#250 Clement Lessage & Federico Ast: Kleros – Crowdsourced Arbitration for Blockchain Applications

Transcript

[Music] hi welcome to epicenter the show which talks about the technologies projects and startups driving decentralization and the global blockchain revolution my name is Sebastien Ogier and I'm a Hanoi today we are having a conversation with Clemens SR and Federico asked from the project Claro's Claro's is a project that seeks to merge merge the field of decentralized arbitration with RF arbitration with blockchain technology

to create decentralized arbitration where commercial disputes and other disputes can be solved through a group of decentralized crowdsource jurors Federico and Clemmie welcome to this show thanks for having us thank you so we can start with Federico Federico tell us a bit about your background and how you what's your journey towards building kleros so my name is Federico ass I am from bonus Aires Argentina I studied economics and philosophy in the university then I started working in the online media and the biggest newspaper

in Argentina tends you know I am in Argentina we have a lot of problems in institutions you know you may have noticed that Argentina had problems with currency and Kronus with governance in the in the history so people here became quite interested at a very early stage about blockchain technology right so what is this idea of a currency that doesn't depend on a government and a currency that people can that it's been control of the people right and at a very early stage also in Argentina people started to be interested in the applications of blockchain not only to

currencies but also to the governance processes some product some projects from Argentina for example democracy earth started to think of how to use blockchain for improving voting system for preventing fraud in elections but no one was really taking a look at a very important part of governance of a society that is justice systems right you have people don't have very good access to justice in lots of the world because access is very expensive justice is very slow so I started looking into that part of governance and so that's what made me become interested in how blockchain technology can be leveraged

for making better institutions right in particularly not in justice so I started working on a concept called bulk then crowd jewelry that was the crowdsource of juries and so we met with Clemmie about a year and a half ago and we were working on quite similar stuff at different sides of the ocean and were introduced by a common friend I will say that you know a bit nation this founder so she met him at a hackathon and she knew I was working on decentralized justice and she said hey guys you should meet them start building this together

and so here we are so what was crowd jury and how did your initial ideas differ from Karos so and the idea of crowd jury was basically the use of yeah the the main concept was use of crowd sourcing for creating a court so in the end you know if you think of what a court is it's basically a group of men that they have to analyze information about some event that happened or didn't happen right so in the end a trial is like so you have some guys saying something about the other and you have to see what the truth is right and we have learned through the

rise of the internet that some processes of information analysis can be done faster and cheaper by using the intelligent collective intelligence right for example Wikipedia so instead of building encyclopedia like Britannica with one centralized agent and different experts writing so you can crowdsource the information flow through the internet people right so I said what if we could crowdsource the information analysis that's basically a trial into the crowds right right so and that was the idea of the behind the concept of off crowd jury it was like very very early stage so I think when I started

thinking about that so not even his theorem was launched so it was like it was a really really early stage idea but the technology was not yet there but some of them of the main yeah concepts were already in place about the use of crowdsourcing but the idea of crowd jury did not have and the game theory selling point principle on which chlorosis built so that was so the engine of klaris was not present of the early ideas a high-level robbery and kima watch tell us a bit about yourself and your background you came from machine learning and transitioned over there cryptocurrency if I'm not

mistaken can you tell us about that transition yeah so actually computer science was in France in the US and even when I was a student I was interested by my crypto even before as a PC roms I'll mostly like playing a bit with Bitcoin but not seeing a professional just like like a no beast and when I finished my studies I had the serum which was offering way more possibility to build application about what Bitcoin was was doing at the time I started being a big kinda beast and so I was interested by Sadao I was interested by this

resolution even at the time of Bitcoin at a time of Bitcoin dispute resolution was basically ruthless nature you have virus ever and an arbitrator which each of the key of a mystic address and is the transaction because it affected both the buyer in the seller sign and if there is a dispute the arbitrator sign flows by your own placenta depending of zombie tweet or bullying so it was like the only idea of automating the enforcement of dispute resolution process then I got also interested by ecommerce this is feisty e-commerce

stuff like open Bazaar and I was looking like what is lacking in open Bazaar is clearly a dispute resolution system because it's interesting to buy something to anyone on the internet but if I cannot trust him although I know that I'm not just gonna get robbed of my money and as a seller if I send a project before getting the money is the opposite is the buyer which can rob me and just having one source philosophy traitor was not a method which was acceptable because we need two bowls trust one person in comment and we can we can do so but only if you have large

institution as we both trust like PayPal I trust a partner to rob me and use a party we also trust my heart let's rob me but since the institution this company gets so big then they start to shout mundo pony rent paypal charge ready I fee not even when they really dispute it is a charge free all the time so it was not technically optimal and so the question was okay oh can I make a decentralized system of disposal to do to solve disputes and all can I make it scale and that's that's how I came up with the early idea of carroll's the only idea

was to draw people once and then the second time if there is an appeal to draw all the code and then okay no this is not gonna scale because even if you have 10% of the dispute which ended up in happy it mean that everyone has to review an amount of dispute which is proportional to the amount of dispute so this one scale so the question was could we scale this kind of dispute resolution mechanism which were also we should just invent like I think his most important previous work is a stress coin which used the shedding point to solve disputes in this case it was dispute

Oracle dispute on prediction market but they were asking everyone to vote on everything and the question was how can we make this scale to make a real centralized debt resolution system which will be general-purpose not only to solve Oracle of prediction mark indisputable to solve every kind of dispute which can be enforced by small contracts so yeah I mean you mentioned some some earlier projects like like open Bazaar and like decentralized e-commerce and you know all these also needs to sort of decentralize the street resolution system it was interesting in the early days to see how were they were solving

that with multi-sig and I mean just recently I was confronted by this I I I tried this this this software like a decentralized Bitcoin exchange cult exchange called bisque and you know just tested it out to basically just sort of experiment and see what the district dispute resolution system was and it actually worked quite well so I mean but you do have to put some money escrow in order to secure your your transaction so it it kind of defeats the purpose or at least it makes a little bit more cumbersome to have to put up collateral in order to buy you know something and so having a dispute resolution system

that where you don't have to put up that collateral but there is some sort of a like a counterparty crowd that can effectively look into a dispute and arbitrate and make a decision is something I think that would be you know quite valuable moving forward as these centralized platforms become more prevalent so you only need to have collateral because smart contract can only move that you like eghh or Tokyo or whatever as being explicitly given control of by someone to the smart contract so we could say okay we make a

district resolution system and we don't ask lateral but when when there is a ruling what is gonna happen nothing because the smart contract will not have control of the asset of the dispute so requiring a collateral is a limitation of a box and base dispute resolution system but on the other hand it means that when you are rolling you don't need to add it enforce its automatically and followed by smart contract you don't need to go to have a boat order to have the police enforcing your ruling which can be ready ready really more problematic than the need to

deposit the collateral yeah what I meant by my collateral was that as a as a buyer I also had to put some collateral to secure the other side of the trade this which was then unlocked once both sides agreed to the transaction but of course if you're doing something like Web Design you know the buyer would have to put up the amount or at least some kind of a deposit in order for some collateral to be available if there was a dispute or something of that nature so let's dive right into it so the project we're talking about here today is Clara's give us a high-level overview of the vision of Clara's and why you're building this project yeah so as we were saying before so we we are have people

believe in this decentralized platforms now some of them for e-commerce for freelancing for building for insurance so and all of them are going to have disputes between users right in existing centralized platforms you have a customer service team that deals with the dispute between users but we don't have this in the decentralized world right so because these companies want to be fully decentralized and so the the vision of klaris is to build this video solution system to which all of the decentralized companies of the ecosystem can plug so they just send like the dispute the smart contracts Alex Claro SAS arbitrator agreed between the parties of course and then when there is

a dispute arose and selects a jury of people who are going to analyze the evidence and they are going to vote who is right about the dispute right so this can be used for example for a website dispute I have I hire some guy from another country or whatever for building a web site for me in a decentralized platform and we both agree that in case that this could happen between us so Clarence is going to be the arbitrator so if everything goes right the transaction is signed and so the payment is done and I get my website but if there is a dispute so the money will stay locked into the into that kind of escrow and then this is going to the evidence it's going to

go to Clara's and depending of how Clara's jurors vote and the money is going to go to one side or the other and of course all the process of selection of Clara's jurors is going to be fully automated based on smart contracts so like nobody can tampered the evidence nobody can put their friends as like jurors or so everything is fully transparent fully yeah it's quite fast and and cheaper than alternative method so I think that Clara's going to solve a very important problem that is at this point preventing the growth of the ecosystem that is like the lack of some disproof solution mechanism that is yea accepted by lots of people different

projects started to build their own arbitration system because they thought that as important thing for their platform but like building a a reiteration system is quite hard to do like a society project if you are building your website for so your platform for e-commerce so you have to focus on your platform right and you can't just build arbitration as a side project because it is a very hard thing to do and we spend all our time building this and so we want to build the arbitration system for all of the decentralized ecosystems so that's like vision of klaris so you have already mentioned that one of the reasons for building a decentralized arbitration system is that other decentralized platforms need a

decentralized arbitration system Connect because they cannot really depend on the government courts in order to settle disputes like imagine if open Bazaar needed to depend on the state of New York to settle its disputes that that would be a little weird wouldn't it so therefore you need decentralized arbitration are there other advantages apart from apart from this feature that that you think it justifies the case for decentralized arbitration so you mentioned that you can make arbitration cheaper right or you can make it faster here is a sense of why it could be cheaper or faster so while arbitration what is

intercession right now I think that who explains this very well so if there is a very good article by Chris Dixon well that the title I think it's why the centralization matters right why should we do this we centralized so of course one of the reasons it's like so this cannot be controlled like by us because this should be control by the community because this is going to deal with lots of yeah very high-value dispute and so this should be in hands of the community and also because I'm in the long run so the goal is not to have Claro's do everything but how people build platforms or like yeah applications on

top of klaris technology right so one of them is going to build an application specifically targeting ecommerce others are going to target like insurance other finance right and and if you are going to build something on top of a platform so you are you want to be sure that this platform is going to be a decentralized one so that you're not going to be locked in so by a big like monster like a big future Google or Facebook of arbitration right so in this article please Dixon he argues that yeah you have on you know this centralized platforms you have this typical curve where you have a early stage where the

platform tries to bring users or like developers on top of it by giving subsidies and then when it has like enough market power it becomes like a monopoly and starts to charge monopolistic rents so the point of building this decentralized way is that the over everybody that's going to build on top of Clairol's can know that they have a say in to the evolution of the platform and they and how it's going to be working in the future so a bit like the same reason why yeah we build this on a theorem because it's the centralized platform and it's not on top of like Google or so that's an important feature of why kleros needs to to build

we build in a decentralized way in order to be yeah the the focal point I'd say of a future ecosystem okay so of course like the idea of crowdsourcing jurors is very interesting right like so so the of the idea with kleros would be that if let's say Federico and I we are the buyer and seller and we enter into a dispute then the dispute is going to be resolved by a Judah or a set of childers and these jurors have been crowd-sourced by the Pharos Network they have been picked out of a group of relatively pseudonymous or anonymous people the

underlying assumption in crowd-sourced juries is that the scale to resolve disputes is widespread in society because like anyone can be part of this crowd that wants to be jurors and therefore anyone can be selected to be one of the jurors that would arbitrate our dispute do you think the scales for arbitration are widespread in society or do you think that this is a skill that is specialized and it needs its own specialized people or specialized community so for now we are focusing on the low-hanging fruits so dispute which do not require I amount of knowledge to solve so in like in the pilots in the

example of create lists of the picture you don't need any kind of party class here also you see that you need to learn is very easy to learn to be a job so I think processing it's really efficient when it's tasks which do not require expert in a particular task due to crowdsourcing responsible mean that you can if you have more adamant for a dispute resolution your kind of people refine in the system or ending the system in way smoother manner compared to a company or a state-based institution and low-risk or

tossing you can handle workers because you can have a draw with I'm not a sunny expert they can you can do side activity they can walk before ok I have some like one how are you trained do to spend and I'm gonna solve disputes in this whenever it's a train touch if you wear a whistle twice company you would have to hire someone put in some office hour and it will be will have to be paying whether or not there is dispute so it's it's way less flexible and so flexibility should decrease cost and also the faculty side is also a system and no one is the locked-in it means that you cannot charge the monopoly rent

as as Federico explained before so you choose is three reason we can lower the cost of arbitration by your processing it for easy to solve dispute so easy to solve is not less I linked to low value so for example if you if you make some some financial contracts and contract for difference on the price of the ETH it's something which can be worse median into dispute but the resolution of the dispute is quite easy what was the price of each h at this particular time and no one requires specific skill to do so so you have to split which are good for purchasing some

wines a lot of rules and follow we will look at the one which are good and easy to pour sauce so there's kind of things that I'd like to unpack here so one is when I was reading your white paper reading through I think one of the examples was a website design as a former person working in web technologies and having worked as a UX designer and work clients and and work with designers in in the u.s. in Europe and also in Asia one thing that we observe is that there are at least in this particular space

some cultural sensitivities that are inherent to each region or specific countries or this sort of thing so you know this sort of brings up the point that the shelling point or focus point in my opinion for certain types of decisions may have cultural implications that would make it difficult to arbitrate so I'll give you an example so take for example a a European company that hires a designer somewhere in Asia let's just say Thailand and that designer produces a design for a website

or a mobile app and there is a dispute so let's say there's a dispute about whether or not the design is something that would be attractive to customers and if there could be a Fault in the system where for instance if most of the jurors were coming from parts of Asia or where they would have similar sensitivities to a Thai designer and perhaps little experience or knowledge of some of the sensitivities of European customers where those jurors might favor might might arbitrate in a direction

that would go against the practical reality which is that you know this design would would not be attractive to European customers so that because what brings us to the point is that shelling points you may or may not have some some cultural or local buy sees any other we could also think of other examples but what would your thoughts on so the way that people would converge around a selling point for for things that may have some subjective or cultural biases so it's not just asking

would this design is okay or not so you have a contract the plane this contract between like in the European customer and the Thai designer and you can also have a special I suppose you can add support which are special I'd buy is a kind of dispute but also by way to solve them so you could have a support with some kind of like Asian sensitivity and some one with European sensitivity in terms of of which customers for the design appeal to and this cancel the

problem where you have a different feature which will give different answer so in this case when you make your contract you decide that it's with this particular support or in Japan English contract you that you decide that the customer should be happier that the website should be appealing for a European customer target and this information have to be taken into account by the jury and about the support you will only get your which shows to arbitrate in a support will use this kind of sensitivity so that is a way to drizzle the control control

difference and there is another thing that we could like think so the fact of the realization of business is a reality so there are contracts between Western people and Thai people and some of these contracts are going to end in some dispute right so what other alternative for solution are for Easter for this and is that alternative like non biased in the way that supposedly the selling point is it's a like a deeper question that affects of course Claro's but any other system for arbitration between cultural sensitivities right okay I see what you mean this other point I wanted

to bring up which occurred to me well well reading the paper because I saw that you had a section there about you there was a sub Court which specializes in insurance or the insurance could be one area that this could be interesting for arbitration and you know last year I I attended this conference in Munich which is specializing in insurance and what one of the things that I thought was really interesting about this industry is that there's a major push in the insurance industry to to arbitrate using machine learning and Nai so there's an enormous amount of startups that are building machine learning systems that do things like look at pictures of a car and assess the

damage or even listen to phone conversations and determine whether or not someone may be being dishonest about an insurance claim or some other matter so there's quite an insurance there's one industry where machine learning is potentially disrupting a lot of people that are doing this kind of arbitration work if there might be other industries where this is the case but you know in terms of cost and in terms of efficiency of arbitration what what do you what are your thoughts on the potential for machine learning and AI to you know really make arbitration much much more much more efficient than any you know

wisdom of the crowd type knowledge could ever aspire to be so at some point you always need some human input because machine learning I can be used to help you in your decision but not to make a decision instantly because machine learning algorithm are generally easier to trick as a human so we've seen some research on the reverse engineering some machine learning algorithm and putting some input which make them make completely obscure decisions so you gave the example of a picture of the car picture

to assess the damages if someone is able to reverse engineer the machine learning algorithm evaluating the dimensions it will perhaps be able juice by changing luminosity in a few places of the car to completely make machine learning algorithm give a completely wrong decision the same for a photo phone call by using this particular tone it's going to be able to treat the machine learning algorithm into thinking that you are honest while you are not so I think machine learning already good decision helping to but you cannot rely on machine learning as to have the final say on problem which are address aisle

so if you want to classify images and just just to learn from them it's fine to use machine learning but know if you want to classify images where you have one per person which have an interest into the image to be a and someone who has interests or the image to be B they're gonna try to buy us this machine or in your grocers very interesting so we have sort of walk through or we've walked to some of like these interesting design choices that that kleros has like outsourced crowdsource judgement if you have mentioned this idea of shelling point as the current current guess the correct judgment and Sebastian's

questions but we have not actually walked through that in detail maybe this is a good time for us to go through how clarity platform works or is supposed to work at the end State so assuming assuming that the dispute is between like okay Sebastian and myself and one is a website developer and one is a company giving work how would declare us platform settle our dispute and what would be our user experience be like sure so um before the dispute starts so you agree put Sebastian so you're going to build this website for me these are the conditions this is what

I expect and so we are we on that and then we agree okay so if something goes wrong Paris is going to be the dispute resolution mechanism and for this right and so you make the payment and so this stays into an escrow smart contract and it says look there and and if there is a dispute the money stays locked right for it stays into the contract and you both have to pay an extra a fee in order to pay for the arbitration right for the juries to be paid and you have to make an extra deposit and so now this goes to dispute resolution and maybe a claim oh can explain better the system or

selection of the juries how the token works and how all the decrypt economics work for juries to make honest decision so as in draw you are deposit your token in parting flowers and quote but you think that you have skilled which is all the dispute of this of course and when there is a dispute one token perjurer is drawn and if this token belongs to you you are you are in in this dispute so you're going to see evidence of both parties you can se quote policies yoga disease plain English Spanish contract and with all those information you're

going to take a decision which can be binary like party a wins party B wins or perhaps let's see if you have more party in your lawn ornaments decision possible and if you watch it the second way as a final decision you're gonna get rewarded with arbitration C and potentially some token of the parties which voted in opposition to the consensus so if in just a simple dispute with only one session where you have to party to 0 which say party ashwin one juror which says party B should win and in this case party aid

wins the dispute so the smart contract executes as enforcement so it's a case of website dispute and past year is the barrier it will be reimbursed party a and the to troll which were in the majority wins some of efficiency and win some part of the token of the last straw which posted for party B obviously you have a key mechanism if as a party into dispute you believe that ruling was wrong because the drawer weapons taken or because you draw a bribe you can buy a PC and leave to get more draw to look at the dispute again and in

this cases there is an appeal it's a key result which are gonna be taken into account by you smart contract for enforcement and bike trails for token and arbitration C distribution the specific of the interface can be tailored by case so if you are in with this website dispute you may have to put the link to the website the link to the source code in the planning this contract you would have specification so the user interface is something which are gonna depend on the kind of dispute you will be participating in yeah for

example now that we launched the pilot called us on trial the jurors have to decide if an image is a dog or a Dortch naj so basically in this case the interface is like some screen where you have to see a picture and say okay vote this is a Dodge not a Dodge and that's the interface can be something as simple as that in this case and the interface which displays this evidence it's not something which is out of the cross application it's something which is part of the arbitrable application so we say like doesn't trial it's part of the trial in the case of freelancer making website it will be part of the

freelancing application so people which are building or plugging into Farrell's a lot of Liberty all to display cases and evidence sort of drawers of course like one of the interesting so there are many different components to your system right so the ones that I could spot is they said there's a component of jury selection deciding who gets to be the jury there is a component of depending on the case like gathering all of the evidence and like passing the judgement right there's a component of economics which is that once you have a group of juries and they have put in their

judgement rewarding the juries based on how they how they followed the process or did not follow the process so there's a component of economic incentives and the fourth component that you have in your system is basically the component of specialization of some kind like so not all duties are not all jury members are suitable for all sorts of cases there might be some jury members that specialized insurance others in website disputes and things like that so there's something that Claro's does for in order to have duties also specialized so like Claro's is a pretty complex system right which has all of these inter moving

parts that like connect together to make a dispute resolution system specifically I would like to deep dive into the jury selection okay how does jury selection exactly work so when Sir disputing how do you decide who gets to be the jury and how big the jury would be in this particular dispute so as a juror you choose a pass in the circle tree so this means that you can say okay I want to be a draw in general on cases in e-commerce cases and in website freelance in cases so you specialize in

specialized as you go deeper in in the industry up to this end quote which would be in this case the freelancing website freelancing support and parent one is a ecommerce of gold and the parent of the e-commerce report is a general one so this means that you can be drawn in those three different quote when you are registered to build wrong you have to deposit tokens so when you deposit knk in into schools and your friends to be drawn as a juror is going to be proportional to the amount of token you depositing so it mean if you

put motor can you are more likely to be wrong obviously if you put number of token which are anybody I you're going to be drawn too much and you may not have time to solve these other disputes so even if you are really rich in token you may not have this much of time to solve the dispute and when there is a dispute the arbitral contract besides Amish zero is talipes so in doesn't trial we start with three jewels but this is a parameter you can say I'm dealing with dispute already really low

value and I don't want to pay that much in arbitration C so I want to start with only one draw or you can say okay this dispute as a quite high value and I don't want to lose a lot of time in a pill because I know that small small jury are more likely to get wrong and he's eager to bribe a big one so I have these pews about the price of D th for a financial contract was one minion so I'm going to start with 100 euro in order to not to lose that much time in the resolution of my dispute so number of Droid something that's decided by a travel fast I think that so the the main

insight about the selection process is that first jurors self select themselves into the court where they think they can arbitrate so if I am an expert in two websites I'm going to so I have an incentive to self select to arbitrate this put into website if I self select into insurance what I don't know anything about that all right if I select myself into a court and then I don't really take the time to make the vote I just vote randomly so I am going to lose money because of how the system is structural right the tokens that I deposit to be drawn so since I'm not arbitrate incorrectly or honestly I'm going to lose them so in the long run

the system is structural for those guys who try to abuse of it are going to lose money and eventually in the year maybe it's interesting also to mention that this is loosely inspiring how courts worked in ancien Greece so the you know the Athenians of the Classical period they have this interesting concept that every citizen of the police had the right to to judge right but they didn't want for anyone to go to the like the Agora and become like a mob justice kind of stuff so they developed this very sophisticated mechanism for selection that was based on token that every citizen had it was an ID token that you had like your ID as a citizen

and you went on the court day and you put your token into this machine like a two meter high machine with slots called clear Italian that means the altar of randomness so it's like the place where randomness happens and this was a allotment machine that selected so some guy threw some white and black dice on a tube affixed on the side of the machine and if you had on your on your row a white dice you went to the jury if you have a black dice you went home so that dice that 20 faces dies we call icosahedron that's one of the Platonic solids it's actually kleros yeah logo so Clairol system is like loosely inspired

it's something that was tested before like 200 of 2500 years into the past and so that's that's where the name comes from also one of the differences between the the Athenian system and Claro's that I can see is that in the Athenian system when each citizen gets a token it's one citizen one token and then the tokens are used to select the jury whereas in Claro's the D token is the is the coin pinaki on coin and the holdings of pinaki Encana different between people right so so somebody might have very little panache pinochle and if you

look at like how the other tokens have panned out the majority of coins are actually held by the crypto hedge-funds now you see a system like tears also Definity i don't know like ten percent of the supply is owned by poly chain right because like poly chain is the biggest crypto hedge fund and there is no no way around such an unfair distribution so in Claro's my odds of being selected as a juror propose - the number of tokens I have right now somebody that has a lot of tokens in a particular coat let's say I own 5% of the supply and I go to the website design code there's very high odds that

I'm going to be selected as juror repeatedly even though I might not be the best juror so do you actually feel that like with with this incentive structure the jury will end up captured by all the crypto hedge funds right because I decrypted hedge funds might end up owning 30 or 40 percent of your supply pretty easily and so the crypto crypto hedge fund managers end up becoming the jurors do you see that as a risk to your selection process Yahoo I kept my amount of words it can provide so if you get 20% of the token yeah you can deposit all of them and get drawn 20% of the

cases but ruled as a crypto edge phone do you have the time to solve all those cases probably not so Israel you can ask for them in a sloppy manner and incur a lot of time and lose money oh you're gonna need to Pascal iron among people to solve disputes instead of you so it's know it start to look like more like pudding than someone having twenty percent of the balls in the engine grease model what you had different is you can easily get identity of people because you get to see them why the crypto world if I split my balance into two accounts no I'm I'm two

person and you have no way to know if I'm too person or if it's just me which is abilify key so you cannot base the chance of being wrong on on being someone because you can be lot of people online you can have lots of identities at the CIA attack now because of the non one person one chance to be drowned you can see okay that's me that there is a problem as a reason kind of democratic problem and the Democratic problem is solved in a different manner than oh it could be sold in icons and grease and kind of like state system because of the possibility of walking if

you intend to in Greece and there is a dispute you have no choice you're gonna be brought to this on some grease coat and you have no say in who is gonna rule on your case wide understand to my system on the Russian world everything is optional so Democratic choice is not made at the draw but it's made as a party lever in the dispute which can say okay I want the system to arbitrate my dispute and I not want this one because I think this phone is interrupted system and I don't if you only accept this system as a dispute resolution mechanism

I don't want to make business with you so that's where are the decisions Democratic decision come from from parties in dispute and not from a draw sign draw are more likely more like back and down like a dispute resolution comparative and they need to be look as it does not look like a state-based institution at all so like we use this as inspiration because it's easier to understand but so it's not that we are like just replicating the incendiaries institutions into the crypto world so it is loosely inspired in the sense that this visual solution uses from this crowdsource model so the Greek had this very interesting insight about every

citizen has the right to be a judge and claryce is based on this peer-to-peer and yeah philosophy of everyone who wants to participate in the arbitration process as a juror can do so under these conditions that are defined by the crypto economic system but it's not so of course there are many many differences between like Klara's and the ancient Greek system so in the white paper there was an interesting section that I want to ask you about and so we'll have the link to the white paper in the end the show notes and anybody looking to understand at a deeper level how close works under the hood should definitely read it and that was a section about random number

number generation the the process of selecting jurors implicates some randomness and there there's a mechanism within Clair's to generate random numbers in a decentralized way could you explain how that works so in the current release following do some block hash but in the next release we will use a second star proof of walk so the idea of sequence a full walk is that you start with a value that everyone can modify but no one can fix to a particular value so this means that you may start like zero piece of blockage or whatever and

then anyone can give local random number to make this seed value change but you cannot fix it to a particular value then what people have to do is to apply second self-love walk on it so they have to ask it repeatedly so amount of time which are going to take computational time so you don't know the result instantly you have to dedicate one CPU to to solve this result and by the time that someone solve this computational problem which is a concern this means that you cannot put more more

computer into solving it it's not possible anymore to modify the scene so it's a deterministic process but it's a deterministic process where anyone can change the point where we start from and the time to know the answer is a is long enough to avoid anyone from knowing sense we know the answer to be able to change the seed so you can know what the number is gonna be but when you know it is already too late and that's a way to generate randomness and really really basic trust assumption which is just you have at

least one honest party which want a number to be run done so basically if you think is there is that there is no one honest you just have to do it yourself and so since you know that shall yourself unless you know that the member is gonna be on them so the white paper also makes mention your governance mechanism could you like lay out governance mechanism what it's used for specifically how it works so issues for creating some quotes specialized quotes and setting parameters so for example habituation see the amount of token you can win or lose in disputes issue a

current or not and it's not it's a voting system but it's not a classical one it's a liquid voting system which means that everyone has a right to vote in proportion to tokens a day old but it's right it's not an obligation or some succeeds expected from them because they can't is a vote or they can delegate their vote to someone else and this someone arts and also delegate is vote to someone else so you can add transgene delegation so a delegate to be be delegates to CC delegates to D and then the vote yes so this is like if a

voted yes to because we wanted to characteristic of the bottom system one first one is that we want everyone to have the right to influence every decision so you need to let everyone to possibility to vote on everything you they want to and the second one is that you don't want the system to be wasteful you don't want to waste people time so you allow people to delegate when it's a decision that they are not specifically interested in so basically you get both of the advantage of direct voting and an election let's presume that I I want to make a new sub Court about the quality of

podcast editing something like that right what would that look like for me as a user how would I propose this change and then what would what would the process of voting that new sub court look like so you would propose and - crazy suppose you will decide what is the parent of this quote so you may have like Aaron booth which is a media quote for example so you will say that this course is a child of the media code you will write the basic policies of the code and you will determine on as usual of the quote have to be paid you will determine how much token they need to

put at least and which percentage of those can be lost if is a so dispute in an increment manner then it will be put forward view by anyone which can claim that your proposal is invalid so if you just like writer will be showing to people in your proposal someone who challenges proposal as an invalid proposal and it would go to this pitch resolution and so if no one a challenge proposal no everyone can express interest in the proposal still in the liquid voting manner and if you proposal get more than the interest forum it's put to vote and anyone can vote for it

and people which did not vote the boat couldn't as if the voltage the same way as a delegate or delegate of the negative the delegate and Senator etc if is a delegate also as that was body and once the votes if the world ends up into a yes obviously the court is created and now people with dispute can specify that the smartphone tried are going to be arbitrated by this party also calls actually so the the podcast quality so court could be quite interesting idea for implementing for a curated list use case because no kleros can be used to arbitrate disputes in created list so imagine you can upload you submit your

podcast to the list and some some user can say yeah this podcast does not have enough quality to be on this list so now there is a dispute between you and the user and this could be adjudicated in clear so this is a even if we usually focus on the use cases of escrow disputes because they are easier to understand so klaris has many applications and one of them is to solve disputing a curated list and them like the experiment we are running now verges on trial is based on a curated list use case of of klaris there seems to be kind of an intersection here with once you get in these these types of use cases they sort

of start to overlap with prediction markets in some sense can you talk about that and maybe explore how arbitration can can merge into prediction markets and vice versa so prediction markets need dispute resolution so prediction market is Oracle dispute is you ask question about the state of the outside world which is a dispute resolution whose case and I treat like the project which is most similar to Carlos is probably earlier it's not a dispute resolution project but in their projects they have the problem of the Oracle problem to solve their producing market so they came up

with mechanism which have some kind of similarities with Carol's it's not the same because they don't rob people randomly instead ask people to stay on dispute that they want so everyone can basically self select into dispute and we don't releasing his optimum because it means that if you are malicious you can target your attack on the particular dispute while if we use a random draw you can try to attack but then you cannot read it focus your attack on something but it's also something which here is basically you have to put a stake in the dispute and if you're your side get the biggest stake for some

period of time you win the dispute and anyone can put a stake in the other side and they have to put the station to other sides of the estate of the other side is at least twice the stake on the previous side so if the question is added train today you might put rather web token on yes and then someone sign oh I disagree he has to put - rap - Kevin - and then if you actually know it's ready yes you have to put three additional replicants and such you have four on the under yes and if no one does anything and during one Daniel one we can I don't know the timeline the winning side wins a token of the other

one so in this case yes side has fought again the no side has - token so the yes side wins the - token of the no side and yes is considered to be the result of the dispute so this also look like to be traction in point because you put your token is a majority you get a wallet if you put them like in the mini Richie you get you get been eyes and with that they were so we have some mechanism which start automatically that we also have intros missing travelers it's not it does not start automatically someone has to say I think that the chart level of the course is to corrupted so I want to for the

system but has there is lots of similarities between between Charlson over yeah very interesting of course like if you look at like current legal systems for nations you see that like many times disputes emerge because contracts are not drafted correctly right like the contracts under specify what should happen and the courts need to add interpretation on what the contract parties meant when they were writing the contract like sometimes sometimes disputes are clear it's a yes and no question but many other times like disputes are more

complex the contract parties did not foresee the particular situation happening a particular situation happened that is not specified in the contract dispute goes to court now the code must interpret what the parties meant when they sign the contract right and so to do things like these the courts have different ways of handling handling such things rights the coat forces interpretation on the contracts based on the laws of that particular jurisdiction right so like many of the laws are needed because when dispute arises and the contracts are not

specified well enough you need a legal system to give meaning to those contracts and still be able to handle these disputes is there an element like that to Claro's where even an under specified contract could be arbitrated I think that this is the point where Claro's is really really useful right because if you have control that is perfectly complete and perfectly clear so you don't need clear because that's called enforcement like yeah this was this payment done or not was done everything enforces right so there is some principle of philosophy of right as you say that every contract is

incomplete because they cannot foresee every situation that could arise in the future so there is some kind of yeah of subjectivity in should this contract go to a or to beasts who is right about this website thing right the website dispute is not completely subjective because there are us there was a control stating how many pages the website should have what time frame should website be deliver on or etc but it is not completely objective either right because like the website can be done in different ways and many of these ways can be correct right so um the world we are building of smart

contract and code enforcement still has not solved this space of subjectivity that is really important for a legal system right so and this is where Clara scan and worldkerros and where humans can do a very important contribution because humans are better qualified that probably AI for this kind of subjectivity questions and and about the question so so how should the contract be interpreted with jurisdiction so now you have in ordinary contract so maybe in some financial control it say that is if there is a dispute this is going to be settled in New York arbitration court

right so now imagine you and I do control all the website and we agree at the beginning so the if there is a dispute is going to be this assault into a sub Court of website with this characteristic sub court and so the jurors who are going to participate to that court they know that the policy of the court says so contract should be interpreted in this way this way this way and so when they do the decision about who is right they're going to use those rules as their guidance for the decision so that's the jurisdiction where the contract is going to be settled interesting so as we wrap up here let's

maybe talk about the current state of the project can you tell us you know where were things that right now and what's the road map looking forward so well about the current stage of the project we did our token sail between May 15 and July 15 we use a new method of tokens like all interactive corn offering that was suggested by vitalik adjacent ouch for making distribution more fair between participants so this ended July 15th then on July 30 I think or 31 we launched our project and our product into the ether illuminate this is a experiment called dodges on trial

where users or jurors have to arbitrate if an image is dogs or not a Dodge and there is a lot of different mechanism for incentivizing people and to try to see how resistant Claro's is to different type of attacks and so we're people we invited you to come to the experiment and submit images and try to fool the system if you can fool the system by making a cut into the list and so you are going to get to it so it's a good incentive for you to try to game klaris jurors and so now we are focusing on that and all the learnings that we expect to have from those yeah from

those submissions and this experiment and then of course trying to go into the main so in the real-world use cases because we already have a number of partnerships for example with in protocol to start using Claro's into e-commerce a website did not ecommerce disputes like in the ink protocol they have this dispute we have other partnerships with crypto currency exchange called dieter so the next step for us is try to prove that kleros can actually work in real-world use cases can actually solve the problem that we expected to solve so now we are recruiting people we are completing the

team and trying to make this very very exceptional team to tackle this very very big problem so on the side of the room and um so we have obviously the passive version of Charles which is with we sought support but with the dispute resolution mechanism the random drawing mechanism Spokane where distribution mechanism which can be used already by my project which will plug on it but for now we we just have this it's a funny game that Carol is at Valerie to explain

to tell the system where we want to test the system in adversarial condition where we give people incentive to try to break it next version will we will have support we will have some improvement of user interface we would have the governance mechanism and because for now the only point which prevent the system to be religious and wise is the lack of of the group of the governance mechanism and on a compiler we have improvement of of Crayolas and integration with with also project in other use cases cool so

the place at which people can actually use your system is with Doge on trial right so that's the that's the public facing experiment you are doing that all listeners can participate in right now yeah you can already use trial you can already use European K to become a juror on trial and we got something like almost 200 submission for the new trial okay that's that's really cool I'm I'm actually curious what your first focus area is going to be I are you going to like focus on some kind of cases at firsts specifically or will you try to build a General Court first so we already built

a general court it is that we have a general corphish now is only plugged to one application which is judge a trial but if you want to plug another application now technically you can do it it is that since the system is still in the early day like it has been lunch less than a month before we advise to wait perhaps one or two months after lunch to be sure that on this test case it's work as expected before putting real use case with money estate but if you see one on the system like operates for two months straight without any problem I think it will be ready to put real dispute yeah very interesting

Thank You Federico and Clement for for joining us today it was great to discover GLaDOS it's a super interesting project one of these kneading projects doing you know justice systems on the blockchain and we look forward to having you back let's say a year or two later when your system is further along and actually processing commercially useful cases for our guests thank you for joining us we release new episodes of epicenter Bitcoin every Tuesday or Wednesday you can subscribe to our show on iTunes SoundCloud or your favorite pot podcast app like stitcher you can also watch the video version of the show on our youtube channel at youtube.com

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