Blog by Federico Ast at Thomson Reuters: “Human communities of every era have had to solve the problem of social order. For this, they developed governance and legal systems. They did it with the technologies and systems of belief of their time….
A better justice system may not come from further streamlining existing processes but from fundamentally rethinking them from a first principles perspective.
In the last decade, we have witnessed how collective intelligence could be leveraged to produce an encyclopaedia like Wikipedia, a transport system like Uber, a restaurant rating system like Yelp!, and a hotel system like Airbnb. These companies innovated by crowdsourcing value creation. Instead of having an in-house team of restaurant critics as the Michelin Guide, Yelp! crowdsourced ratings in users.
Satoshi Nakamoto’s invention of Bitcoin (and the underlying blockchain technology) may be seen as the next step in the rise of the collaborative economy. The Bitcoin Network proved that, given the right incentives, anonymous users could cooperate in creating and updating a distributed ledger which could act as a monetary system. A nationless system, inherently global, and native to the Internet Age.
Cryptoeconomics is a new field of study that leverages cryptography, computer science and game theory to build secure distributed systems. It is the science that underlies the incentive system of open distributed ledgers. But its potential goes well beyond cryptocurrencies.
Kleros is a dispute resolution system which relies on cryptoeconomics. It uses a system of incentives based on “focal points”, a concept developed by game theorist Thomas Schelling, winner of the Nobel Prize in Economics 2005. Using a clever mechanism design, it seeks to produce a set of incentives for randomly selected users to adjudicate different types of disputes in a fast, affordable and secure way. Users who adjudicate disputes honestly will make money. Users who try to abuse the system will lose money.
Kleros does not seek to compete with governments or traditional arbitration systems, but provide a new method that will leverage the wisdom of the crowd to resolve many disputes of the global digital economy for which existing methods fall short: e-commerce, crowdfunding and many types of small claims are among the early adopters….(More)”.