Decentralized Justice - Using Blockchain with AI Technologies: a review

DHAN PRASAD GHALE*1,2 and ALEXANDRU ALOMAN*1,2 

Abstract: Revolutionization of Technology brings together to enhance legal services and the creation of the virtual court to provide efficient dispute resolution procedures. In Alternative dispute resolution by means of Online dispute resolution” ODR”, technology facilitates the resolution of disputes between different commercial parties. The early stage of ODR brought incremental innovation that streamlined existing alternative dispute resolution procedures, however, it did not create any disruptive innovation and optimal solutions. Emerging technology such as Blockchain allows transactions on a distributed ledger, and it maintained cryptographic audit and check validation by multiple standard protocols in an associated network called Decentralized. Smart contracts or self-execute as programmed must incorporate an autonomous decision-making mechanism able to solve dispute procedures called Decentralized Justice. Furthermore, the AI algorithm provides the ability to make self-decisions for data processing, and sentiment data analysis. A discussion on how to use AI and Blockchain Technology to determine the legal way to resolute the dispute without human interference. This paper reviews the main theoretical principles, legal procedures in the field of decentralized justice, and experimental use cases for real-life applications.  

Keywords: Alternative dispute resolution, online dispute resolution “ODR” Blockchain Technology, Decentralized Justice, AI algorithm, data processing, sentiment analysis, smart contracts. 

 

 

 

1. INTRODUCTION 

Since the late 1990s, as modern technology generated new types of transactions and disputes [1], 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, in particular, to fill the “digital justice gap. The Legal sector has witnessed a growth in the use of Legal technology both in the office and in courts”. As early as the 1990s, companies like iCourthouse experimented with collective intelligence to resolve civil cases. In the 2000s, eBay implemented a crowdsourced panel for user disputes. During the early days, ODR was seen as a radical transformation of traditional Alternative Dispute Resolution (“ADR”) systems such as Stanford Journal of Blockchain Law & Policy When Online Dispute Resolution Meets Blockchain: The Birth of Decentralized Justice negotiation, mediation and arbitration. Katsh and Rifkin introduced the concept of technology as a “fourth party” in conflict resolution procedures [2]. The approach focused on the functional role of technology in guiding litigants towards an agreement in the shadow of the law. Different protocols were developed that could operate without any human involvement. Traditionally, the dispute is resolved by resorting to law, where cases are resolved by Judge who decides the case according to the law in the particular case, where the dispute occurred or is regulated. Some technological software helps in law practice management, documents, storage, billing, accounting, and electronic discovery. It also includes connecting people with lawyers more efficiently through online marketplaces and lawyer-matching websites. However, despite a number of advantages to traditional technology-based courts, the ODR industry failed to become massive.

 

1.1. Alternative Dispute Resolution (“ADR”) Typically denotes a wide range of dispute resolution processes and techniques that parties can use to settle disputes, with the help of a third party [3] They are used for disagreeing parties who cannot come to an agreement short of litigation. However, ADR is also increasingly being adopted as a tool to help settle disputes alongside the court system itself. [4] [5]

ADR [4] is designed to resolve disputes without going to court. The common forms of ADR are

Negotiation—often lies at the centre of conventional ADR, where the mediator aims to build a dialogue between the parties where trust has broken down. The goal is the ‘win win’, whereby the parties abandon their entrenched positions and attempt to move forward in a manner that is viewed as constructive to both parties. Divorce cases are an example.

Mediation—where an independent third party attempts to build a dialogue with a view to negotiating a settlement.

Once an agreement is reached, it is reduced to writing and becomes a binding contract. In many ways, Mediation is the polar opposite of conventional litigation or arbitration, where there is generally a winner and a loser, and the loser bears the entire costs of the process.

Arbitration—where the parties submit the case to an unbiased third person designated by the parties who agree in advance to comply with the findings and then participate in a hearing where both sides can present evidence. The arbitrators’ decision is governed by a country’s arbitration laws or the arbitration rules prescribed by an international organization.

Early neutral evaluation—where a ‘neutral’ person, often a retired Judge hears a summary of each party’s case and gives a non-binding assessment of the merits. This can be used as a basis for settlement or further negotiation.

 

1.2. Online Dispute Resolution (“ODR”)

Legal certainty seemed at the core of the debate. Hence, Online dispute settlement by means it requires technology to facilitate the resolution of disputes between two different parties, involving negotiation, mediation and arbitration, or a combination of all three; and can be fully automated or involve human intervention [6]. In Online Dispute Management, automation is used both in the process of bringing the parties together for a ‘neutral’ decision or to propose a settlement; in the resolution i.e. as the ‘Fourth Party’; or can be mandatory. But even if a decision was reached through an ODR mechanism, there was no guarantee that it would be accepted by the parties and enforced. Since they lacked an institutional arrangement such as court imperium, 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 on large trading platforms like eBay. As Rabinovich-Einy and Katsh note: “ODR has been successful where its design fulfilled adequate levels of trust, expertise, and 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 is ultimately premised on trust (trust in the system, trust in the process and trust in its fairness) and therefore a willingness to abide by outcomes [7]. 

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 that centralized solutions are generally expensive and are not free from problems of trust. For instance, Deffains and Roussey [8] explain that an effective judiciary must not only provide good substantial and procedural rules but should also inspire citizens with confidence and respect which are not intrinsic dimensions of the judicial system. It also has been shown in law and economics literature that trust in the judiciary may improve the performance of the judiciary itself [9].

 

1.3. Smart Contracts

Smart contracts are executable codes that run on top of the blockchain to facilitate, execute, and enforce an agreement between untrustworthy parties without the involvement of a trusted third-party [10]. Smart contracts gave network automation and the ability to convert paper contracts into digital contracts. Compared to traditional contracts, smart contracts enabled users to codify their agreements and trust relations by providing automated transactions without the supervision of a central authority [11]. In order to prevent contract tampering, smart contracts are copied to each node of the blockchain network. By enabling the execution of the operations by computers and services provided by blockchain platforms, human error could be reduced to avoid disputes regarding such contracts. For instance, the smart contract can define the constructor function that enables smart contract creation. Hosting a new smart contract in the blockchain is enabled by invoking the constructor function through a transaction, whose sender becomes the smart contract owner. A self-destruct function is another example of a function that can be defined in a smart contract.

 

1.4. Decentralized Justice

It is a new approach to online dispute resolution that combines blockchain, crowdsourcing and game theory in order to produce resolution systems that are radically more efficient than existing methods. Decentralized justice platforms are a form of “digital courts” supported by blockchain technology whose purpose is the settlement of disputes by crowdsourcing jurors under economic incentives to provide fair [12]rulings. Decentralized justice platforms aim to provide a way to resolve matters of interpretation inherent to smart contracts thus lowering transaction costs and enabling the thriving of many decentralized applications built on blockchain. 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.

 

2. DISCUSSION 

Crowdsourcing and game theory are the basic applicable mechanism to produce true decisions in decentralized justice. However, there are different specific features needed to qualify as a decentralized justice system.

 

2.1. Decentralized justice and Its key features

As we know, decentralized justice needs rule and law for legal and order to emerge. Three conditions need to comply for decentralized justice, a dispute resolution system. (a) To be built as a Decentralized Autonomous Organization (“DAO”) on Blockchain Technology (b)To be based on a mechanism design using cryptocurrency incentives and (c) to generate a perception of fairness.

(a) To be built as a Decentralized Autonomous Organization (“DAO”) on Blockchain Technology— it is novel scalable, self-organizing coordination on the blockchain, controlled by smart contracts and its essential operations are automated agreeing to rules and principles assigned in code without human involvement [13]. Democratic societies have built checks and balances and a number of bureaucratic procedures to prevent influence on the legal system from powerful agents in favour of their preferred outcomes. In the digital world, the equivalent of a stable bureaucracy is DAOs based on blockchain technology. A DAO effectively is a collection of smart contracts bound together to form a digital organization that operates according to specific rules and procedures. According to Hadfield and Weingast, [14] the rule of law is a classification institution that complies with six features: (1) The decision-making logic is publicly available, (2) the institution resolves ambiguity, 3) the decision-making logic is stable, (4) the institution gives predictable results to novel inputs, (5) the institution is impersonal in the sense of decisions not being influenced by the rank or status of parties, and (6) the institution can produce new rules by soliciting information from users. Decentralized justice systems have a governance mechanism that enables users to make decisions about the evolution of the protocol, including the creation of new courts, the developing of rules for courts, setting adjudication fees as well as a number of decisions regarding software development. These features guarantee that decentralized justice systems comply with two key features that we would expect from any justice system. (I) the system is secure in the sense that no agent can unilaterally and arbitrarily influence the decision-making process. The entire procedure (handling evidence, jury selection, jury incentivization and execution of ruling) works in a fully automated and immutable way thanks to blockchain code. This guarantees that the decision-making process will work exactly as written in the code and will not be affected by any agent with “special decision rights.” (II) the system is managed by the community (typically defined by users holding the protocol cryptographic tokens). Any necessary changes in the procedure will have to be made through some type of voting procedure. Transparent to all participants in the network is the information regarding how rule changes are executed. These two key features that handle decentralized dispute management by rule of law: are equality of citizens, predictability and community

governance.

(b) To be based on a mechanism design using cryptocurrency incentives— decentralized justice systems do not rely on any expectation of moral behaviour of agents but on strict economic incentives achieved through mechanism design. Agents are not expected to act honestly (i.e., be neutral in their decisions) because of moral reasons but because they are part of a set of institutional rules where it is in their rational interest to act in such a way in order to optimize their economic gain. The base of agency theory [15]Satoshi Nakamoto's seminal paper on Bitcoin builds on this idea to claim that, provided incentives are correctly designed, a number of self-interested anonymous agents can collaborate in maintaining a distributed ledger of monetary transactions. Decentralized justice systems are based on a similar principle: agents lend their “computing power” (time, skills, etc.) to the network in order to solve disputes. The better their performance, the higher their reward. While there are many alternative ways in which these mechanisms can be designed, they all share the fact that the performance of the system does not rely on a moral expectation about agents “doing the right thing” but on aligning incentives for creating the desired behaviour and achieving the desired goal. Even with individual agents behaving selfishly, the mechanism design results in a desirable outcome at the aggregate level. Early models of decentralized justice systems rely on a mechanism design inspired by the concept of focal points developed by game theorist Thomas Schelling. Schelling introduced the concept of focal points as “each person’s expectation of what the other expects him to expect to be expected to do.”21 In other words, a focal point (or Schelling point) is a solution people tend to choose when unable to communicate because it seems natural to them [16]. As in any cryptoeconomic protocol, decentralized justice systems have a number of game theoretical defences against attacks by malicious agents who would try to abuse the system for their own interest.

(c) To generate a perception of fairness—Daniel Dimov has worked extensively on the development of a model for assessing procedural fairness in the context of crowdsourced online resolution systems (“CODR”). Procedural fairness refers to a number of criteria for determining whether a given procedure contributes to a fair outcome. [17] Dimov examines two types of procedural fairness: objective procedural fairness (defined as the extent to which the procedure complies with the fairness standards defined by the Directive on Alternative Dispute Resolution of the European Union, 2003) [18] and subjective procedural fairness (an individual subjective perception of the fairness of a procedure), and then merge them into a single framework which may be used to assess the overall fairness of a dispute resolution procedure. Dimov’s framework argues that there are 14 points to assess the fairness of a crowdsourced online dispute resolution system: (1) Expertise (2) Independence (3) Impartiality (4) Transparency (5) Fair Hearing (6) Counterpoise (7) Reasonable Length of Procedure (8) Providing Reasons (9). Process Control (10). Decision Control (11) Consistency (12) Accuracy (13) Correctability (14) Ethicality. Hence, an evaluation of these points enables a judgment on the fairness of a dispute resolution process.

 

2.2. Blockchain Technologies 

The blockchain is highly appraised and endorsed for its decentralized infrastructure and peer-to-peer nature. However, much research about the blockchain are shielded by Bitcoin, but blockchain could be applied to a variety of fields far beyond Bitcoin.  Blockchain has shown its potential for transforming the traditional industry with its key characteristics: decentralization, persistency, anonymity, and audibility [19]. The two core technologies are

1. Distributed Ledger (DL)—A distributed ledger which is also known as a shared ledger is a list of shared and synchronized data which are geographically spread across multiple sites. The data is exactly replicated and synchronized across all locations to maintain data integrity, availability, and resiliency [20]the distributed ledger uses a peer-to-peer network to communicate with nodes that are spread around the globe and it provides real-time information and reduced error or fails rates of transactions.

2. Smart Contracts— A smart contract is a common agreement between two or more parties. It stores information, processes inputs, and writes outputs thanks to its pre-defined functions [21]. For instance, the smart contract can define the constructor function that enables smart contract creation. Hosting a new smart contract in the blockchain is enabled by invoking the constructor function through a transaction, whose sender becomes the smart contract owner.

2.3. AI Technologies 

 

The topic of artificial intelligence (AI) is seen frequently popular in the law and justice industry. However, law and justice are an industry notoriously slow to adopt new technologies. AI provides the ability of a machine to do work without the interference of any human and also gives the machine intelligence which helps it to take decisions by itself. Basically, AI categories based on their activities (1) knowledge base system and (2) Machine learning. Machine learning (ML) is an umbrella term that refers to a broad range of algorithms that perform intelligent predictions based on a data set. These data sets are often large, perhaps consisting of millions of unique data points [22]. However, Natural language processing (NL) and sentiment analysis (SA) is a new emerging sub-branch of AI, that enables machine or programming code to understand human language. Natural language processing units enable machines to understand natural language and analyze it by extracting concepts, entities, emotions, keywords, etc. It is used in customer care applications to understand the problems reported by customers either verbally or in writing. Similarly, Sentiment analysis (SA) is an intellectual process of extricating a user’s feelings and emotions [23].

 

2.4. Approach of Blockchain with AI

Artificial Intelligence when combined with Blockchain is known as Decentralized AI. Start-up companies in the decentralized justice space are beginning to use a variety of AI and machine learning (ML) techniques to enhance insights, scalability, productivity and accuracy.  The main purpose of Blockchain is to store data and transfer data, so when it is combined with AI, we can say that the stored data can make decisions of their own or we can say that they will have intelligence of their own. Also, the data on which the AI works can be transferred to various other networks with a reliable and secured Blockchain system. With the combination of Blockchain the AI the data will easily be available for the users and they will able to see the data but will not be able to edit it. Third-party involvement will not be required because of the Blockchain technique. AI will add intelligence to that data which will then analyze the data on its own and respond to events that require a quick response [24]. Blockchain with AI is two different technology, and its breakthroughs for decentralized justice and the key attention factors for legal professionals: (a) Autonomous  (b) Transparency (c) Data Security and Integrity (d) Open access and immutable.  

(a) Autonomous— The basic autonomous smart contract code hosting in a Blockchain network and controlled by smart contracts and its essential operations are automated agreeing to rules and principles assigned in cod without human involvement. 

(b) Transparency—Blockchain works on Distributed Ledger Technology (DLT)  and cryptographic hash signatures are being used for data distribution across a connected network. Each blockchain consists of multiple data blocks to record every transaction, multiple blocks are connected to each other to form the chain through the node. The node can be an individual computer system, which is connected to each other, it maintains completed past transaction history and can track each transaction without any limitations. 

(c) Data Security and Integrity—The blockchain ledger can realize the secure and reliable multiparty storage of ledger data. The verification process data is recorded on the blockchain ledger to prevent all parties from tampering with the verification process and ensure the authenticity of the data integrity verification history. The unique identifier Node block of the data on the blockchain ledger on the blockchain ledger is recorded. The determination of the unique identifier can ensure the data. The consistency of storage and integrity verification enables retrieval of a particular data integrity verification history. By returning the data integrity verification history, the historical character of the data before sharing can be guaranteed and the reliability of the data can also be guaranteed [25]. AI uses data stored efficiently to provide meaningful and timely insights that researchers, and analysts can act on it. 

(d) Open access and immutable—  Decentralized with AI can remove mediators, it connects businesses to consumers directly. Large volumes of data from within and outside of the organization access from public Domin. Which when analyzed using AI scale can provide more actionable insights. Immutable by means remain permanent, blockchain immutability has the potential to transform the auditing process into quick, efficient, and cost-effective, trust to the data business.

 

2.5. Benefits of Blockchain with AI in the legal industry

The field of decentralized justice emerges as a credible new framework for dispute resolution.

Some benefits are: (1) accessible (2) cost reduce (3) automation and tokenization.

(1) Accessible—   Lawyers can leverage blockchain technology to streamline and simplify their transactional work, digitally sign and immutably store legal agreements. Using scripted text, smart contracts, and automated contract management reduces excessive time spent preparing, personalizing and maintaining standard law documents. These cost savings are passed on to the customer.

(2) Cost Reduce—  The introduction of smart contracts will accelerate and lower the cost of transactions between parties. A cost-efficient algorithm can automatically and transparently manage escrow accounts at a fraction of the cost of manual labour. Lower costs will increase the overall demand and accessibility for legal services.

(3) Automation and tokenization—  Utilizing a legal agreement repository and pre-fabricated smart contracts, lawyers can automate non-billable administrative tasks and transactional work. Cutting down on excessive manual labour will also accelerate legal proceedings, which decreases costs to customers. Tokenization refers to the concept of creating a singular identifier on a distributed ledger in terms of a token that may represent anything from financial assets, and goods, to other valuable resources [26]. Tokenization will be applicable to participants voting procedure to express their interest and availability in resolving disputes. 

 

3. CONCLUSION 

In 2001, Ethan Katsh, the “father” of Online Dispute Resolution, observed: “The power of technology to resolve disputes is exceeded by the power of technology to generate disputes.” [27] .“Decentralized justice” is a new approach to online dispute resolution that combines blockchain, crowdsourcing, and game theory in order to produce resolution systems that are aimed at being more efficient than existing methods. Decentralized Autonomous Organizations ("DAO") which comply with the required features of the rule of law rely on crypto economics for incentivizing decision-making such as transparency, accountability, accessibility, and fairness. Artificial Intelligence (AI) is the technique in which we interweaved human intelligence with machines. It has the competence to rationalize and step forward to accomplish targets. AI is continuously giving perks to the tech industries. When we unified AI with blockchain, it is called decentralization AI  and how this integration helps us to resolve online disputes in the digital world. Blockchain with AI combination that uses in different industries. However, in the legal industry, it helps to provide autonomous legal procedures, participation in the decision-making process as well as immutable data security and integrity slow to modernize. Enterprise Ethereum alleviates labour-intensive manual processes while providing increased accessibility, transparency, cost savings, speed, efficiency and data integrity to the legal industry.  

 

 

 

 

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