Imagine a future where conflicts and legal disputes are no longer settled between the four walls of a courtroom but by anonymous jurors of a blockchain network. The concept seems far-fetched, but it is already a reality as a result of some forward-thinking projects that are using the power of decentralized smart contracts and participants that are incentivized to make rulings as jurors.
Kleros, a blockchain dispute resolution system, is already operational, and it has sparked heavy debate around blockchain technology and its application in the legal space. In February, Kleros will be joined by another platform with its own dispute-resolving platform — Aragon Court.
The decentralized court falls under the umbrella of Aragon Association’s decentralized platform that enables users to create a variety of organizations and companies. Users can manage a variety of aspects of an organization, from management to voting and finance.
The premise and purpose of Aragon Court is intriguing, as it has the potential to become a borderless dispute resolution tool that transcends the jurisdictions of different nations and laws. What remains to be seen is whether the judgements made by jurors of the platform can be enforced and if they hold weight in the eyes of conventional legal systems and courts.
How it works?
Such court platforms work under a protocol handling subjective disputes that cannot be automatically settled by smart contracts. The protocol makes use of human jurors who vote on a specific dispute in order to reach a final ruling.
For example, to become a juror on the Aragon Court, a user is required to sign up, stake and activate ANJ, which is the platform’s native token. The likelihood of being drafted is increased proportionally by the amount of ANJ that a juror has activated.
Once jurors have been called to rule in a dispute, they enter the voting phase of the protocol’s process. The Aragon Court uses a game theory method known as a Schelling Game in order to provide a subjective outcome to the dispute. Jurors are asked to vote on a ruling that other jurors in the dispute are most likely to vote on as well.
As previously mentioned, a portion of jurors’ ANJ tokens are locked in a pool until a verdict is reached. With the objective being the consensus of an outcome, jurors that opt for the minority ruling lose their staked tokens. Alternatively, jurors that vote with the majority are rewarded a share of the staked tokens as well as ruling fees from the protocol.
Parties involved in the dispute are able to appeal the outcome of a ruling by staking more collateral for a proceeding round of adjudication. This preliminary round will require new jurors to vote on a new ruling. This process can happen multiple times if subsequent findings are appealed. The smart contract that initiated the dispute can then be settled in accordance with the final ruling of the voting jurors.
A viable alternative to traditional courts?
Aragon Court’s dependence on game theory and consensus leads to some interesting questions around the viability of the platform becoming an alternative for various disputes to be settled outside of traditional courts.
Unlike a conventional trial jury that will hear evidence and deliberate over the outcome of a court case among its members, Aragon Court’s jurors do not have any lines of communication with each other. They vote on the given outcomes of a dispute and are directly incentivized to vote for the outcome that other jurors are most inclined to select.
CryptoX reached out to United States-based corporate lawyer Dean Steinbeck for a legal perspective on the potential of digital courts like Aragon. As Steinbeck explains, the nature of the game theory mechanism is one that has been considered for many years for a host of different applications. However, the mechanism may not lead to an outcome that delivers justice in a conventional sense:
“On the one hand, skin in the game ensures that jurors make rational decisions. […] On the other hand, jurors will not vote based on what they think is right, but based on what they think the majority of jurors will think is right. So there could be a situation where a juror has a strong conviction of something but is afraid to vote for it because he or she might lose money. The safest bet will always be to vote with what you think is the majority decision. Ultimately, that’s not justice but populism.”
Aside from the mechanism of voting, Aragon Court potentially offers a far more cost-effective mechanism of reaching an outcome than traditional legal means. Taking any dispute to a formal court of law can be a costly exercise and that provides room for viable alternatives of mediation. Steinbeck suggests that individuals, companies and online platforms may be inclined to use a service to settle disputes that are fairly menial from a legal perspective:
“I think Aragon Court looks like an efficient way to settle disputes that would otherwise be too costly to adjudicate in a court of law. However, my guess is that if enough money is at stake a litigant will still want to hire a lawyer to prepare paperwork stating his or her case. So it’s likely that lawyers, or other experts, will still be used.”
Another point of consideration is the possibility of jurors conspiring to reach an agreed outcome in order to secure a share of the rewards of a ruling. Given the way in which the Aragon Court protocol works, malicious parties could be tempted to take advantage of the game theory mechanics. Aragon Association Executive Director Luis Cuende told CryptoX that the voting mechanism is designed to discourage this type of behavior by jurors.
“Jurors have to vote with a mechanism called commit-and-reveal — which makes it impossible for them to have certainty of what each other will vote. Therefore they could try to cheat on each other and get fees from the ones on the losing part, so they are incentivized to not do that.”
Legally binding?
Another pertinent question surrounding the future of digital courts is whether rulings of disputes hold any weight from a formal legal standpoint. Are parties beholden to a ruling from such a court, legally speaking? Steinbeck suggests that if two parties contractually agree to have a dispute settled, the ruling will be legally binding:
“Today, third-party arbitration and mediation is a huge business. There is no reason why parties can’t contractually agree to the outcome of an Aragon Court ruling. When parties agree to adjudicate their disputes via Aragon, those decisions will be binding.”
As a signal of intent, the Aragon Association has done just that in a contractual document between itself and an ongoing development, as Cuende explains:
“You can also use traditional legal agreements and set Aragon Court as the dispute resolution mechanism — we have actually done that for one of our grants to the team developing Aragon Chain.”
While Steinbeck considers such a legal contract as binding, Cuende believes that a ruling by a traditional court may be what is needed to give credence to the Aragon Court, “The true test of this would be a case convened in the Aragon Court being taken to a conventional court.”
What about the jurors?
A dispute resolution mechanism like Aragon Court does not require jurors to have any formal legal qualifications or background. It is an interesting premise, given the fact that jurors could be involved in making decisions in complicated disputes. Their involvement as jurors is solely determined by their stake of tokens in the platform.
While Steinbeck suggests that knowledge of legal systems and law is not imperative for jurors, the lawyer thinks enforcing jurors to meet certain criteria might make the system more acceptable to prospective users:
“I don’t think jurors need a legal background, but some level of sophistication is desirable. I think imposing certain age, educational and/or professional qualifications would let users feel more comfortable with the decision making process.”
On the other hand, Cuende insists that the “magic” of the blockchain-powered court is provided by the incentives of consensus, “Anonymous Internet miners secure your Bitcoin, and anonymous Internet people secure your legal certainty — all thanks to crypto economic incentives.”
Jurors still need to be able to make sense of the contractual parameters of a dispute as well as the evidence given. The complexity of some cases and questions around the authenticity of evidence used to dispute claims add another dimension to the capabilities of the blockchain-based court systems.
Additionally, Cuende concedes that some disputes may not be able to be settled by Aragon Court at this stage in its development:
“For some evidence, it’s straightforward. Let’s say you want to claim a reimbursement for a flight — then it’s trivial to check if the flight was delayed. For more subjective things, especially those that may need physical interaction, it gets way harder, and those cases may not be adequate for Aragon Court just yet.”
A waiting game
Aragon Court began the process of onboarding jurors earlier this month ahead of the proposed launch of the platform in February 2020. It seems unlikely that major legal disputes will be settled through the Aragon Court in the short term. Cuende went as far as advising against it until the platform is up and working smoothly.
From a legal perspective, Steinbeck believes that it will take a considerable amount of time before businesses and institutions look to platforms like Aragon Court to preside over contractual disputes. He also argued that for now, the size of a dispute makes no difference to how these platforms operate. He also went on to summarize:
“However, I don’t see parties with millions at stake voluntarily submitting to Aragon Court in the near future. The system is so novel. It will take decades for enterprises to get comfortable with the idea of decentralized jurisprudence based on sophisticated game theory.”
