Ethereum On-Chain Arbitration Protocols, Consent & Functionality

An Aragon Court Case Study.

?????????????Aragon Court is arguably the oldest arbitration protocol on the Ethereum blockchain. Built as open source addon, its purpose is to specifically serve the Aragon Platform as a Dispute Resolution System. There are many different procedures an Arbitration Protocol can adhere to; I will be covering the procedural aspects of Aragon Court the Dispute Resolution System. I chose Aragon Court because it has the most open-source information available on it. However, you are welcome to checkout other Protocols like Kleros (on Ethereum) or even Celeste ( on Gnosis Chain).

????Like an arbitration clause, compromissory clause or optional clause, parties must explicitly consent to the jurisdiction of the Arbitration. Generally speaking, parties consent to the jurisdiction of the court by integrating it to the 'smart contract' that is object of the dispute.

What is the Aragon Platform?

?????????????Aragon is a platform for creating and administering Decentralized Autonomous Organizations (DAO for short) with a friendly and convenient User Interface. This user interface incorporates different tools into a unified control panel where users can come together to ‘attract contributions, pool capital, & govern themselves transparently’.[1]

?????????????Messari defines the Aragon Network as a “Decentralized Autonomous Organization (DAO) whose goal is to act as a ‘digital jurisdiction’ that aims to make it possible for organizations, entrepreneurs, and investors to do business without a legal nexus’[2].

?????????????In essence, Aragon is: 1) a Platform, 2) where people can create an Organization that can 3) attract contributions, ?4) pool capital & 5) govern itself transparently.

What is a DAO?

?????????????Because most of the information on blockchain and related phenomena is still new, for coherence purposes we are going to define a ?DAO as the Aragon team does so in its blog. They break up the words and define them separate in order to illustrate the ethos behind DAOs:

?????????????‘Decentralized = online, global, uncensorable.

?????????????Autonomous = Self-governing.

?????????????Organization = Coordination & collaboration around shared objectives.’[3]

Where does Aragon Court Come in?

As the integrated Dispute Resolution System of the Aragon Platform, Aragon Court functions as a system where DAO members can solve disputes amongst themselves, typically arising from proposals spending capital from the organization’s capital pool.

What is Aragon Court?

?????????????Aragon Court defines itself as a Decentralized Dispute Resolution Protocol. Clearly, it is a Dispute Resolution System. It can handle subjective disputes that cannot be resolved by smart contracts alone. Through the use of a growing borderless network of incentivized guardians drafted for each dispute, guardians are ready to intervene and arbitrate on a ruling over human—readable agreements protected by Aragon Court.

How does Aragon Court Work?

A dispute is generally commenced by challenging an organization’s proposal on the Aragon Platform. To make a proposal one must stake Aragon Tokens (ANT). To challenge a proposal another must stake an equal amount of ANT.

? The Aragon Court Dispute Life-cycle generally consists of 5 stages with the 6th stage being the repetitive exception: 1) Dispute Creation & Evidence Submission, 2) Summoning Guardians, 3) Vote Commit, 4) Vote Reveal, 5) Appeal and Confirmation, & 6)Final Ruling & Final Appeal. [4]

01 Dispute Resolution

Once the disputed is created, a time period of seven days is granted to submit evidence in text format (HTTP and IPFS links are also accepted). Once the seven days have surpassed or the dispute creator has closed the evidence submission stage this stage will close.

02 Summoning Guardians

Being the first adjudication round, the summon guardian period consists of somebody clicking on the summon guardians button and receiving a reward proportional to the number of guardians being drafted.

Summoned guardians receive email notifications containing information about the dispute. A portion of their active (staked) tokens are locked until the final ruling is confirmed (the purpose behind this lock is to incentivize consensus decisions and honest behavior). In the case of appeal rounds it is possible to be summoned more than once for the same dispute.

03 Vote Commit

Within this voting period guardians must review evidence and try to anticipate what the decision of the plurality of guardians will be. Contrary to the traditional court system where the court is asked to give an unbiased opinion, in Aragon Court guardians are incentivized to reach consensus and are rewarded or penalized accordingly. Failing to cast a vote as a guardians has financial consequences on the guardian (over his staked tokens).

There are three voting options on every dispute brought to guardians: 1) Allow the action being disputed, 2) Block the action being disputed, or 3) refuse to vote (abstain). These are pretty self explanatory, remember that no-action involves a penalty.

04 Vote Reveal

After the voting period ends, guardians have two days to reveal their vote unless automatic reveal is activated.

05 Appeal and Appeal Confirmation

After the votes are revealed guardians can validate if they voted with the plurality or not. Before the ruling is executed (the ruling = plurality vote winner), there is a period in which any user can lock DAI (Digital Asset Pegged to the United States Dollar) to propose an appeal (even users that are not a party). An appeal must be confirmed by a second user to officially start a new round of adjudication. ?

If an appeal is confirmed, a new adjudication round is initiated, and a new jury is drafted. With each appeal the number of guardians is multiplied by three. Both the appeal and appeal confirmation periods last two days.

If an appeal round is commenced but not confirmed, then the outcome proposed by the appealing party wins. For example, if the ruling was ‘allow’ and the appellant alleged ‘block’ and no one confirms the appeal the final ruling will be ‘block’.

Appealing and confirming parties will receive the collateral of the opposing party as reward if they succeed. If neither the appealing or confirming party’s contention succeeds then they both get back their collateral minus the guardian fee in favor off the guardians that voted with the plurality.

06 Final Ruling

The maximum number of appeals is set to four. For the final appeal round the auto-reveal service is not available for which guardians will have to manually reveal their vote.

Conclusion

Aragon Court is a novel Dispute Resolution System that was developed to attend disputes between DAO members the Aragon Platform. It decentralizes the power of adjudication by dividing it between its 'guardians' (finders of fact and 'rules'). It provides an appeal system that allows for up two 4 appeals and it requires a controversy at every stage for the court to entertain the dispute. Parties consent to Aragon Court's jurisdiction by interacting with the smart contract that integrated the Court's API (Application Programming Interface). Generally speaking, in the case of Aragon Court, most controversies arise from organizations created on the Aragon Platform.

[1] Aragon.org. 2022.?Govern better, together. Build your DAO now.. [online] Available at: <https://aragon.org/> [Accessed 11 April 2022].

[2] Messari.io. 2022.?Aragon Network. [online] Available at: <https://messari.io/asset/aragon-network> [Accessed 11 April 2022].

[3] Aragon's Blog. 2022.?What is a DAO?. [online] Available at: <https://blog.aragon.org/what-is-a-dao/> [Accessed 11 April 2022].

[4] Help.aragon.org. 2022.?Dispute lifecycle - Aragon Help Desk. [online] Available at: <https://help.aragon.org/article/43-dispute-lifecycle> [Accessed 11 April 2022].