seen here

kleros2018

Twitter link
https://twitter.com/deIdialu/status/1032016988242145285

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