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Ichika Aoi
Ichika Aoi

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Law Blocks Online Dispute Resolution Meets Blockchain: The Birth of Decentralized Justice.

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, enables the possibility of a radical increase in the efficiency of dispute resolution. Blockchain the technology you can trust 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, with less time and money and hence the role of Law Blocks it resolves disputes virtually, online with the best legal heads.

As early as the 1990s, experimented with collective intelligence to resolve civil cases & 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, this approach focused on the functional role of technology in guiding litigants towards an agreement 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.

Hence, even if a decision was reached through an ODR mechanism, there is a guarantee that it would be accepted by the parties and enforced. Since they have the intermediation of the Arbitration Courts. 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.

ODR has been successful where its design fulfilled adequate levels of trust, expertise, convenience, and efficiency. If one of these elements is not present, the system lacks effectiveness. At the heart of dispute resolution lies the concept of legitimacy, which exists now. 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 centralized solutions.

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 is collectively maintained and controlled by a distributed network of computer servers called nodes.

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 of establishing a consensus between validators on the correct record of transactions. Such a consensus requires that —

(i) users do not double-spend documents and

(ii) validators can be trusted to accurately update the ledger.

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. This new discipline combining cryptography signatures and economic theory to create secure distributed networks came to be known as crypto economics, which can be considered a branch of mechanism design.

Theory of Decentralized Justice

In the previous section, we 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.

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, then comes the role of the Law Blocks which resolves disputes through its team of Free Legal Systems, community resolution, experts of Mediation and Arbitration, and the Arbitration Courts and centers all round the world.

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, taken care of by the Law Blocks.

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? 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.

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