Decentralized Dispute Resolution

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Decentralized dispute resolution is perhaps one of the most fundamental elements of decentralized governance, because the person with power to resolve a dispute has de facto control over who owns what and when. A community dedicated to protecting the freedom and independence of its members needs to protect itself from corruption of centralized courts which write de facto laws by virtue of how they consistently rule on disputes. This means we need a decentralized system that ensures “fair” resolution of disputes regarding subjective matters and protects the integrity of a fractal democracy.

Growing Community vs Disintegrating Community

The simplest form of dispute resolution is for two people to part ways. In my book, “More Equal Animals”, I lay a strong foundation for the idea that individual independence necessitates cooperation with others. Those who are unable to cooperate will end up conquered and enslaved by groups of people who can cooperate. It is therefore imperative that any group of people establish a process for resolving disputes without forcing everyone to part ways. It is desirable to be a member of a powerful community, so more often than not there would be a dispute over who gets to stay in the community and who is forced to leave if they cannot make amends.

More Equal Animals — The Subtle Art of True Democracy

Appeal to Authority & Who judges the Judges?

The next most common form of dispute resolution is an “appeal to authority”, a supreme court or dictator. When children have a dispute, they appeal to their parents to settle it. This form of dispute resolution enables corrupt judges to replace community consensus with their own opinion. As someone who has been through mediation, arbitration, divorce, and class action lawsuits I can speak from experience that you never want to empower a judge to make arbitrary rulings. You want to bind the degrees of freedom in the hands of a judge as much as possible. Any honest attorney will advise their clients to find a way to settle the dispute outside of court because court is almost completely unpredictable.

Perhaps one of the biggest reasons to avoid appeal to authority is that it undermines the relative independence of the members of a community. Who judges the judges? Who watches the watchmen? Once you agree to dispute resolution by means of appeal to authority you are no longer equals with the judge. What recourse do the states have if the supreme court refuses to hear a dispute or to follow the law? Who chooses the judge?

Dividing a Cookie

In my book I present the challenge of two children attempting to split a cookie. They both want the bigger half. By default, the children appeal to authority and ask their parents to divide the cookie and decide who gets each half. This exposes the children to any unconscious favoritism or even laziness of the parent who might say, “I don’t have time nor care who gets what part of the cookie”. The outcome is either random, biased toward the squeaky wheel, or biased based upon some other external factors. In any event, at least one child (and often both) are left unsatisfied.

My proposed solution is to let one child divide the cookie and the other child to choose. Under this model, the divider knows that the selfish chooser will pick the better half and will therefore use extreme care to make sure that they are indifferent to which half of the cookie the other chooses. The chooser is happy and the divider is indifferent and there is no one else to blame for the outcome. Randomness can be used to decide who is the divider and who is the chooser. Critically, there is no need to appeal to authority.

Proposed Dispute Resolution Principles

The challenge we face with community dispute resolution is to apply the principles of dividing a cookie to general decentralized dispute resolution without centralized authorities. In any dispute there is a claim of damages and the plaintiffs proposed restitution. For example, the Plaintiff could claim “The Defendant served coffee that was too hot; therefore, I propose restitution of $1,000,000 to make up for the resulting pain and suffering.”

Under a traditional court system, the judge and/or jury would have some discretion to set damages anywhere from $0 to $1,000,000 based upon what they think is “fair”. The dispute, which consists of pain, suffering and restitution, is the cookie and the judge is dividing the cookie and telling the children who gets what half. In many cases, both the plaintiff and the defendant are unhappy.

I propose an alternative approach where the judge and jury have no power to divide the cookie and instead the Plaintiff and Defendant each propose a division and a randomly selected jury chooses which proposal is “more fair”. This removes the power of a judge or jury to impose a solution that neither party finds fair and forces both parties to present the most fair possible solution.

So let’s look at the dispute over hot coffee. The Plaintiff has claimed that a transfer of one million dollars from the Defendant would “balance the scales” of pain and suffering caused by the Defendant. The Defendant would argue that it would be more fair for the Plaintiff to suffer the injustice of “pain and suffering” than for the Defendant to suffer the injustice of a loss of one million dollars. A jury would have to choose which is “more fair”. If the jury concludes that $90,000 would have been “fair” then it would most likely side with the Defendant because the one million dollars proposed by the Plaintiff would be an unbalanced division of the “cookie”.

A wise Plaintiff would therefore reduce what they are asking for because getting something is better than nothing. A wise Defendant would also offer to pay some damages to the extent there is any merit to the other party’s case. So the Defendant may offer to pay $10,000 and the Plaintiff may only ask for $150,000. In this case, the jury may decide in favor of the Plaintiff because the Plaintiff is closer than the Defendant to what is perceived as fair.

In a traditional lawsuit the Plaintiff and Defendant argue for opposite extremes in the hope of biasing the judge or jury to grant them a bigger piece of the cookie. This leaves us with two people working against a fair division and one corruptible and imperfect person attempting to cut the cookie.

In the proposed process, the Plaintiff and Defendant are now working toward producing the fairest possible compromise that they think a jury will side with. The jury is now left with far less discretion and must choose between two “fair” proposals. This makes the jury decision “binary” (only two possible outcomes) which is trivially resolved with a 2/3+ vote.

There remains one last potential outcome: the jury may not come to a consensus. In this case both proposals are so close to “fair” that random chance is used to pick the winner.

The Plaintiff can still make the case that $1,000,000 is the fair and just restitution in order to put their proposed settlement of $150,000 in better light. Likewise, the Defendant can still argue that in a “just world” the Plaintiff should pay the Defendant additional money for the frivolous law suit in order to put their settlement offer of $10,000 in the best possible light.

Community Membership Disputes

All communities need a means to determine who is a member and who is an outsider. Members receive the benefits and support of the community. Meanwhile, outsiders cannot be trusted and do not get the mutual aide benefits provided by the community. It should be obvious that effective communities make membership valuable and ineffective communities disintegrate or fail to form because there is no value in the membership. Given that membership has value, there will inevitably be disputes regarding who should be a member and who should be cast out.

Cryptocurrency culture has historically been based upon a philosophy of open entry and non exclusion. In effect, anyone can buy (or steal) tokens and no one can take your tokens. In token-weighted voting systems, this means community governance is for sale to the highest bidder, and if that bidder is corrupt everyone else is forced to sell and move on. Sadly, those who can afford to bid the most are the same people who have corrupted the current financial system and control the printing presses.

This is what happened with Initially there was a thriving community of posters producing reasonably good content and playing by the spirit of the rules. Unfortunately, money attracted new players who studied the letter of the “law” and figured out how to take money from the community without following the spirit of the “law”. Eventually the corruption drove away everyone who had a sense of fairness. Steemit “failed” because of an inability to reach consensus on who should be removed from the community.

All communities need an immune system: a process for identifying toxic and cancerous people and removing them. Only with such a process and the vigilant effort of community members to identify and remove the toxic elements can a community grow and thrive.

Eden has a process for inviting people in; however, no process is perfect and eventually some corrupt people will be invited. Left unchecked, these corrupt people will invite more corrupt people and/or drive away the good people who are frustrated by the corruption.

Corruption can take the form of complete disrespect for subjective community guidelines arrived at using the fractal governance process. These guidelines could be as simple as “be honest” or “don’t speak disrespectfully of the community” or “wear clothing during an election video” or “follow through with your promises to those you represent”. If the community is of religious nature, then the rules could be to adhere to dress codes, Sunday worship attendance, or other religious conventions.

The point of being an Eden member is to voluntarily align with the community consensus so that the community can act as one. The community can only provide benefits to the individual members if other individual members contribute to the community as intended. If the community cannot act as one, then it will lose respect with everyone, both inside and outside the community. Loss of respect is a loss of power and value. Therefore, every member who disrespects the community and its subjective rules is harming the integrity of the community and harming all other members. Being a member is voluntary, yet conditional.

Since there is much to be gained by being a member and the rules and expectations of membership are subjective, there is a lot at stake in designing a dispute resolution process that doesn’t undermine the protections of fractal democracy.

Dispute Resolution Process

Any member at any time can ask the community to help resolve a dispute with another member; however, we must acknowledge that the very act of starting the dispute process can cause harm to others who are accused of frivolous things which they are forced to pay the costs of time and money to defend. This means there must be sufficient disincentive to filing frivolous claims.

For this reason, anyone who wishes to file a dispute with another member must first find three other members of the community willing to endorse the legitimacy of the dispute and the fairness of the proposed settlement. Want to claim $1,000,000 in damages for hot coffee? Then you must find three other community members who think that is fair and just given the circumstances.

In addition to finding others to endorse your dispute, you must post sufficient collateral (money) to cover the cost of the jury in the event your proposed settlement is found to be less fair than the Defendant’s proposal.

The Defendant would then have the following choice:

Accept the proposal and pay the settlement and thereby avoiding jury costsPresent an alternative proposal and post the collateral to cover the cost of the jury

Once the jury makes a ruling, the loser must pay the proposed settlement or they are automatically removed from the community. The winner gets their collateral for the jury returned. If the jury is hung and random chance is used, then both parties get their collateral returned because the jury only gets paid in the event they come to consensus.

Jury Selection and Compensation

Eden already has a process for randomly grouping people for elections and selecting up to 20% of the membership to be delegates. These delegates are trusted to represent others and receive a budget from the community. All delegates are automatically opting in to the juror pool. When randomly selected for jury duty, the juror will receive a fixed compensation for filing a vote for one of the two proposals. Jurors must appear and cast their vote in a timely manner or they must compensate the community for their failure to appear. In this case we want to make the cost for not appearing high enough to incentivize them to perform their role. My proposal is that the cost of not appearing should be 2x the income they would have earned had they appeared.

The jury must deliberate in a recorded call in which they voice their vote. In this case, the jury is acting like a panel of “judges” and doesn’t get to hide behind anonymous votes. The use of a recorded deliberation helps ensure that all jurors are actively engaged and state their opinion on which of the two proposals is more fair. Without this process it would be difficult to assess when a juror delegates their job to a bot.

In a jury of 5 delegates, 3 must agree or the outcome is randomly selected (using provably random techniques).

What is in a Settlement

A settlement proposal can contain any set of proposed actions that the other party should take. The more objective and measurable a proposed action the better. It can include compensating multiple third parties as well.

To the extent that a settlement requests a transfer of blockchain tokens, the collection and validation of the transfer can be automatically enforced. However, in most cases the settlement may involve taking actions in the real world which cannot be directly validated on chain.

Additionally the Plaintiff and Defendant may propose two summaries that goes on the public record, one associated with the Plaintiff’s and one with the Defendant’s profile. This will impact their reputation if reputational damage is deemed justified. Note, that all settlements and cases are public and can be viewed, but most people just look to the summary. Jurors should consider the fairness of the summaries when determining which settlement is more fair.

A performance bond could also be required. Suppose a settlement requires the transfer of a GitHub account to another user. Since the blockchain cannot verify it, the settlement also requires a bond be posted and held in escrow until released. Failure to post the bond or get mutual acceptance of the completion of the task shall constitute an objective default on the settlement.

Enforcing the Settlement

Once a judgment has been issued the parties are expected to comply if they wish to remain in the community. The case is considered closed once both parties mutually agree that all settlement terms have been completed. If one party claims everything has been carried out and the case should be closed and the other disagrees then this represents a new dispute. This kind of dispute is different from the original dispute because the only allowed settlement proposals are those that can be objectively verified by a blockchain.

Suppose the original settlement stated that the Defendant must hand over the credentials to a social media account. The Plaintiff and Defendant cannot agree that this order had been carried out. Either party can then file an enforcement request with financial damages measured in EOS. Both parties submit their proposed EOS-denominated damages. Then a jury decides which resolution is more fair given evidence provided by the parties. Lastly, the derelict party either pays the EOS as required by the deadline or is automatically removed from the community.

Enforcing Community Standards

There are many things a community may want to require of its members which do not directly harm any specific member. For example, suppose the community has a “dress code” as specified by the bylaws enacted by the fractal democracy process. Who gets to start a dispute with a violator of the “dress code”? I use a “dress code” as an example because it is off chain and obviously subjective and yet can be obvious. Note that I am not advocating a dress code for Eden members beyond wearing clothes on Zoom calls.

Under existing corrupt governments, government officials are responsible for identifying people they wish to bring criminal charges against. This process, combined with selective enforcement, creates a system of arbitrary and inconsistent and unpredictable justice. What good is a law that is not enforced consistently and reliably?

Since violation of community bylaws harms all community members, all community members have standing to request their enforcement against other members of the community. So if you see someone who has violated the community “dress code”, then you can start a dispute with said individual.

Starting a dispute is risky! You might lose! If you lose you are liable for the cost of the dispute and damages to the falsely accused. Therefore, the safest bet for all community members is to refrain from attempting to enforce community standards. This rational abstention is effectively a tragedy of the commons.

To overcome this, the community must provide incentives for members to take a risk to file a dispute on behalf of the community. This can be accomplished by passing bylaws that define a fine for violating the “dress code” and a reward for being the first to file and post the collateral to cover the cost of a jury.

In the vast majority of cases, the violator of the “dress code” would rather pay the fine than post the collateral required to take it to court. The only time an alleged violator would actually take it to court is if the plaintiff was clearly making false allegations. In this case, the alleged violator would ask for damages from the false accuser.

While a “dress code” is obviously frivolous in the case of Eden on EOS, it might very well apply to an Amish community. In the case of Eden on EOS it could be compliance with rules regarding profile photos being recognizable likeness of the real person. Alternatively, it could be for spreading FUD on twitter.

Double Jeopardy

When a community member is opening a dispute with another member for a “crimes against the community”, they must certify that they are the first to open a dispute for this violation. The defendant can use prior rulings of a jury as a positive defense against a repeat claim. Note that all disputes require at least 3 other parties to certify. All three parties are responsible for their sworn testimony the dispute is not an attempt at double jeopardy.

Imagine the Plaintiff and Defendant attempt to collude to violate a bylaw and then utilize the Double Jeopardy rule to prevent others from opening a dispute. In this case, the Plaintiff and Defendant could achieve this collusion by both proposing settlements that are unjust to the broader community. The jury would have no choice but to approve an unjust settlement.

This represents a new kind of dispute. In this case other community members can open a dispute against the colluding parties and a random jury of elected delegates will determine whether the proposed and accepted settlements were inline with the spirit of the community or attempts to subvert the community. The members of the original jury, witnessing the abuse, are likely the ones to file a new dispute with the Plaintiff and Defendant.

Why subject yourself to this process?

Nobody likes disputes. No one likes to open themselves up to additional liability. No one likes being subject to other people suing them. Why join a community that adds “yet another way” to get into a dispute?

“When one of you has a grievance against another, does he dare go to the law before the unrighteous instead of the saints? Or do you not know that the saints will judge the world? And if the world is to be judged by you, are you incompetent to try trivial cases? Do you not know that we are to judge angels? How much more, then, matters pertaining to this life! So if you have such cases, why do you lay them before those who have no standing in the church? I say this to your shame. Can it be that there is no one among you wise enough to settle a dispute between the brothers?” — Corinthians 6:1–2

No individual can gain independence without the help of an independent community and no community is independent without being able to resolve its own internal disputes. Therefore, it is my contention that any member of an Eden community that attempts to sue another Eden member in state courts should automatically forfeit their membership status. Furthermore, the full Eden community should then come to the defense of the party being sued in state courts.

The purpose of intentional communities is to take back our power from corrupt governments, which means rejecting the corrupt court processes and instituting new processes. Who do you trust more, fellow community members who share your values or corrupt government courts which seek to protect the interests of the government?

Ultimately, the reason you submit yourself to community dispute resolution is because it is the price you pay for the benefits a community bestows upon its members. And ultimately, the only thing at risk by consenting to community dispute resolution is your status as a community member.

Decentralized Dispute Resolution was originally published in EdenOnEOS on Medium, where people are continuing the conversation by highlighting and responding to this story.

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