Introduction

Smart contracts are smart enough to automatically execute as programmed, but not to render subjective judgments or to include elements from outside the blockchain.

Kleros is a decision protocol for a multipurpose court system able to solve every kind of dispute. It is an Ethereum autonomous organization that works as a decentralized third party to arbitrate disputes in every kind of contract, from very simple to highly complex ones. Every step of the arbitration process (securing evidence, selecting jurors, etc.) is fully automated. Kleros does not rely on the honesty of a few individuals but on game-theoretical economic incentives.

Previous work: SchellingCoin

Game theorist Thomas Schelling developed the concept of Schelling Point (also known as Focal Points) as a solution that people tend to use to coordinate their behavior in the absence of communication because it seems natural or relevant to them.

Example: “Tomorrow you have to meet a stranger in NYC. Where and when do you meet him?”. While any place and time in the city could be a solution, the most common answer is “noon at the information booth at Grand Central Terminal”

The claim here is that, for parties unable to communicate who need to report on a result, honesty can arise as a Schelling point.

Ethereum founder Vitalik Buterin has proposed the creation of the SchellingCoin, a token that aligns telling the truth with economic incentives.

(Note: SchellingCoin was proposed in 2014)

Use case

Consider the following example: Alice wants Bob to develop a website for her.

1. Instead of paying directly to Bob, Alice will send the funds to a Kleros smart contract, which will play the role of escrow.
2. Assume that, on delivery of the project, Alice is not satisfied with it, so she calls a function on the contract that issues a claim.
3. Kleros will choose a jury from a specialized court—in this case, it requires people with web development knowledge. They do not know each other, nor do they need to interact.
4. Every jury submits their decision on-chain, and depending on the ruling they will transfer the money to Bob or back to Alice.

Project description

There are specialized courts within Kleros, for different types of disputes.

Figure 1: Current Kleros courts and subcourts Source: Kleros Gitbook.

<aside> ❓ Question: How are juries selected for their expertise?

See the answer on Kleros’ Gitbook below:

“Kleros jurors self-select into the subcourt where they wish to conduct arbitration. Kleros does not ask for the jurors' real identity or to prove they are qualified to arbitrate disputes in the subcourt where they want to work.”

”The expertise requirement is conducted via economic incentives. Kleros generates for users the incentive to self-select for the subcourts where they have expertise. Users who self-select into the courts for which they have the right skills will, on average, make money over time. Users who self-select into courts where they don't have the right skills will lose money and tend to abandon the system.”

Committees are not curated at all. We should think whether this is acceptable for Lido’s needs.

</aside>