This paper reviews the main theoretical principles underlying the nascent field of decentralized justice and the early empirical experience in real life use cases. Part of the Blockchain & Procedural Law seminars (Max Planck Institute Luxembourg for Procedural Law).
The Online Dispute Resolution ("ODR”) industry was born in the 1990s. As the Internet became a part of people’s everyday lives, many also sought to leverage the web’s potential for the creation of virtual courts that would greatly increase the efficiency of dispute resolution procedures. This vision, however, failed to fully materialize. To some extent, early ODR solutions only brought an incremental innovation that streamlined existing alternative dispute resolution procedures, but did not create any disruptive innovation with the potential of generating a more than 10x advantage over existing methods. In recent years, a number of technological innovations in computer networks such as blockchain and the growing use of cryptocurrencies enabled new types of mechanism designs for online dispute resolution. This emerging approach, which may be called decentralized justice because of the decentralized nature of blockchain and of juror networks, enables the possibility of a radical increase in the efficiency of dispute resolution. This Essay reviews the main theoretical principles underlying the nascent field of decentralized justice and the early empirical experience in real life use cases.
1.1. Blockchain and the Problem of Trust
Market relations require institutional mechanisms to solve conflicts. And these mechanisms need to be coherent with the economic realities they have to address. Since the late 1990s, as modern technology generated new types of transactions and disputes, it also sparked the development of the new field of Online Dispute Resolution (“ODR”) which suggested the use of technology to solve conflicts fairly and efficiently, in particular to fill the “digital justice gap.”
As early as the 1990s, companies like iCourthouse experimented with collective intelligence to resolve civil cases. In the 2000s, eBay implemented a crowdsourced panel for user disputes. During the early days, ODR was seen as a radical transformation of traditional Alternative Dispute Resolution (“ADR”) systems such as mediation and arbitration. Katsh and Rifkin introduced the concept of technology as a “fourth party” in conflict resolution procedures.1 The approach focused on the functional role of technology in guiding litigants towards an agreement in the shadow of the law.
Different protocols were developed that could operate without any human involvement. This constituted a significant “legal turn” with respect to previous ADR because the process was being run by a machine and influenced interactions between parties to reach an efficient agreement.
However, despite a number of advantages over traditional courts, the ODR industry failed to become massive. Some reasons were inherent in the design of the ODR systems.2 Others refer to ex ante constraints (access) or to ex post limitations (reputation). Most of the automated bargaining systems were developed by private companies and were contractual by nature. It was only through the signature of a contract between conflicting parties that a settlement could be enforced.
Hence, even if a decision was reached through an ODR mechanism, there was no guarantee that it would be accepted by the parties and enforced. Since they lacked an institutional arrangement such as court imperium, ODR solutions only worked under circumstances when they were supported by mechanisms powerful enough to have rulings enforced, such as conflicts between insurance companies or between consumers on large trading platforms like eBay.
As Rabinovich-Einy and Katsh note: “ODR has been successful where its design fulfilled adequate levels of trust, expertise, and convenience and efficiency.”3 If one of these elements is not present, the system lacks effectiveness. At the heart of dispute resolution lies the concept of legitimacy, which is ultimately premised on trust (trust in the system, trust in the process and trust in its fairness) and therefore a willingness to abide by outcomes.
Legal certainty seemed at the core of the debate. For an ODR solution to be adopted, a central authority is needed that initiates its adoption, follows its implementation, and ensures that such processes operate in a fair and effective manner. However, we can observe that centralized solutions are generally expensive and are not free from problems of trust. For instance, Deffains and Roussey4 explain that an effective judiciary must not only provide good substantial and procedural rules, but should also inspire citizens with conﬁdence and respect that are not intrinsic dimensions of the judicial system. It also has been shown in law and economics literature that trust in the judiciary may improve the performance of the judiciary itself.5
1.2. Blockchain and the Problem of Trust
In October 2008, a paper was published in a cryptography online forum under the pseudonym of Satoshi Nakamoto. Its stated intention was to develop a decentralized cash-like electronic payment system. For this purpose, it solved the fundamental challenge of how to establish and transfer digital property rights of a monetary unit without a central authority.
Blockchain is a particular type of distributed ledger technology (“DLT”), a way of recording and sharing data across multiple data stores where each has the exact same data records and are collectively maintained and controlled by a distributed network of computer servers called nodes.6 Instead of having a trusted validator (i.e., a central bank), the system relies on a decentralized network of anonymous validators to maintain and update copies of the ledger.
The key innovation enabling blockchain technology was a clever way for establishing a consensus between validators on the correct record of transactions. Such a consensus requires that (i) users do not double-spend currency and (ii) validators can be trusted to accurately update the ledger.
The first application of blockchain technology occurred in the financial sector, with cryptocurrencies such as Bitcoin. However, at a more fundamental level, blockchain brought a potential answer to the problem of trust that had affected the early days of ODR. Thanks to blockchain, trust could be generated by mathematical algorithms.
The launch of the Ethereum blockchain in 2015 brought the concept of smart contracts to the mainstream world. Smart contracts are programs which self-execute as programmed when the conditions are met. An agreement encoded in a smart contract can be executed irrevocably without the need for a central authority to enforce it. In this way, blockchains can handle agreements that reduce the opportunistic behavior of agents and provide the legal certainty that was absent in traditional ODR systems. Dispute resolution systems coded as smart contracts in blockchains have the advantage of guaranteeing that their rulings will be enforced.
1.3. Game Theory, Mechanism Design and Cryptoeconomics
Economists normally think of economic coordination as a result of a combination of organizations and institutions: e.g. the organization of the firm,7 the organization of a club,8 the institutions of a commons,9 the institutions of the market,10 the institutions of law, the institutions of money, the institutions of government. These organizations and institutions are essentially rule-systems.11 Economic coordination is about aligning incentives within rule-systems.
The field of mechanism design can be considered as the “engineering” part of economic theory.12 The designer starts with a desired goal and then defines how a mechanism (a game) can be designed to attain it. Required is a systematic look at institutions and how they will affect the interactions between agents that are expected to act strategically in order to reach their own goals.
Designers of the early ODR systems were attempting to use technology to build institutions. But, in general, they did not rely on solid mechanism design foundations. The Bitcoin blockchain was a working example of how a clever mechanism design could create an institution that effectively incentivized a distributed network of anonymous computers to reach consensus on a single state of a ledger. This new discipline combining cryptography and economic theory to create secure distributed networks came to be known as cryptoeconomics, which can be considered a branch of mechanism design.13
In the wake of Nakamoto's pioneering design, the potential of blockchains for building economic and social institutions has been studied.14 Cryptoeconomic designers seek to engineer solutions that drive human behavior toward the desired goal. In this way, blockchain is a technology for creating and executing the types of rule-systems (i.e. smart contracts, decentralized autonomous organizations) that enable economic coordination.
Cryptoeconomic design can be applied to produce a wide variety of systems to reach desired outputs through incentivizing adequate behaviors. Cryptoeconomic systems provide an innovative way to coordinate behavior beyond governments or centralized mechanisms. As we shall see in the next section, it also has the potential to produce a legal order than can be defined as decentralized justice.
2.1. Towards a Definition of Decentralized Justice
In the previous section, we have observed that smart contracts deployed on a blockchain have the advantage of providing legal certainty to economic interactions. However, they also have an important limitation. Smart contracts are sufficiently “smart” to self-execute as programmed, but not to deal with situations where subjectivity is involved.
Let us imagine, for example, that Alice contracts with Bob to build a website for her. If a dispute arises regarding the scope of the agreement, smart contracts cannot resolve this by themselves. The code cannot ascertain by itself, for example, whether the delivered website complies with the aesthetic and functional specifications required by Alice. When contracts are incomplete, computer code is insufficient to produce legal certainty.
Smart contracts must incorporate a decision-making mechanism able to solve situations where subjectivity is involved without introducing a single point of failure into the system (as in the case of a centralized institution that would decide on enforcement). In order to guarantee legal certainty and decentralization, a fair, neutral and efficient method is required to produce a ruling which will later be executed by the smart contract.
What should be the nature of a decentralized decision-making process able to resolve situations where subjectivity is involved in a way that complies with fairness and efficiency considerations?
From the perspective of legal epistemology, a court proceeding can be considered an epistemic engine, a tool for ferreting out the truth from a confusing array of clues and indicators.15 The critical feature of a court system is the ability to reach true decisions. A court that frequently convicts innocents and acquits the guilty (respectively Type 1 and Type 2 errors) would fail to win the respect from those it governed.16 Beyond epistemic accuracy, other important criteria for assessing a court performance include efficiency and ethicality. Efficiency is mainly about cost and speed: Reaching a true decision at a low cost and quickly is preferable to reaching a true decision at a high cost and slowly. Ethicality is about the ability of the system to be perceived as fair by the community.
With the above points considered, the key question for a court system can be framed as follows: How to design a mechanism able to produce true decisions efficiently and in such a way that it is compatible with the ethical beliefs of a community?
Throughout history, different communities have given different answers to this question, depending on the technology available to them and their system of beliefs. In ancient Athens, trials were conducted by large bodies of randomly selected voluntary citizens. The merchant courts of the Middle Ages were based on peer judges via the Lex Mercatoria. Contemporary legal systems put legal decisions in the hands of professional attorneys and judges.
Since the 1990s, the Internet has drastically changed the world’s economic systems and humankind’s ability to organize social cooperation. Global connectivity enables crowds to collaborate online in unprecedented ways. Over time, crowd intelligence succeeded in producing a collaborative encyclopedia such as Wikipedia, a sophisticated operating system such as Linux and a decentralized monetary system such as Bitcoin.
The wisdom of crowds can also be leveraged for a radical transformation of ODR systems. The field of decentralized justice seeks to leverage blockchain and mechanism design in order to build dispute resolution procedures able to efficiently and fairly address the new types of disputes of the digital age. It is decentralized because the process is fully driven by peers and built on blockchain technology and cannot be controlled by any single agent. It is justice because the design complies with a number of conditions to be considered fair by the people using it.
2.2. The Features of Decentralized Justice
This section seeks to define the key features of decentralized justice. We will contend that, in order to qualify as a decentralized justice system, a dispute resolution system needs to comply with three conditions: 1) To be built as a decentralized autonomous organization (“DAO”) on blockchain technology, 2) to be based on a mechanism design using cryptoeconomic incentives, and 3) to generate a perception of fairness.
2.2.1. Decentralization and Rule of Law
The rule of law is a necessary feature for a legal order to emerge. Legal systems are expected to treat all citizens as equals before the law, regardless of their social origin, and should conduct the same procedure for the same case, regardless of whether the parties are black or white, rich or poor, and to be governed by members of the community following a set of rules.
According to Hadfield and Weingast,17 the rule of law is a classification institution which complies with six features: 1) The decision-making logic is publicly available, 2) the institution resolves ambiguity, 3) the decision-making logic is stable, 4) the institution gives predictable results to novel inputs, 5) the institution is impersonal in the sense of decisions not being influenced by the rank or status of parties, and 6) the institution can produce new rules by soliciting information from users.
In the analog world, societies have built checks and balances and a number of bureaucratic procedures to prevent influence on the legal system from powerful agents in favor of their preferred outcomes. In the digital world, the equivalent of a stable bureaucracy are DAOs based on blockchain technology. A DAO effectively is a collection of smart contracts bound together to form a digital organization that operates according to specific rules and procedures.
The decision-making process in a DAO is encoded directly in computer code and deployed on a decentralized network of computers. Members can participate in decision-making through voting in a way that is similar to a cooperative or a direct democracy government. The combination of a procedure with the immutability of blockchain and governance rights in the hands of the community is a key feature of decentralized justice.
Decentralized justice systems built as decentralized autonomous organizations on blockchains such as Ethereum’s comply with the Weingast and Hadfield (2013) criteria for institutions able to produce rule of law:18
The decision-making logic is publicly available. As open source projects, decentralized justice systems have their code deployed on a public blockchain which anyone can examine and replicate.
The institution resolves ambiguity. Decentralized justice systems typically have different courts addressing different types of cases (e.g., e-commerce, insurance, finance). Each court has a clear set of rules defining how evidence should be evaluated and how decisions should be made.
The decision-making logic is stable. Both the general procedural rules of decentralized justice systems, as defined in their mechanism design, and the specific rules of each court tend to be stable and not change often.
The institution gives predictable results to novel inputs. Court guidelines and jurisprudence accumulated in past rulings help predict how the system is likely to rule in a given case.
The institution is impersonal. As users interact with the decentralized justice system under a pseudonym (e.g., an Ethereum public address) the real identity of parties and jurors stays hidden. This contributes to decision-making on impersonal grounds.
The institution can produce new rules by soliciting information from users. Decentralized justice systems have a governance mechanism which enables users to make decisions about the evolution of the protocol, including the creation of new courts, the developing of rules for courts, setting adjudication fees as well as a number of decisions regarding software development.
These features guarantee that decentralized justice systems comply with two key features that we would expect from any justice system.
First, the system is secure in the sense that no agent can unilaterally and arbitrarily influence the decision-making process. The entire procedure (handling evidence, jury selection, jury incentivization and execution of ruling) works in a fully automated and immutable way thanks to blockchain code. This guarantees that the decision-making process will work exactly as written in the code and will not be affected by any agent with “special decision rights.”
Second, the system is managed by the community (typically defined by users holding the protocol cryptographic tokens). Any necessary changes in the procedure will have to be made through some type of voting procedure. Transparent to all participants in the network is the information regarding how rule changes are executed.
The combination of these features gives a decentralized justice organization the key features we expect from rule of law: equality of citizens, predictability and community governance. In order to assess whether a dispute resolution system qualifies as decentralized justice, one may ask the following questions:
Is the dispute resolution procedure encoded as a decentralized autonomous organization on a blockchain?
Does it comply with the features that Hadfield and Weingast require for the rule of law?
Does the system have a governance mechanism that members must use in order to make changes in how the system works?
Does any agent possess some “special rights” to introduce changes in the procedure?
2.2.2. Cryptoeconomic Incentives
Traditional dispute resolution systems are based on the concept that decision-makers such as judges or arbitrators have a fiduciary duty to conduct their work in an honest way. Judges are required to follow some ethical code which forbids accepting bribes or engaging in any conduct that could result in favoritism to some of the parties.
On the contrary, decentralized justice systems do not rely on any expectation of moral behavior of agents but on strict economic incentives achieved through mechanism design. Agents are not expected to act honestly (i.e., be neutral in their decisions) because of moral reasons but because they are part of a set of institutional rules where it is in their rational interest to act in such a way in order to optimize their economic gain.
The idea that desirable social outcomes can be the result of the rational self-interested behavior of individual agents can be traced back at least to Adam Smith’s metaphor of the invisible hand19 and is at the base of agency theory.20 Nakamoto's seminal paper on Bitcoin builds on this idea to claim that, provided incentives are correctly designed, a number of self-interested anonymous agents can collaborate in maintaining a distributed ledger of monetary transactions.
Decentralized justice systems are based on a similar principle: agents lend their “computing power” (time, skills, etc.) to the network in order to solve disputes. The better their performance, the higher their reward. While there are many alternative ways in which these mechanisms can be designed, they all share the fact that the performance of the system does not rely on a moral expectation about agents “doing the right thing” but on aligning incentives for creating the desired behavior and achieving the desired goal. Even with individual agents behaving selfishly, the mechanism design results in a desirable outcome at the aggregate level.
Early models of decentralized justice systems rely on a mechanism design inspired by the concept of focal points developed by game theorist Thomas Schelling. Schelling introduced the concept of focal points as “each person’s expectation of what the other expects him to expect to be expected to do.”21 In other words, a focal point (or Schelling point) is a solution people tend to choose when unable to communicate, because it seems natural to them.
Let us consider a decision scenario where a number of agents have to pick independently one of the following numbers: 3785, 4903, 5232, 9864, 3927, 1214, 1000, 2783, 4287, 3893, 2398, 8538. Agents know that if they pick the same number as the majority, they earn $20. It they pick a different number, they earn $0. Under this decision scenario, the community consensus tends to be 1000. Even though any of the 12 options would be equally acceptable, agents tend to find it more “natural” to pick 1000 because they expect others to pick that option, too. In this case, 1000 is the focal point.22
Existing decentralized justice systems (e.g., Kleros and Aragon) require users to deposit a cryptographic token to express their interest and availability in resolving disputes in the platform. A pre-defined number of jurors are randomly chosen among all those who deposited the tokens. Once they are drawn, jurors independently analyze the evidence and vote for the party they believe is right. Jurors are rewarded with cryptocurrency tokens if they vote like the majority and penalized with the loss of their deposit if they are incoherent with the majority.
In this way, by looking at their individual self-interest, jurors are incentivized to vote on the consensual truth about the dispute. The truth about the dispute is the focal point on which jurors tend to coordinate in order to collect the reward.
As in any cryptoeconomic protocol, decentralized justice systems have a number of game theoretical defenses against attacks by malicious agents who would try to abuse the system for their own interest. This results in a mechanism design structured in such a way that agents, while seeking their economic interest, produce a fair outcome without any ethical assumption on juror behavior.
Users seeking to attack the system (e.g., accepting bribes or casting a vote without proper consideration of the evidence) are likely to vote incoherently with the consensus majority, resulting on average in an economic loss. On the contrary, users behaving honestly (e.g., not taking bribes, taking proper care in assessing the evidence, etc.) are likely to vote coherently with the majority resulting on average in an economic gain.
In order to assess whether a dispute resolution system qualifies as decentralized justice, one may ask the following question: Does the mechanism design generate the economic incentives for the system to produce fair decisions without having to rely on moral considerations about the agent's behavior?
A key feature of a court system is that the outcomes it produces are expected to comply with some standard of fairness. Fairness is a difficult concept to define, and philosophers do not necessarily agree on its definition.
Daniel Dimov has worked extensively on the development of a model for assessing procedural fairness in the context of crowdsourced online resolution systems (“CODR”). Procedural fairness refers to a number of criteria for determining whether a given procedure contributes to a fair outcome.23 Dimov examines two types of procedural fairness: objective procedural fairness (defined as the extent to which the procedure complies with the fairness standards defined by the Directive on Alternative Dispute Resolution of the European Union, 2003)24 and subjective procedural fairness (an individual subjective perception of the fairness of a procedure), and then merges them into a single framework which may be used to assess the overall fairness of a dispute resolution procedure.
Dimov’s framework argues that there are 14 points to assess the fairness of a crowdsourced online dispute resolution system:
- Expertise: The neutral third party should have the necessary knowledge and skills in the field of dispute resolution.
- Independence: Jurors must be free from coercion when adjudicating disputes.
- Impartiality: The neutral third party must not have any internal prejudices toward certain parties or certain of the elements of the subject matter of the dispute.
- Transparency: The dispute resolution process should be understandable and, if necessary, possible to replicate.
- Fair Hearing: Parties should be provided with a notice informing them about the commencement of the dispute resolution process and an opportunity to present their cases and rebut the cases of their opponents.
- Counterpoise: Pre-existing imbalances in the financial status of parties and the computer skills of the disputants should be neutralized.
- Reasonable Length of Procedure: The outcome of the dispute resolution procedure should be available within a period of 90 calendar days from the date on which the provider of the dispute resolution service received the complete complaint file.
- Providing Reasons: Jurors must give parties a statement of the grounds on which the decision is based.
- Process Control: The increase of control over the development and selection of information that will constitute the basis for making a decision strengthens the perceptions of procedural fairness.
- Decision Control: Parties have the possibility of appealing a decision rendered by a third party.
- Consistency: The procedure must be applied consistently across persons and across time.
- Accuracy: Information used in the resolution process is agreed beforehand by the parties.
- Correctability: The opportunity to correct a decision strengthens the perceptions of fairness of the procedure used for making the decision.
- Ethicality: The extent to which a procedure conforms to personal standards of ethics and morality increases the extent of the perceived fairness of the procedure.
An evaluation of these points enables a judgment on the fairness of a dispute resolution process. A decentralized justice system needs to comply with most of the criteria.25
In order to assess whether a dispute resolution system qualifies as decentralized justice, one may ask the following question: does the mechanism design ensure a fair procedure and decisions?
In summary, in order to qualify as decentralized justice, an ODR system needs to comply with the following features:
The system is built as a DAO deployed on a blockchain. The procedure is fully automated and coded in smart contracts. Changes in the system can be made by participants through a governance mechanism with clear rules.
The system uses cryptoeconomics to generate incentives for agents to make decisions and does not rely on assumptions on the agent’s ethical behavior.
The system has a fair procedure and reaches fair decisions.26
As a new industry and research field, a number of challenges lie in the horizon for decentralized justice. We can categorize these challenges in market, technical, legal and ethical aspects.
3.1. Technical Challenges: Is Decentralized Justice Feasible?
Decentralized justice relies on game theory and mechanism design in order to produce true decisions more efficiently than alternative methods. However, the optimal way in which the mechanism should be designed to achieve the expected result is open to discussion, with an eye on resolving a number of questions:
Can cryptoeconomics create a decentralized justice system that is both effective and secure?
Are there incentives that will lead general users, whose behavior might deviate from mathematical models of rationality, to act in such a way that decentralized justice systems produce desirable outcomes, while nonetheless not allowing openings for sophisticated users or hostile parties to game the system?
Are Schelling points the best mechanism design for decentralized justice systems? Or are there other game theoretical principles that could be better?
3.2. Market Challenges: Is Decentralized Justice Profitable?
The rapid growth of the online economy and the rise of low value disputes require a dispute resolution methodology that is radically more efficient than traditional ODR methods and business models able to capture this value. Many questions arise regarding the economic sustainability of decentralized justice models and where they can have a larger impact in the long run:
- Can decentralized justice systems produce such a cost-effective dispute resolution method that it can be used for a large number of digital small claims which today lack an effective resolution method?
- What will be the use cases where decentralized justice gains higher adoption?
- What will be the business models that arise to capture the value of decentralized justice systems?
- Will decentralized justice systems be circumscribed to digital disputes, or will they also be adopted in the mainstream world of traditional justice systems?
- What will be their place in the market compared to other emerging dispute resolution technologies such as AI?
3.3. Legal Challenges: Is Decentralized Justice Legal?
Decentralized justice systems have a working logic that strays from traditional methods of dispute resolution framed by traditional courts and the arbitration framework built on top of the United Nations Convention on the Recognition and Enforcement of Foreign Digital Awards. This treaty, usually known as the New York Convention, presents a number of conditions for an award to be enforceable in courts of the member countries.27 The new paradigm of decentralized justice poses a number of challenges in the interplay between traditional law and blockchain law. A number of key questions in this regard include:
- Do decentralized justice methods conform to the law in the sense of courts recognizing their rulings?
- Could rulings be subject to judicial review by courts made on the grounds of the New York Convention?
- Are decentralized justice procedures compliant with the substantive due process principles of international arbitration such as independence, impartiality, jurisdiction, effectiveness, accessibility, liberty, legality, expertise and procedural fairness?
3.4. Ethical Challenges: Is Decentralized Justice Fair?
Decentralized justice is a completely new approach to dispute resolution and introduces economic incentives instead of relying on assumptions about the ethical behavior of decision-makers. In order to thrive and gain acceptance, it will have to convince the public and policy makers that it complies with a number of conditions for fairness in dispute resolution. Some emerging questions include:
- What are the criteria by which decentralized justice systems should be assessed?
- Are there some fields or types of cases where decentralized justice approaches tend to be perceived as fair more than in others?
- Are some cultures or communities more likely than others to perceive decentralized justice as a fair method for dispute resolution?
In 2001, Ethan Katsh, the “father” of Online Dispute Resolution, observed: “The power of technology to resolve disputes is exceeded by the power of technology to generate disputes.”28 In this context, the field of decentralized justice emerges as a credible new framework for dispute resolution.
In this paper, we have introduced the concept of decentralized justice, with its antecedents, definition and future challenges.
In the first section, we reviewed a number of academic fields and socio-economic trends leading to the birth of decentralized justice. From a theoretical perspective, decentralized justice comes from streams of research in the fields of cryptography, computer science, game theory and collective intelligence.
In the second section, we presented the main features of decentralized justice. We defined decentralized justice systems as decentralized autonomous organizations which comply with the required features of the rule of law, rely on cryptoeconomics for incentivizing decision making and result in fair procedures and outcomes.
In the third section, we presented a number of technical, market, legal and moral challenges for decentralized justice on the path to becoming a viable efficient method for dispute resolution. The advent of the Internet brought a new set of rules that has been presented as a form of Lex Informatica.29 It is a system of customary rules and technical standards elaborated by those who interact on the global Internet network. The system operates transnationally, across borders, independent of national boundaries and domestic laws. Lex Informatica is unilaterally imposed by online service providers onto their users, by restricting the type of actions that can be performed on a digital platform. But these norms are not a direct expression of the will of users. They represent the interests of those in charge of maintaining the platform.
To a certain extent, it can be argued that ODR platforms failed to have a massive impact because they only applied digital tools in order to streamline old court procedures instead of rethinking how a dispute resolution system could be reinvented with the tools of the digital age—in particular, a technology such as blockchain, with the ability of producing digital legal order.
Blockchain has enabled a new mechanism which also relies on technical means in order to coordinate behavior. Yet as opposed to Lex Informatica, whose rules are ultimately dictated by a centralized operator, the rules established by a blockchain protocol are established by the community and for the community, and must be enforced through a mechanism of distributed consensus involving all network participants. Blockchain enables a whole new body of law made of rules administered through self-executing smart contracts and decentralized organizations. This new system, which some call Lex Cryptographia, operates independently of any third party authority or intermediary operator.30 Decentralized justice systems based on innovative cryptoeconomic mechanisms can produce radical efficiencies able to handle microdisputes and enforce rulings. For such a mechanism to reach mainstream adoption, it also needs to satisfy the basic requirements of transparency, accountability, accessibility, fairness and due process enshrined into our common understanding of the rule of law.
Decentralized justice is still in the early stages of development, and there is much potential for innovation and improvements. But the goal is clear in creating a fundamental governance infrastructure that is native to the Internet Age. Just as cryptocurrencies provide banking to the unbanked, decentralized justice can provide justice to the “unjusticed.”