Kleros Introduction

With globalization, digitalization and with new cryptocurrency projects being born every day in the blockchain ecosystem, we are realizing that the exponential growth of online transactions between companies and individuals that take place around the world is becoming increasingly complicated . The massive adoption of the blockchain brings positive aspects for the economy because it makes it decentralized, but intelligent contracts can not resolve the subjective aspects nor include elements outside the block chain, for this reason it can not resolve the aspects outside its ecosystem. Disputes or disagreements that are generated between companies or individuals can not be resolved quickly and efficiently in the blockchain and this is a necessary factor for the success of a decentralized economy.

Source of ImageKleros Website

Kleros was born to answer these problems of dispute. Kleros is a fast, efficient dispute resolution mechanism, cheap, transparent, decentralized and reliable that gives definitive answers to these problems. Kleros is a decentralized application built on Ethereum that functions as a decentralized third party to arbitrate disputes over intelligent contracts of all kinds.

With Kleros proper final judgments are issued, because it is based on giving incentives to judges who make correct judgments, using game theory to develop a justice system that results in and produces true decisions in a safe manner.

The Current Status of Dispute Resolution

Today there are many small businesses and individuals that make smart contracts, but when one of the parties breaches the contract, the costs of bringing the party that breached the contract to a trial are costly, cumbersome and slow. It is not worth filing a lawsuit because the cost of bringing it to court outweighs the cost of the contract. What makes it unfair to the company or the individual who is affected by the situation when they are for small amounts of money.

Many websites offer to arbitrate these cases, but they offer poor resolution protocols that are not suitable for particular cases, which often results in unjust resolutions that lead to the loss of everything by the plaintiffs.

Kleros Resolution Mechanism

The Kleros resolution mechanism that composes by subcourts defined by categories.

Source: WhitePaper, Page 3

Kleros is an optional judicial system in which intelligent contracts have to design a Kleros as their arbitrator.

After the creation of the contract they will select:

• Number of jurors.
• Category of contract (subcourt).
• Outcomes

When they register, the creators of the contract choose the number of juries they want and in which court the contract will be decided in the event of a dispute.

Options for Juries

Source of Images Kleros Website

The contracts will specify the options that juries have to vote if one of the parties breaches the contract. Example: reimburse the money, give more time to complete the assigned task or pay the agreed upon. It will also specify the behavior of the contract once the ruling has been issued. Example: transfer the money, block new disputes until the additional period of time is reached or transfer the agreed upon.

Privacy

In disputed situations, it may be requested that privileged information be given to the jury, in order to prevent external persons from accessing the information. Natural language contracts and voting option labels remain outside the blockchain. Asymmetric encryption is used that only juries can see what are the options and behavior of the contract, which previously those who subscribed the contract sent and can verify that it is the same through the hash they previously sent. All these steps are handled by the application that the users executed while using Kleros.

Kleros Experiement: Live

Kleros has launched an experiment to show how it works.

As you can see the Doges are loaded on the website and users can question whether it is a Doge or not.

Source: Doges on Trial, "How it Works"

Here the graph shows the whole process of making decisions about whether a Doge is sent or not. This process represents several appeals and is efficient in cases where disputes do not arise.

Kleros Incentive System

Users have an economic interest in serving as jurors in Kleros, since they receive an arbitration fee when participating as a jury in a disputed contract. Candidates will select themselves to serve as jurors using a token called pinakion (PNK).

Source of ImageKleros Website

How does it work?
For a user to be chosen as a jury in a specific dispute will depend proportionally on the amount of token or tokens deposited by the jury, that is, the more chips you place, the more likely you will be to be chosen.

Pinakion has two key functions in the design of Kleros. First, they protect the system against sibyl attacks. Second, it provides the members of the jury with honest votes, since if their votes are incoherent to those of their peers, they must deliver their deposits to those who voted correctly.

Source: WhitePaper, Page 9