Kleros Project Update - May 2023

A comprehensive update on everything going on in the Kleros world...

Another May is upon us and with it comes our regular project update, giving you unprecedented insight into what's been happening in our ecosystem in the past year. Coopérative Kleros, the main entity currently developing the Kleros protocol, is a mission-driven company with a focus on positive social impact with four key drivers behind it:

• Justice Inclusion. Our mission is to contribute to the development of a protocol for secure, affordable and fast dispute resolution. The successful completion of the project has the potential to greatly increase access to justice opportunities for people around the world.
• Open Source Technology Development. The Kleros protocol is open source and free for anyone to use. The Cooperative holds no patents on any of its code or other developments, which are freely accessible via Kleros Github.
• Open Research. All research activities conducted by the Cooperative are published openly and free for anyone to use.
• Education. The Cooperative also engages in the important activity of educating the public. Different educational activities are conducted in partnership with academic and business organizations in order to foster awareness about decentralized justice.

Let's have a look at the landmark moments of the year behind us, assorted by the above mentioned topics.

Research

During the past year, the Kleros team conducted the following research activities:

• We continued with our research on griefing, a measure of the effectiveness of sabotage introduced by Vitalik Buterin. This research allows one to measure the resistance of a system to attackers who are willing to incur financial losses upon themselves in order to cause harm to others. In particular, we studied in what situations the equilibria of a system can be altered by the presence of griefing participants and applied the results to study the degree to which the Kleros protocol can be made resistant to such attacks.
• We have begun research on how "Soulbound Tokens" (SBTs) can be incorporated into the Kleros protocol. SBTs were introduced in a work by Weyl, Ohlhaver, and Buterin (2022) as a means of establishing social identity information about blockchain users, particularly towards enabling non-financial use cases. We have considered how an approach using SBTs can be adapted to the process of juror selection in the Kleros protocol to draw juries with diverse backgrounds and expertise.

• In preparation for the Ethereum Merge, a thorough analysis of the random number generation that could be achieved with the tools available post-merge has been conducted to ensure that it still offered adequate security when used as part of the Kleros protocol.
• Tooling for parameter calculation has been improved upon, both by incorporating more nuanced models of certain attacks, as well as by improving upon the methods used to approximate certain inputs into parameter calculation from historical data.

• The team has begun to consider how tools from cooperative game theory can be incorporated into Kleros. Notably, how Kleros could act as a social planner for parties that failed to negotiate among themselves. Furthermore, we have engaged in research combining ideas from the field of law and economics with tools from graph theory, specifically attempting to obtain a better understanding of inter-address links/interactions in Proof of Humanity and Kleros.
• Research has been conducted on the role of cryptographic primitives (RSA type encryption, hash function, etc) as legal objects in a decentralized, public blockchain environment.
• Jamilya Kamalova, one of Kleros’ PhD researchers, co-authored an ethnographic case study (together with her colleagues from BlockchainGov Tara Merk and Sofia Cossar) on the governance issues leading to the Proof of Humanity fork, supervised by Dr. Primavera De Filippi.

• The team conducted research on legal pluralism and its relation to the “Schelling point” type of justice. This involved a Kleros case study presentation at EUI University in May 2022, the organization of a decentralized dispute resolution reading group together with BlockchainGov (discussion involving founders/collaborators of projects such as UMA, Aragon, etc.), and a hypothesis paper presented by Jamilya Kamalova at the RMIT University conference in December 2022 on decentralized justice and distributed ledger technology.

• Team members have participated at different academic events, meetings, workshops and classes at the University of Valencia, the Smart Contract Research Forum, Paris 2 Panthéon-Assas, the Plurality Institute at UC Berkeley, the University of Oxford, Stanford University, Harvard University, the Wharton School, RMIT, Metagov, and IAE Business School among others.

• The 6th cohort of the Kleros Fellowship of Justice was launched with a record number of applicants. Selection of the accepted fellows was done after 34 candidates made it to the final interview round.

Development

2022 was a year of hard work towards the goal of launching the much anticipated Kleros V2, as well as important improvements to our codebase and to that aim the team conducted the following development activities:

• The scope for Kleros 2.0 has remained mostly unchanged: delivering feature-parity with Kleros 1.0 initially. The roadmap, however, has evolved to prioritize the launch of Kleros 2.0 on Gnosis Chain at first. This was considered a less risky strategy than migrating the Ethereum court first.
• We have been closely following the progress in rollup technology and recognized that even the most promising solutions (Arbitrum and Optimism) will take some time to reach the level of security originally envisioned. This is another reason for not rushing the migration of the main court currently on Ethereum and for instead migrating the Gnosis Chain court first.

The functionalities for Kleros 2.0 have been implemented at 90% on the smart contract level. On the frontend level (including the indexing layer), the essential arbitration functionalities have been implemented at 75%.

• The team has created a new user-interface components library which serves as a building block for the Kleros 2.0 frontend. The library’s design is inspired by user research with nearly 50 community members and will provide a consistent look and feel to the Kleros product portfolio.
• Several previews of Kleros 2.0 have been showcased to the community throughout the year.

• A particular challenge for Kleros 2.0 has been identified when it comes to supporting existing arbitrable contracts on the Gnosis Chain. These contracts pay the Kleros dispute fees in a currency (xDAI), which differs from the other courts (which receive ETH). We have designed a solution which is currently being implemented.
• The team has continued refining a number of upcoming Kleros 2.0 features scheduled further on the roadmap including evidence moderation, modularity of the juror sortition mechanism and forking strategies.

• Vea (formerly known as the Fast Bridge) is a bridging mechanism critical to the cross-chain design of Kleros 2.0. This bridge has been implemented on the smart contract level between the Arbitrum and Ethereum testnets, and partially implemented between the Arbitrum and Gnosis Chain testnets. The client specifications and implementation are underway, as well.

• Kleros Moderate is a new product built during 2022 and announced at the EthCC 2022 conference. It is initially focused on discussion moderation for the instant messaging app Telegram with a bot named “Susie”. Kleros Moderate has expanded on earlier code contributions from Kleros community member Rodrigo Souto. Significant efforts have then been made on the user experience side to make it easy to onboard a new chat group or to report content. On the policy side, work has been done to provide a reasonable set of rules by default and on the technical side - to improve the bot’s reliability.

• The entire stack of Proof of Humanity 2.0 has been implemented and is currently undergoing internal security reviews. That includes the smart contract layer on both Ethereum and Gnosis chains, the subgraph, the frontend and the automation bots. Vitalik Buterin’s essay on soulbound tokens prompted the realization that a Proof of Humanity account could be abstracted and attached to a registered human. This opens interesting applications in the field of social recovery for crypto accounts.

• The governance difficulties in the Proof of Humanity DAO have delayed the launch of Proof of Humanity 2.0. Despite this challenge, the development team has remained continuously engaged with the community, has continued advocating for the protection of the original mission (sybil-resistant identity) and providing technical support.
• The team started a redesign and modernization process for Kleros Curate, the most widely adopted product so far. Work is being done to rethink the strategy to further ease onboarding of new integrations and improve user experience. The process of upgrading and securing the technical stack to ship value incrementally and more efficiently is underway.
• The UX & design team is working on giving Curate a fresher look and making user participation more accessible. All these efforts will lead to a Curate stack that is both more performant, easier to use and ready for new use cases. The upcoming UI will have capabilities to show data from multiple chains, reduce page-load times and allow us to expand Curate to more L1s/L2s.
• The team has continued providing technical support to both end-users of Kleros products and developers/partners who have been building on top of the Kleros protocol. Specifically, the development team has been facilitating the adoption and usage of the Governor (which translates governance decisions voted off-chain into on-chain protocol changes in a trust-minimized way) in the Proof of Humanity and UBI communities. The Cooperative has often assisted with the review of proposed transactions and funding deposits.

Integration Activities

The last year was a big year in terms of partnerships and integrations. With Guangmian Kung coming onboard as Integration Lead in March 2022, an extensive partner management process was put in place, enabling the team to track and manage several partner conversations in parallel.

• The integrations team grew from one to five members, gaining the bandwidth needed to explore new industries and markets where more experimentation and active outreach are needed. The increased team and improved operational processes put in place allowed us to handle an increasing amount of inbound leads, resulting in many of them converting into actual partnerships.
• During the last year, we have seen a substantial growth in committed partners with the numbers more than tripling in the course of 2022, from 30 to more than 110. Over 20 different industries were represented in these partnerships, including DeFi, identity & credentials, marketplaces, real-world asset tokenization, wallets and blockchain oracles. All these partnerships are now visible on the revamped partnership portal - kleros.world.

• The collapse of Terra Luna allowed Kleros to showcase its capabilities as an impartial claim arbitrator for the DeFi insurance industry. The integration with Unslashed Finance secured over 5400 ETH in claims with over 20 claims coming to Kleros for appeal. In one of those claims, an individual under the name of Avraham Eisenberg tried an unsuccessful attack against Kleros (this individual is currently under custody in the context of a US Department of Justice investigation for commodities fraud and market manipulation).
• The team made an important push into the identity and credentials space, and increased the number of identity partners integrating Proof of Humanity to over 20, including projects such as Gitcoin Passport, Lens Protocol, Noox, Sismo, CyberConnect, and EtherScore.
• The team also made significant progress in token-curated data integrations. In particular, the address tag and contract domain name registries built with Kleros Curate gained significant adoption in the wallets and explorers space. Ledger, Etherscan, MyEtherWallet and Alphawallet have all signed up to use the crowdsourced data from these registries for their consumer-facing products, with many more in the pipeline.
• Kleros Oracle expanded its reach to another blockchain, with the successful deployment of a bridge to Polygon for the Kleros-Reality integration. Bhavish Finance, a leading decentralized prediction market and betting platform on Polygon, was the launch customer for this integration.
• The 2022 FIFA World Cup was also a significant event for Kleros, the Cooperative celebrated this through several community campaigns in collaboration with Kleros’ prediction market partners using Galxe and Port3.

• The team made important progress towards the application of the Kleros Protocol for consumer disputes in the mainstream economy. Two pilots have been under development since mid-2022, one of them with an insurance company and the other one with a cryptocurrency exchange. A unique implementation achieved during the customer discovery process was something called “asymmetric arbitration”, where a Kleros ruling is binding for the company but not for the user. From our preliminary research, this seems to resolve an important part of the legal uncertainty that mainstream companies have when considering the implementation of the Kleros protocol.

• The third cohort of the Kleros Incubator was launched with three teams: TheBadge, a decentralized certification service; TalentLayer, a decentralized social network for labor and LensTags, a decentralized social media application.

• We launched “How to Build in Web3”, an online course where we share our experience and knowledge building a Web3 project with the wider community.

Marketing and Communications Activities

During the past year, we have conducted a number of marketing and communications activities with the goal of strengthening the Kleros brand, raising awareness about decentralized justice and increasing interest for integrations:

• We have strengthened the marketing and communications team with the recruitment of members for the positions of content writers, event manager, and developer relations.
• Team and community members have participated in conferences and meetups both in the blockchain and the legaltech industries such as the EthCC, ETH Denver, ETH Amsterdam, ETH Dubai, ETH Prague, ETH Barcelona, ETH Latam, ETH Uruguay, ETH Santiago, ETH Porto, DappCon, the Oracle Summit, Token 2049, BlockchainRio Festival, Labitconf, the Dubai Arbitration Week, the ODR India Forum, CODIFI the Hague Conference on International Private Law and the Paris Arbitration Week among others.

• Members of the team have been active in legal innovation communities such as ArbTech and MetaLaw among others.
• We organized a number of side events in conferences such EthCC, Devcon Bogotá and Token 2049.

• We co-hosted hackathons such as the Infinite Hackathon of Devcon Bogotá, and the official hackathon of EthCC.

• We relaunched the Decentralized Justice Broadcast with guests including Mark Miller, José Luis Martí, Thibault Schrepel, Antonio Canova and Roberto Hung, Jason Potts, Glen Weyl, Nathan Schneider and Robin Hanson.

Listen to all the episodes of The Decentralized Justice Broadcast on Apple Podcasts, Spotify, Google Podcasts and YouTube.

• Research and thought leadership pieces produced by members of the Cooperative have been published at prestigious outlets including the Cyberjustice Laboratory at the University of Montreal and BlockWorks.
• Kleros was covered among the top Web3 projects in a report by CBInsights and was featured in high impact general and specialized media outlets such as Wolters Kluwer, Bankless, CoinTelegraph, the Global Arbitration Review, Arbitech TV, La Nación and Globo.

• Kleros was mentioned in several pieces by industry leaders such as Vitalik Buterin (What in the Ethereum application ecosystem excites me; DAOs are not corporations: where decentralization in autonomous organizations matters) as well as in Balaji Srinivasan's influential book "The Network State".

• A significant amount of time and communications efforts had to be spent on addressing PR concerns associated with the Proof of Humanity governance conflict. This included correcting and responding to misinformation campaigns directed at Kleros.
• A large number of blog posts, explainers, articles and social media material were produced in content moderation, DeFi, insurance, NFTs, DAO governance, prediction markets, parametrization and the metaverse as well as a series of interview articles for the community to know about members of the team (see articles on JB, Jamilya Kamalova and George).

Finances

The blockchain industry had a difficult year following the crash in the crypto markets triggered by the collapse of Terra. Many projects failed or drastically reduced their activities. Even though the general crash affected the finances of the Cooperative (as a large part of the treasury is held in cryptoassets which fell in price), the team still has a comfortable runway for sustaining operations.

Conclusion

The year behind us was challenging for the blockchain industry as a whole, triggered by the collapse of Terra and exacerbated by high-profile bankruptcies such as 3AC and FTX. Despite this difficult context, Kleros made progress in fulfilling its mission of building tools, driving adoption and evangelizing the world on decentralized justice.

In summary, during the past year, the Cooperative:

• Conducted research relevant to increasing the efficiency, security, and flexibility of the Kleros protocol, which is reflected in introducing ideas such as soulbound tokens, new social choice mechanisms, and learnings from the field of behavioral game theory.
• Participated in many relevant academic conferences in both the blockchain and legaltech industries.
• Continued the active development of Kleros 2.0, which is vastly more flexible and efficient than the current version.
• Launched new products such as Kleros Moderate for content moderation and the Vea bridge.
• Developed different communication activities to strengthen the positioning of Kleros as a leader in the decentralized justice industry.
• Collaborated with entities from traditional legal systems to foster the use of decentralized justice methods.
• Conducted continuous support for the growth of the Kleros ecosystem by incubating teams.

In a very challenging year, I am proud that Kleros has continued to make progress towards its vision of justice inclusion, and I look forward with confidence to the next year.