Why Kleros Can Be The Best Arbitrator Tool for Crypto Enthusiasts, E-Commerce Websites and More

artgirl (66)in #originalworks • 6 years ago (edited)

If you've been involved in online retail or freelance work for a number of years, you should know that disputes can be unavoidable. I've experienced this from time to time and it is never funny. Sometimes a payment/project problem resolution doesn't even happen at all and you are left with no money or get a product/service you are unhappy with. This is why I know dispute resolution is important. This is also where Kleros can help.

I. What is Kleros?

The word Kleros is from an ancient Greek word, Kleroterion, a randomization selection tool during Athenian elections for public office and court juries. A pinakion was the identifier for each citizen. Inspired by these and the cryptocurrency world, Kleros was created.

Kleros integrates crowdsourcing with game theory on the blockchain. This tool makes use of the Schelling Coin concept where people will naturally choose the most likely option to anything when it is incentivized. Kleros also stands for honesty and fairness among its agents thus it can be the perfect online justice system.

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Kleros is a fast, secure, trusted and more affordable online dispute resolution tool. It's like a money back guarantee on the blockchain once integrated into a smart contract. _{Wikipedia says: "A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract."}
Arbitrated contracts will call the service of Kleros to decide who wins if a dispute resolution is needed.

II. How Does Kleros Work?

The Kleros mechanism is made up of four things:

Contract
Dispute
Selection
Enforcement

Its main components are The Arbitrated Contracts, The Jurors, The Votes and The Arbitration Fees. It also takes care of Appeals, is Attack Resistant, has an Incentive System, Court Arborescence (Branches) and Governance Mechanism.

The Arbitrated Contracts are the smart contracts integrated with the Kleros system. It will be put under certain courts depending on the contract type the two parties are involved. The arbitrated contract needs to specify the number of jurors, category of contract and the choices to be voted on. Kleros involves privacy, meaning only the randomly selected jurors will see all information on the encrypted file/s. Jurors are thus able to objectively decide without interference.

Kleros has specialized agents or jurors who will "judge" the disputed "case" in whichever specific court and subcourt/branch they specialize in. These jurors are experts in their fields. Each one will start from the general court down to which specific field to opt into. See below image.

The juror selection process depends on the number of Pinakion (PNK) token one has. Kleros uses PNK tokens on the Ethereum blockchain. The higher PNK tokens deposited, the higher the chance of becoming a juror.

Jurors must activate their tokens to be drawn. Tokens from anonymous jurors will be randomly selected. Selected juror token owners must vote on a dispute winner carefully. Each vote is final and cannot be changed.

The judging agents will also be paid an arbitration fee plus PNK tokens. The more appeal a person makes, the higher the arbitration fees go. These fees are there in order to prevent spammers or dishonest people from disrupting the justice system. Jurors must vote correctly or honestly otherwise they will lose tokens. This is part of the Kleros incentive system.

Votes are also not displayed until a decision has been made. An explanation on why the decision was made should also be included. This will lessen the appeals made by any of the two parties involved. Yes, appeals to any jury decision can also be made as long as one party opts in to the service.

Anonimity in the system prevents bribery, intimidation or retaliation from happening. Other attacks or malicious actions will be made difficult even if one has the most number of tokens.

The Kleros governance system allows for each decision maker to delegate their votes as well. These delegatees need not be human but can be specifically programmed smart contracts. Also, as Kleros users grow, more subcourts can be added, modified or removed by votes from token holders. The higher the token number the bigger vote count one has.

All these features make Kleros the appropriate arbitrating solution for different online sites and activities. Kleros is good for escrow services, e-commerce, insurance, social networks, curated lists, micro tasks and more.

III. Why Do We Need Kleros?

Our ever developing technologies have allowed people to often do transactions online. More and more people are buying and selling products and services over the internet. We use various websites, apps and several interconnected financial platforms to fulfill and acquire any product/service.

_{A few perfect examples of popular e-commerce sites are eBay, Amazon, Zalora and Shopee. Examples of financial platforms are bank/finance mobile apps (BPI, Citibank, GCash, etc.) and websites like PayPal or Skrill.}

And because Bitcoin has gained popularity since December 2017, we should expect a growth in cryptocurrency market transactions too. Several businesses worldwide have already started accepting digital money as payment for products and services. This means we will see an increase in various peer to peer or decentralized tools/systems as well.

_{Examples of crytocurrency related websites or apps include wallets and exchanges like CoinsPH, Coinbase, MyEtherWallet, Binance, Blocktrades, etc.}

An increase in exchange between digital money and Fiat means an increase in general crypto use and application too. Online cryptocurrency marketplaces and escrow services are starting to pop up one after the other. This is why there is also a growing need to have a decentralized dispute resolution tool on the blockchain.

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IV. Kleros Sample Use Cases

Here you can see Kleros users can choose to apply it individually, within an e-commerce platform or make it an extra income source.

♦ Direct Kleros System Usage

Let's say Eric hires Lorna to create a brochure of Eric's Motorcycle Parts product line for 1 ETH. They both agreed to use cryptocurrency as payment method. He makes a smart contract and integrates Kleros as the arbitrator before any payment is released.

Inside Eric's Kleros account, he will upload the actual signed agreement/contract so it becomes part of the blockchain. The system will also require him to pay the arbitration fees that will go to the jurors if a dispute arises.

He puts the following choices to be voted on in case of dispute:
A. Return funds to Eric
B. Only pay Lorna 50% of total amount agreed on
C. Pay Lorna

Now that Kleros has been set up, Lorna creates the brochure and sends some designs to Eric. He is satisfied with one of the choices, no revisions required, so he asks for its finalized files. Lorna suddenly asks for additional payment before sending everything which is not in their contract or agreement at all. They both could not agree on what to do next thus Eric disputes it in Kleros. Lorna pays the arbitration fee and both of them upload evidence on why they should win the dispute.

Three randomly selected anonymous jurors will see the encrypted information within the Kleros court. Each will separately decide on who should win. A day or two later all three have come to a decision: Eric will not pay Lorna. The three jurors have written their explanation regarding the decision. Aside from ETH arbitration fee payment, they also get paid PNK tokens.

The image above is how the process would have gone if Lorna appealed and lost, however this is not the case. Lorna files an appeal because she still should be compensated for the designs she created. She pays more than what Eric pays for the appeal arbitration fee. The three jurors are deducted the payment and PNK tokens.

Five of the seven random new jurors decide in favor of Lorna. They all write an explanation as to why Eric should pay part of the original fee. She gets 50% of the total ETH she should be paid for. Both parties are content with the decision.

All jurors get paid the distributed fees and total PNK tokens. However, two of the jurors who voted against the majority will get their PNK tokens distributed to the five jurors.

♦ E-Commerce Site with Kleros Integration

Jose wants to buy a shirt. He finds a decentralized e-commerce website called YourNewShirts.com. After looking at various designs and stores, he chooses an abstract cat designed shirt from Mario's Store. He checks out and pays using ETH.

Upon receiving the item, Jose finds some really small but noticeable holes in it so he contacts Mario. Mario refuses to replace the item. Jose files for a dispute on the website. Because YourNewShirts.com has Kleros integrated in their system, the dispute will be decided on by three random anonymous jurors.

Jose uploads photos of the said shirt still inside the sealed, clear and undamaged plastic wrapper. Mario also uploads a certificate as proof that each product was inspected for quality. Based on the evidence provided, all three jurors decide in favor of Jose. Their reasons will be visible as to why they voted for Jose. The buyer gets back the same amount of ETH he paid and the seller learns to double check each item before shipping anything in the future.

♦ Kleros as a Source of Extra Income

Mary signs up to Kleros and buys 27 Pinakion tokens in order to be a juror. She has 10 years of retail and freelancing experience thus she selects the said subcategory under e-commerce.

One day, while waiting in line at the supermarket she gets an email alert. Mary checks her phone and sees she was randomly chosen as a juror to an opened dispute. She downloads the evidence from the email link. Upon reviewing everything she decides in favor of Eric and just put in a short general explanation. She then receives her share of the the arbitration fee and PNK token.

However, the next day she gets an email stating the opposing party has filed an appeal. Her juror payment gets returned to the arbitration pool.

The next time she was chosen as juror, she decides to be more thorough in the review and judging reason provided. This resulted in no appeals and she got to keep the fee and tokens she is owed.

V. Recommendations

Kleros is an attractive blockchain tool to doing business online. As an online seller and freelancer, it really is something that I and others can use as long as we know how to make smart contracts.

Most of the things related to cryptocurrencies take a while to be understood. This is why Kleros would probably be used first by tech savvy people in the IT industry like developers, computer science graduates, accountants and anyone involved in math and applied sciences.

Crypto enthusiasts will obviously also prefer using Kleros now that it is available. For me, these people are those who really have the drive to study cryptocurrencies and grow their finances, prefer decentralized systems, anonymity and use smart contracts. All these make them the best Kleros users. Other freelance artists or writers like me would have to learn about smart contracts, blockchain, digital currencies and dApps or websites like Steemit to appreciate and use Kleros. If not, people might just choose to be jurors and not users.

Unless Kleros is seamlessly integrated into user-friendly websites (like e-commerce or for freelance work), the general public might not appreciate it. At this point I don't think people without much cryptocurrency or programming knowledge will have an easy time using Kleros.

If Kleros is applied to current e-commerce websites like eBay and Amazon, this will lessen the workload of the employees thus probably reducing company costs. It can be applied as soon as they begin accepting cryptocurrency payments too. Their developers would need to intricately create policy-friendly smart contracts if they decide to adopt Kleros. Also, depending on how the companies handle it, it can either be good or bad for the employees involved.

It would be better if Kleros is used by startups or cryptocurrency related companies for easier system integration and usage. Any future Steem/Steemit based e-commerce website or app can also include it in their system once the Kleros multichain feature is available. I believe even websites like Cure Cosplay can use it as soon as their COT token sale is over.

As stated in the Kleros whitepaper, this decentralized court tool is still undergoing several tests and is under research. This means any of its processes can be still changed and improved in the future. Future adopters can easily contact the team members in order to use and help grow this amazing system.

If you or anyone you know is in any of the below business fields, Kleros can be the perfect arbitration solution you are looking for. Actually, almost anything that requires any specified action or decision can make use of Kleros.

Live Usage

If you're interested to spend and earn some ETH or just have fun with Doge or cat images, check out the Kleros usage experiment. It's called Doges on Trial and is an actual use case for white or blacklisting.

Here's how it works: