How this startup uses blockchain to resolve legal disputes

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This article is part of Tech in Asia’s partnership with The Jay Kim Show where we publish the revised transcripts from the show’s podcast interviews with top entrepreneurs. This is heavily revised from the original show transcripts. For the full interview, go here.

Federico Ast is the founder of Kleros, a blockchain-based arbitration platform. It’s a unique solution for resolving disputes while ensuring integrity and transparency of rulings.

In this interview, Ast walks us through this interesting application in the blockchain space and how the platform works.

Tell us about what you do and your background.

I was born in Buenos Aires, Argentina. I studied economics and philosophy, but I always wanted to be a writer. So when I finished university, I went to work for a website covering business and entrepreneurship. That’s what took me to blockchain. It was in early 2010 when people started to talk about blockchain, bitcoin, and these weird internet currencies.

I also got very interested in governance because my country, Argentina, has a lot of problems there. There is also a very serious currency crisis. So, this connection between governance and currency crisis made me become very interested in blockchain.

I started working on the use of blockchain for governance and published a paper in 2015. I wrote a paper to propose how justice should work if we had to build it with the tools we have and the things we know today. Then, I got invited to a conference in Amsterdam to talk about it, where I met a professor at Singularity University.

I was not trying to do a bitcoin or blockchain startup. One thing they always tell you at Singularity is fall in love with the problem, not with the solution. So I am just in love with the problem, and it happens that blockchain is the solution. If the solution had been AI, VR, or whatever, maybe I would be working with a different technology.

What’s the idea behind Kleros?

The idea that ordinary people can be a judge in a dispute. For example, I am in Argentina and I want to hire a developer in Guatemala to do a website for me. We do an agreement, I pay him, he does the website, but I don’t like it. I’m not going to Guatemala to sue him for a US$500 or US$1,000 website.

But imagine this: Instead of paying him directly, I put the money into a smart contract. And if everything goes right, the money is transferred. But if there is a dispute, the money is locked in the smart contract, Kleros selects a jury of experts in website disputes, and these guys analyze the evidence and vote for who is right. They collect a fee for that work.

Kleros is an autonomous organization—completely decentralized—that selects experts (not like professional lawyers or judges but people from the community) in the issue at hand to adjudicate a dispute. It can also be used in insurance, transit tickets, and ecommerce disputes, among many other different small claims.

How are the jurors selected?

People can select a court where they think their expertise can help solve disputes.

For example, there’s this guy who works in a website design company. During his downtime, he wants to make extra money by arbitrating disputes on Kleros. So, he needs to have the token that gives him a chance to be a juror. Then, there is this random machine that selects a certain number of jurors to arbitrate a dispute. The assigned jurors are anonymous.

But the biggest risk here is having jurors who vote randomly just to collect their fees. What we do is we use game theory incentives to ensure honesty. A juror who does not do his job properly will lose his token, which will then be distributed to other jurors.

How is different from traditional ICOs?

How do you see the blockchain space evolving in the next 12 months?