Kleros will enable the widespread use of smart contracts in a growing number of economic activities. Smart contracts self-execute when the predefined conditions are met. However, automatic enforcement by code is at odds with a key principle of the philosophy of right: all contracts are incomplete. At the moment it is signed, no contract could ever foresee every possible situation that could arise until the time it is to be enforced. Sometimes, strict enforcement may result in an unfair situation. And this cannot be solved exclusively by computer code.
The Greek called epikeia a moral principle that exempted a citizen of strict compliance with a positive law or contract in order to be faithful to its spirit. Modern legal systems also recognize that parties may be relieved of the obligation of compliance if such obligation has become unreasonable after a change in context. Massive adoption of smart contracts require an “escape hatch” mechanism for when strict compliance would produce undesirable or unfair consequences. But how to create a procedure for an escape hatch without using a centralized decision maker that introduces a new single point of failure into the system?
Kleros can become this method for “error correction”, a decentralized escape hatch to revoke smart contracts when compliance has become unreasonable. It can comply with this, without reintroducing arbitrariness and corruption into the system.
In the past years, e-commerce has been growing at double digits and is expected to total a 2 trillion dollar market in 2020. Key components of the sharing economy (travel, car sharing, finance, staffing and streaming) are expected to reach $335 billion in spending by 2025. Around 2,000 platforms of equity crowdfunding exist in 2016 and the World Bank predicts that crowdfunding investments will be a $96 billion a year market in developing countries alone by 2025.
The legal systems of the nation state era were successful in creating an institutional framework for economic growth and social prosperity. In the wake of the digital revolution, however, they are reaching their complexity limits. While the new economy requires a deep institutional rethinking, few people are conducting research on legal infrastructure from a system level perspective. Lawyers research what the law is. Economists study what the law should be in order to promote trade or improve incentives for workplace safety. But hardly anyone studies how law works as a system, what determines the system’s costs and efficacy (Hadfield 2015: p. 215).
Inability of legal systems to solve the disputes of the Internet Age led platforms such as eBay or Alibaba to develop their own arbitration mechanisms. However, no horizontal system emerged to be used across the board and that could gain from increased specialization over time. Kleros seeks to become this system.
While Kleros relies on cutting edge technologies in blockchain, cryptography, game theory and collective intelligence, its fundamental logic is still based on a principle the Greek knew 25 centuries ago: justice can be served on a peer-to-peer basis. Bitcoin is helping advance the cause of financial inclusion. Justice inclusion is an equally important goal. Just as Bitcoin is bringing banking for the unbanked, the Kleros promise is to bring justice for the unjusticed.
Want to learn about the cryptography, math, economics and computer science behind Kleros? Check out a technical version of the paper here.
Want to know more about the historical, philosophical and business side? For a long conceptual version go here.
Want to know more about the project and joining our team? Visit our website.
Federico Ast graduated in economics and philosophy from the University of Buenos Aires. He holds a PhD in management from IAE Business School. He was a participant at Singularity University Global Solutions Program in 2016. He hosts a Coursera program on blockchain to be launched in January 2018. He is founder of Crowdjury and Kleros, projects that leverage the use of blockchain and collective intelligence to democratize access to justice.
Clément Lesaege graduated in computer science at the Université de Technologie de Compiègne. He holds a masters degree in computer science from the Georgia Institute of Technology. He is an expert in decision systems and machine learning.
(1) In the 420s BC, jurors were paid three obols for a day’s work. While it was not a grand sum, it was enough to make a difference in the way a man lived and more than enough to sustain mere existence.
(2) Notably, the United States judiciary kept some of the spirit of Athenian courts in using citizen juries. This participatory feature of the American political system was greatly admired by Tocqueville: “The jury, and more especially the civil jury, serves to communicate the spirit of the judges to the minds of all the citizens; and this spirit, with the habits which attend it, is the soundest preparation for free institutions (…) It invests each citizen with a kind of magistracy; it makes them all feel the duties which they are bound to discharge toward society; and the part which they take in the Government” (Tocqueville 1961: 336–37).
(3) Pseudonimity, a critical feature of the Kleros adjudication process, may be seen both as an advantage as well as a disadvantage. It is an advantage from the point of view of protecting jurors from possible retaliation or intimidation from the parties. It is a disadvantage when individual accountability of jurors is required or when jury must be drawn from a pre-defined pool of candidates.
(4) The name is a reference to the pinakion, the bronze plaque that each Athenian citizen used to be drawn in popular trials. In the Kleros network, the pinakion represents a right to work and therefore to earn arbitration fees. Pinakion will initially be given to people in a token distribution event. A lesser part of them will be given to project contributors.
Black, Duncan (1948). On the Rationale of Group Decision-Making. Journal of Political Economy, 56. The University of Chicago Press.
Blt, Manuel (1981). Coin Flipping by Telephone: a Protocol for Solving Impossible Problems.
Boegehold, A. L. (1995). The Lawcourts at Athens: Sites, Buildings, Equipment, Procedure, and Testimonia. American School of Classical Studies at Athens.
Brabham, Daren (2013). Crowdsourcing. The MIT Press Essential Knowledge series.
Brassard, Gilles; Chaum, David and Crepeau, Claude (1988). Minimum Disclosure Proofs of Knowledge. Journal of Computer and System Sciences, 37, 2, 156–189. Academic Press, Inc.
Buterin, Vitalik (2016). Decentralized Court.
Buterin, Vitalik (2014). SchellingCoin: A Minimal-Trust Universal Data Feed.
Buterin, Vitalik (2015). The P + epsilon Attack.
Buterin, Vitalik (2014). Ethereum, A Next-Generation Smart Contract and Decentralized Application Platform.
Buterin, Vitalik (2017). Introduction to Cryptoeconomics.
Certicom Research (2010). Standards for Efficient Cryptography 2.
Clarkson, William (2013). Time-Lock Cryptography, Sending Messages to the Future.
Douceur, John (2002). Revised Papers from the First International Workshop on Peer-to-Peer Systems. Springer-Verlag.
Ford, Bryan (2002). Delegative Democracy.
Friedman (2005). The World Is Flat: A Brief History of the Twenty-first Century. Farrar, Straus and Giroux.
Friedman, David (1994). A Positive Account of Property Rights. Social Philosophy & Policy, 11. Cambridge University Press.
Hadfield, Gillian (2016). Rules for a Flat World: Why Humans Invented Law and how to Reinvent it for a Complex Global Economy. Oxford University Press.
Katsh, Ethan and Rabinovich-Einy, Orna (2017). Digital Justice: Technology and the Internet of Disputes. Oxford University Press.
Laudan, Larry (2006). Truth, Error, and Criminal Law. An Essay in Legal Epistemology. Cambridge Studies in Philosophy and Law.
Lesaege, Clément (2017). Random Number Generation using Sequential Proof of Work.
Martic, Dusko (2014). Blind Arbitration. Sintelnet WG5 Workshop on Crowd Intelligence: Foundations, Methods and Practices.
Nakamoto, Satoshi (2008). Bitcoin: A Peer-to-Peer Electronic Cash System.
Peterson, Jack and Krug, Joseph (2015). Augur: a Decentralized, Open-Source Platform for Prediction Markets.
Reitwiessner, Christian (2016). From Smart Contracts to Courts with not so Smart Judges.
Schelling, Thomas (1980). The Strategy of Conflict. Harvard University Press.
Sztork, Paul (2015). Truthcoin, Peer-to-Peer Oracle System and Prediction Marketplace.
Teusch, Jason and Reitwiessner, Christian (2017). A Scalable Verification Solution for Blockchains.
van den Herik, Jaap and Dimov, Daniel (2012). Towards Crowdsourced Online Dispute Resolution. Journal of International Commercial Law and Technology.
van den Herik, Jaap and Dimov, Daniel (2011). Can the eBay’s Community Review Forum Fairly Resolve Disputes? Proceedings of the 23rd Benelux Conference on Artificial Intelligence.