Blockchain Empowered Online Dispute Resolution: A Decentralized Approach To Enhancing Trust And Efficiency
With the emergence and assimilation of AI, multiple industries are going through a paradigm shift. This wave of AI has impacted the legal sector too, which till now relied on human judgement and interpretation.
Today, blockchain is recognized as a turning point in the history of technology, having been first introduced by Satoshi Nakamoto in 2008. Further, as it was made popular by cryptocurrencies such as bitcoin, it garnered interest of the corporate world and dispute resolution sector. Blockchain is decentralized, transparent and immutable in nature, which ensures its efficiency as compared to traditional approaches. Moreover, in the case of Hangzhou Huatai Media Culture Media Co., Ltd. v. Shenzhen Daotong Technology Development Co. Ltd. Ltd., a Chinese court accepted blockchain evidence for the first time in June 2018. Following suit, the state of Vermont approved that blockchain data is admissible as evidence. Traditional methods, which have long been criticized for their cost and length, may change with blockchain's unique characteristics for ushering in a new era of trust and transparency.
I. Records That Cannot Be Changed and Can Be Seen By Everyone:
When talking about cryptocurrencies, it's impossible to leave out blockchain. This technology is changing the way we resolve disputes in a positive way. It is decentralized and can't be changed, and its transparent nature allows for efficient solutions. Chinese Internet Courts and Vermont are just two of many countries who see the potential in this technology. There have been some proposals for blockchain-based arbitration that aim to reduce unnecessary and unwarranted costs as well. Blockchain has been revolutionary since it first emerged into the world in 2008, and it's safe to say that information processing in dispute resolution will never be the same.
II. Automated Resolution with Smart Contracts:
Smart contracts are another vital tool when using blockchain to settle disputes. For those who are not familiar with them, they're basically self-executing contracts written in code that live on the blockchain which automatically carry out their terms when they've been satisfied. Misinterpretation or non-compliance stemming from unclear terms is no longer a worry because smart contracts establish clear-cut conditions before being executed by intermediaries. “Smart contracts work similarly to software in that they automatically carry out the obligations owed by each participant, making it impossible to break the agreement. Oracles are third-party services connecting the smart contract to the outside world by giving it access to external data. Blockchain oracles are third-party services that supply external data to smart contracts”. Oracles then act as a bridge between blockchains and third-party services that supply external data to smart contracts by giving them access to information outside of the network.
It's crucial for blockchains or smart contracts to obtain data off-chain (data located outside of network) since countless commercial agreements rely on it to properly function. This is where blockchain oracles come into play as they serve as an intermediary between what's happening on-chain and off-chain data.
III. Decentralized Arbitration:
In the land of dispute resolution, it is known that everything has to run through centralized authorities like courts and arbitration institutions. While this procedure is time-consuming enough as it is, it also happens to be quite expensive and ambiguous, no matter how you slice it. But with blockchain technology, we could fix all three of these pain points. With decentralized arbitration, disputes can be resolved by a network of independent arbitrators selected based on their reputation and expertise rather than where they work or who they know. By doing so, you provide a more inclusive, efficient, and cost-effective alternative for people seeking justice around the globe.
Kleros and Resolution are two platforms that leverage blockchain in dispute resolution procedures. Blockchain arbitration is essentially what it sounds like: resolving disputes using a crowdsourced, decentralized jury that remains anonymous until they're ready to establish a consensus and offer up a ruling (which they'll then write into one). They do this by using game theory principles and Bitcoin payments to keep everyone engaged. A prominent example of these platforms is Kleros, which works on Ethereum (ETH) and its native coin Pinakion (PNK). For a user to use the Kleros platform, they have to start by purchasing ETH with fiat currency like the Indian Rupee then proceeding to purchase PNK with ETH. In addition, the 'gas charge' is also paid in ETH as it is a transaction fee for using the ETH blockchain. The 'gas fee' charge — which functions as a transaction fee for using the ETH blockchain — also needs to be paid using ETH. Before filing their case with Kleros, any party involved must pay fees in PNK (or your case will not be heard), which will later be distributed among jurors based on their performance throughout the process. In addition to this portion of the process being fairly different from anything that's been done before, even their actual terminology sets them apart from traditional systems at each step.
At a Kleros Court jurors stake some PNK as an entrance fee once chosen after being randomly selected from a group of users, and they will receive cryptocurrency payments for their services. The more PNK you stake, the better your odds are of being chosen to be part of the jury. However, once chosen jurors will decide on the case based on three things: the facts stated, the applicable statutes and any digital proof supplied by both parties. The process itself is conducted entirely on the blockchain with an input (the evidence) creating an output (the award).
Resolutio has its own unique system as well. They also use arbitrators who are paid to do what they do best and are chosen by both parties involved in a dispute rather than randomly pulling names out of a hat like Kleros does. Although Resolutio has already finished developing its prototype and entered testing while Kleros is still in development but has started providing services, they each have the potential to completely change how we settle our problems.
IV. Tokenized Dispute Resolution:
Blockchain's ability to create and manage digital assets opens up new doors in dispute resolution. The tokenization of these assets can represent ownership, value, or rights meaning parties can resolve disputes by just transferring or exchanging a few tokens. Both sides can establish an escrow account by tokenizing assets and holding onto funds until the dispute has been resolved so everyone gets their fair share. This is a pretty neat way to enforce agreements, streamline settlements as well as the process overall.
Challenges
There are going to be a lot of legal disagreements coming from smart contracts in different systems across the world which means national courts might need some extra assistance applying international private law once they come across these digital issues.. Some serious challenges that will come with trying to determine where something was contracted and performed on blockchain include finding out which court system is applicable as well as what legislation applies to said smart contract.
I. Jurisdiction conflict: Most conflict of jurisdiction rules in the world are based on such geographical or physical concepts as the defendant's domicile, the location of formation, negotiation and performance of the contract, etc. These conflict-of-jurisdiction regulations that are territorial by nature are unlikely to be applied to smart contracts made and executed on a blockchain between two anonymous individuals connected only through their crypto wallets. National systems will likely run into some serious difficulties when they try to hear disputes over smart contracts if they rely on concepts like defendant's domicile or habitual residence. In order to determine where they live, it is necessary first to know who the other party is. But blockchains often ensure user anonymity, which creates significant barriers for dispute resolution. However, as blockchains often guarantee user anonymity, several obstacles to its resolution will exist.
II. Laws to govern: Once national courts establish their jurisdiction, it will then become important for everyone partaking in the transaction to select what law they want governing over their smart contract for legal purposes.
Blockchain technology is on the rise, and for good reason. It offers transparency, more efficiency and integrity than ever before. This is done by using smart contracts, records that can't be tampered with, decentralized arbitration and tokenization. Blockchain has the potential to cut costs while speeding up the resolution process. Moreover, it gives people better access to justice. However, it's important we address any issues that come with implementing blockchain tech and make sure legal frameworks are in their proper place during this transition time.
The process of conflict resolution has never been quicker when using blockchain tech. Not only does it help resolve conflicts faster but also at a lower cost. However, there are some hurdles that need to be addressed such as scalability, privacy concerns and legal frameworks before we go full steam ahead with this technological revolution in conflict resolution. By understanding these challenges now, rather than leaving it for the future, stakeholders can pave the way for an even better system of resolving disputes in the future.
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