Layer 2 for Dapps: When Decentralized Protocols Meet the Real World

Transcript

how many of you know Clara's oh good great well so I'm going to speak about how we are thinking about real-world implementation of our protocol and what we call layer 2 and so for those who don't know Claro's has do a very short introduction you have Alice from France who hires Bob from Guatemala to do a website and you know they're in different countries and there's a dispute about the scope of the work and she's not going to court against Bob in Guatemala of course and imagine if they had used kleros for for this contract

Alice sends the payment into a smart contract that works as a scroll and they both agree that in case of a dispute this is going to be solved by an arbitrator called Clara's Clarissa Dao and the dispute starts and the money stays locked into the smart contract and claryce is going to select a number of jurors who are going to analyze the evidence and they're going to use this very beautiful interface that's the terrorist court they're going to analyze evidence and they're going to vote who is right and in this case they vote that Alice was right and the money that wasn't to the escrow is sent to her and

this solves the contract problem all good for now yeah so the big question about in Clara's is how do you select jurors right who are these people who are going to adjudicate the dispute and you have this woman I mean she's a designer from let's say Vietnam and she has a job as a designer and she wants to make some money on the side and she can do some money by arbitrating disputes into the trellis platform and for this you need to get a token called pin action and this is token gives you the right to be drawn as a jeweler in disputes in the Paris Protocol

so this woman deposits are talking to one of Clare of course in this we'll be court about freelancing for example and different people take the token and some of them are randomly drawn as jurors and these guys will have the right to adjudicated disputes and after this there's a incentive mechanism that will distribute the that will distribute tokens from those who voted incoherently those who voted coherently this is a whole different story we are not going to address now but there's William who works very deeply into these matters how to make the protocol efficient security trap so when

we typically present kleros we presented as a decentralized court system for the decentralized internet as you know many people here are building the web 3 application right the new internet that is going to replace the Facebook's the googles on all these centralized monsters that make today's internet and you know dubs don't have a dispute resolution system and 3 to 5 percent of all the Internet transactions and in a dispute so when we typically pitch Claro's in the context of the world Rico system we present it as a dau that is a court to which all of the other dowels

are going to send their disputes and then get back a decision made by the klaris jurors good but we also typically get lots of questions about ok yeah we get the part of the recent rise internet but can't Claro's work like in the real life mainstream use cases that we have now like could eBay use Claro's for Russell resolving disputes in their platform cool and insurance regulator use Claro's to adjudicate disputes between an insurance company and customer right the customer claims that he needs to be paid for a problem with the car and the

insurance company said no so who is right not going to court with these problems but if tears can do it cheaper faster so that's a very good use case and also think about all of the problems that like you have disputes between a user and a utility company and the crater company all those small claims that are not really solved by courts and to which they're not a very cheap solution and very effective solution now good clear us be in charge of solving this so besides the well three core system there is a whole world of potential use cases where trails protocol could be used so a

number of questions of how do you connect this serial protocol which is up basically system of incentives for different people to adjudicate this Petunia in a fair way how do you connect this with a real-life and a real-world loss of business I'm going to tell you a bit about the exploration we are doing we don't have answers because we are working on this but at least for you to know how we are thinking about these problems and the problems we have found in a way so if you are building a protocol which is decentralized and you want to address real life use cases so you will have some experience from us to

lead your your way so the first thing is of course as any entrepreneur knows so what's your value proposition what is that you're going to offer your the customer what problem does your product solve and of course coming from the crypto ecosystem we went to the customers you know chlorosis decentralized and trustless who you know and then we figure out that well maybe that doesn't work for everyone the decentralized and trustless thing is great for the DAO ecosystem but not every company of the real world really

cares about decentralization and business so what is a value proposition that companies from the real world can understand and can relate to kleros is potentially cheaper and faster than other methods for resolution and and why is this because the protocol has a huge network of users or potentially has a huge network of users that when they start to adjudicate disputes it can scale very fast the amount of jurors and if you have lots of jurors adjudicating disputes then the cost and the speed so because we'll go down a lot and the speed of resolution will go down below existing methods that you have now but

not just that because when a real-life customer is going to evaluate kleros he's not going to evaluate errors only against like other protocols for the centralized justice they're going to evaluate this against potentially other methods for a solution that they could use including machine learning which is a very important trend that is growing in the audience important for you to present to the potential customer exactly were in the in this like continuum of different solutions where is the problem that Claro's can solve best close it's not the best idea for very simple problems that could be

solved maybe faster and more cheaply by AI and Laros at the moment it's not the best idea for more complex dispute that may involve more than two parties so there is a sweet spot on which the value proposition that service can provide is ideal for for the customer so one thing is that think about the whole proposition and in this case fast and cheap and there is another thing that can be valued by by customers klaris is a transparent resolution method why do we say it's transparent well because all the procedure for a solution is encoded in the blockchain all the way in which

jurors are selected is going to be like verifiable by anyone who wants to do it on the blockchain and you can't verify how eBay solves disputes right because they do this within their offices but you can't verify that Clara's selected the jurors in the way it was said that they were willing to be selected so this is what the Clara's proposition of value looks like in the mainstream world right it can be cheaper it can be faster and it can be more transparent than existing methods for resolution so the first tip for you to to think when you are thinking about your offer of your protocol to mainstream customers is what

is your value proposition and how can this solve a real problem of real companies of the real world for this you need to really understand your customer and who is actually going to use your protocol what are the companies that you can address with your solution what are the drivers that are of the decision of these companies to adopt or not adopt your protocol and for this exploration it's very useful to think about user personas for example you have this woman of courses called Alice and she is the complaint claims manager of a imaginary

ecommerce company called much trade and as the complaint manager she is under pressure by different agents in her organization on the one hand her CEO of course he wants her to spend less money and so he's cutting her budget so now she has lots of disputes to resolve and she doesn't have enough budget to do it so she can be potentially interested in a metal that can resolve disputes cheaper than how she does it today another very important aspect for the e-commerce companies is how fair is the resolution process that do you think do

you typically think of this processes are are fair know how eBay or Amazon they resolve disputes it's a really big problem for them because users complain all the time about this because these platforms they are not in the business of struggling disputes they are in the business of maximizing revenue and so they typically favor the big party of the disputes and this creates lots of reputational loss so there is a principle business case to be made to these companies that they could just outsource the resolution process to someone who can do it in a more transparent way and that the customer

can trust okay so after you identified the organization you want to target and the user persona engineers to the problems that they have you have to understand the friction points that may affect your implementation and let me tell you something that mainstream organizations they don't always use crypto and also they don't always understand your protocol they don't always have the time to start learning how this works and so this is a very important friction point right and for

this matter it's it can be very interesting to know how Bitcoin became a massive protocol how it can became massively used as you know Bitcoin started in 2008 with the paper of the ocean agamotto and at the beginning it was kind of a toy for for nerds to play with it was really extremely hard to use this is the first Bitcoin wallet with one core wallet and what was the point where Bitcoin started to become like more massively adopted do you remember yes

very well when coinbase came out right coinbase was founded in 2012 and what was the value proposition so this is part of the original pitch deck of coin base when they went out of their way Combinator acceleration program and this is what they said that they would do so VidCon is too difficult to use so we're going to give better tools and easier to use for onboarding more people into the crypto ecosystem so that's what Brian ours from was pitching at the end of Y Combinator of course the the purist were saying yeah right okay but that's not not York is not your crypto of course

and we all know that here but you know what like not everyone heard about that for some people they just wanted to have crypto and not being worried about losing the keys or yeah right and for a large number of future segments it makes sense and this can be seen in the adoption rate that coinbase enjoyed after the creation but the important thing to learn here is that coinbase with coinbase users didn't have to interact directly with the Bitcoin protocol they interacted with an intermediary company that provided all

of this layer of services of security of assets etc and co-invest was only one of those layers that gave users an experience that was better suited to their needs on top of the Bitcoin protocol a whole layer of other companies started to emerge and addressing different user segments and this is a bit the way in which we are thinking about the creation and the growth of the Clara Slayer 2 squares literature let's go back to Alice right so she is the crane manager and she needs to cut costs

she needs to have a more fair resolution process and she can't use klaris directly so what's going to happen in the future is that some company let's call it like fair Commerce which is going to be built on Clara it's going to go to her and offer her service for resolving disputes for e-commerce like a Business Process Outsourcing right a BPO so hello Alice I'm going to offer you use send us disputes and we will send you the solutions and you paid you paid like one euro per dispute solve and that's it and you have to worry about anything else so let's say that the Alice users in the match trade

platform they fill this claim form and all of the after they fill this form and the claim starts so the user doesn't know he's using fair commerce or klaris the dispute is actually solved by Clara's into the Clara's platform but the decision is sent back to the user in the third trade platform through the work of an intermediary company called third commerce so this is how how the system will work so what does for commerce do well he process payments right he creates course in Clara's for addressing disputes for creating this PC and he has all of this backend that much

so that the Alice company doesn't want to handle so it's handled but this intermediary company and this company can collect a fee for this work right in a way that is not completely different of how coinbase uses the Bitcoin ecosystem coinbase uses beacon in your system or other crypto system as a provider of monetary services so fair commerce uses the Clara's ecosystem as a provider of dispute resolution services right and claryce has many use cases terrace is basically a protocol where people are incentivized to make

decisions in a fair way some of these decisions may be applied to disputes others may be applied to contain moderation shall imagine like reddit outsourcing their content moderation service to a company called safe content and this safe content company uses Glaros network of jurors to moderate content in a fair way and imagine the IMF which is the French regulator for financial services they will have to start in the future handling lots of new digital assets right a lot of these digital assets are going to be scans or are going to be non-compliant which

French financial law so regulators can handle a couple of them right but what when you start having like thousands of new coins tokens or crypto equity which are being created every day like can you find metal that will red flag those that seem like scam very fast before they become too big and before they can create a big problem so this is a way in which even a government and a regulator like the the IMF could potentially use the service of klaris in this case through an intermediary company called true finance so this is the generic way in which we expect this system to work

like you have on the one side a customer an intermediary company and the protocol which provides the service of the crypto Network incentivizing jurors to make decisions and as klaris has lots of different use cases we can have some companies that are going to specialize in travel dispute others in gaming others in insurance and commerce and all of these are going to be using the closed protocol for dispute resolution of course as people had to come to terms with the fact that coinbase was not

fully decentralized and it may not be a problem because the later two companies even if they are centralized they are still less centralized that the existing services that Amazon or Ebay used for the stood resolution so it's going to be in the middle between the decentralized and trustless world of klaris for dubs where everything is on chaining force and dowels and that and this centralized world that we have now but in the end the way into which disputes were solved by these true commoners or fair commerce or true finance companies still come

verified into the etherium blockchain right and this gives an extra layer of transparency that does not exist today in the Amazon any base of the world so it's important for you if you are building on your protocol or incentivizing people to build on your protocol to define what is your layer to and what type of problem your layer tree is going to solve and also after you you did this so you are going to start addressing customers who are corporates and enterprise users and this require lots of of work in like credibility of

your your protocol and your team right in our case we were incubated by Thomson Reuters and this gave us a lot of insights on how to address this segment of customers and more recently we received a grant by the BPI it's French bank to build this new layer to develop the kind of things that we need for this strategy to work so financial resources and social capital are going to be very important to have credibility to address the corporate use cases then of course you will need to incentivize the people

who are going to build this layer through companies and they're going to bring your protocol to the to the end-users at close we have a fellowship program and one of the trucks of this fellowship this is a research program which has different tracks one of them is for studying crypto economics another one is for studying computer science but one of them is about business and this business track without helping people to build this type of layer to companies and there is already a team from Brazil that is building a later - company based on kleros for dispute in the construction

industry you know there's lots of construction industry disputes because of the contractor and this was not made on time so one company is already starting to to do this service and there is a team of for another students but maybe they will move forward and this is a company from France actually their student from the legal tech program at assess and they created a company or a project to use kleros for accelerating claim management in dispute happening in the sharing economy in France so that's another case of potentially growing yeah ecosystem so in short like we are just

starting our layer two strategy up to now all of our effort was made into the creating the protocol making it work improving the crypto incentives for for Asians - the RAM we of course we are still and this is our main focuses using Claro's for a solution of all the dialogue disputes but we are now also starting to develop this new strategy about layer 2 and for this the learnings that we had and just to summarize and that I want to share with you is ok what is your value proposition so what is the problem you solve for this real-life companies ok to develop this proposition

you need to your customer you need to understand the Alice's of the world and see what problems they are trying to solve in their positions under the type of incentives they have and the kind of pressures to which they are a subject you have to of course identify friction points affecting the use of your protocol in the case of klaris I just mentioned one that was about yeah they don't use crypto there may be potentially other friction points to solve that may address the privacy of disputes so you need to see what are the the privacy or the friction point in your case are relevant for your value proposition and try to partner with

mainstream companies which will give you first access to knowledge of how enterprises make decisions for hiring these types of services and you but you have to see what service you want to offer first but you need to then do business development in this way and of course try to help all the people that you see will start building on your layer too right people who are going to build companies that will use your protocol to serve this piece of the end customers and so this is our experience so far and hope it helps for some of you to start thinking about these issues and

thank you very much and I am open to your questions [Applause] hello let's say a lot of business development happens in layer 2 in the short term how can they sell these services to other people without a massive install installed base of users on the protocol and what will you do - what's your strategy to grow this installed base of jurors in the case of klaris that's not that a big problem because the the Harpe you know every marketplace has a hard part an easy part

in our part the in our case the hard part is the demand of arbitration services part like it's about having enough dispute when we have disputes so there is money to be made by jurors and so more people come and they go and they stake and so when there is more dispute souls so more demand user come because this oh this is working ok let's solve our disputes here or and more jurors will come so the the chicken and egg problem on our side can be solved by solving the demand side of the marketplace that was a very nice presentation I have two questions the first question is what do you think the

business model for layer 2 companies is in regards to charge in enterprises and the second question is have you done any research on how these layer 2 companies will use crypto and deal with the volatility and fluctuation in prices and convert that to a fee for the enterprises yeah so the about the business model like my our Hansie so it will probably start by like handling Commission on its transaction that is resolved by the layer 2 company so the virtual company like collects money from the customer from the e-commerce

platform and then has to pay the cross network fees of perjurers so probably they're going to collect a fee between what they like their cost of paint jurors and what they sell to the customer but of course innovation can happen right that's that's like the what I see as a low-hanging fruit but maybe some like Steve Jobs of layer 2 comes oh I have a better business model I can I solve in this way and like that that's where the innovation of the entrepreneurs is going to come and create things that we didn't think about the volatility we you can use use stale coins right so that's not the problem

right but no um well I'm still free to speak after you after the talk and then be around all day so thank you very much and well thanks for coming [Applause]