The birthplace of Democracy is experiencing a few problems in the area of governance. One solution that’s been suggested could be an important new direction for us all: governed blockchain.
The financial crisis of 2008 gave birth to a monetary system free from the constraints of institutional authority. Bitcoin and other cryptocurrencies are now used for online payments, real estate transactions, and an ever-growing list of other types of transactions.
Now, the technology that makes Bitcoin possible, Blockchain, is transforming other industries beyond payments. One area is arbitration.
Thanks to a new movement and brand new technology, it’s now possible to conduct a complete arbitration process on blockchain. And just like cryptocurrency transactions, blockchain arbitration is entirely trust-free and independent of any third-party interference.
But make no mistake: blockchain arbitration may just be taking off, but like Bitcoin, it’s also rooted in the financial crisis of 2008. What drove the demand for a trust-free payment system like Bitcoin is also what’s now driving the digital migration in other areas like arbitration.
To understand why, we have only to return to the very birthplace of our entire judicial system: Greece.
What Greece’s Anti-Austerity Movement Tells Us About Modern Governance
The irony hardly escapes anyone: in the birthplace of Democracy, there’s a real problem with representation. As you may recall, Greece suffered greatly as a result of the global financial crisis that began a decade ago. Their subsequent bailout packages came with severe stipulations: authorities were forced to raise taxes while drastically cutting public spending. Hospitals closed. The rates of infectious diseases skyrocketed, including Malaria, which hadn’t been seen in that country in 40 years.
Along came the protests, which developed into a full-fledged anti-austerity movement. Many felt that Parliament’s acceptance of the bailout packages was not in accordance with what the people wanted. Many also felt that ordinary Greek citizens were asked to sacrifice while the rich and powerful in Greece continued to benefit. Even before the bailouts, there had been a general feeling of frustration with the rampant government corruption that has come to characterize Greece in the past several decades.
Definitely not what the Ancients had in mind when they invented Democracy.
Blockchain to the Rescue?
Blockchain is a game-changing technology not only in finance but also in governance. The checks and balances that protect payment transactions can also serve to protect social contracts. Blockchain technology allows virtually any type of transaction to be performed outside the trust-based model. For example, property can be bought and sold without the usual intermediaries of title insurance companies or escrow. Last March, in the United States, we saw the first all-blockchain real estate transaction.
If the Greek government could move its entire accounting department to the Blockchain, ensuring accountability and transparency, ordinary Greek citizens might begin to feel they had a stake in the movement against corruption. The oligarchic environment from which the austerity measures were carried out would be replaced with an alternative model wherein the Greek people could actually play a role. They’d have access to public accounting data. They’d know who’s paying taxes and who’s evading their civic responsibility to keep the country afloat. They could make decisions outside the realm of influence, using facts to inform their choices.
Arbitration on the Blockchain
Blockchain technology allows for decision-making according to consensus rather than power. It’s a system that hearkens back to the original concepts put forth by the founders of Democracy: every voice is heard, without reference to fear of intimidation or any other form of outside interference.
One thing that Democracy hasn’t been able to stand up to over time is the degrading influence of human self-interest. Greed, power, wealth, narcissism have all worked to devolve the democratic concept to the level we’ve seen in Greece: total corruption.
For those entrenched risks of Democracy, Blockchain offers the perfect solution. It offers distributed accountability, vastly improved security, irrevocability, and last but not least, a way to achieve consensus that’s resistant to outside influence.
All this makes the blockchain a perfect platform for dispute resolution.
The Preference for Cryptographically-Proven Evidence
You can see where all this is leading. There’s a new way for people to solve disputes and of course, it’s rooted in blockchain technology. We now have what’s called the governed blockchain, which makes possible a more efficient way of tapping into the power of this new technology. Using Proof of Stake (POS) as a means of authentication brings a new efficiency to the blockchain that was unheard of under the Proof of Work (POW) system. It means faster, cheaper transactions so blockchain can be leveraged in many more ways.
And, compared with traditional arbitration systems, arbitration on the blockchain can take place in as little as one-third the time. Blockchain arbitration has, of course, a preference for cryptographically-proven evidence. It’s easier to establish procedure and it’s faster to move things along in the arbitration process.
In addition, with a governed blockchain like the one managed by Telos, the arbitrators are elected by the members. Arbitrators are free from liability via an opt-in mechanism where users release their claims when they sign in. Arbitrators set their own fees are paid in tokens. Fees are substantiated by reputation and experience on the network and arbitrators are even paid to learn about the network — how to manage setup, get feedback, and get off the ground as an arbitrator on the network. All of this ensures Telos itself gets off the ground with good people acting as arbitrators. As the system gets on its feet, it will become sustainable via arbitration fees.
It’s the genius of Democracy but reinvented for the 21st century. There’s proper incentive for participants to be honest. There’s accountability. There’s equal representation. There are rules which are applied equally to everyone on the network. There’s no room for self-interests or malicious intent. No single entity can gain the upper hand. Disputes are resolved quickly and there’s a checks and balances system in place for arbitrators, who must act responsibly or be placed at risk of being voted out.
Rooted in the woes of Greece, blockchain-based solutions are rising to meet the needs of today’s arbitration community. It’s an exciting and innovative alternative to yesterday’s cumbersome, trust-based arbitration. It might not solve the deep-seated problems with Greece’s troubled Democracy but it holds exciting promise for those of us who navigate the world of arbitration.