VAIOT’s Decentralized Dispute Resolution System (DDRS)

17 min readOct 6


If you’re unfamiliar with Decentralized Dispute Resolution (DDR), please check out our deep dive on the benefits, real-world applications, features, and history of it here.

Why is VAIOT developing a system for Decentralized Dispute Resolution?

It is estimated that from 3-5% of online transactions end in a dispute. A legal dispute is a disagreement or controversy between parties that arises out of conflicting legal rights, claims, duties, or obligations. These disputes often involve issues that are subject to legal resolution, such as contracts, property rights, torts, or constitutional matters. Legal disputes can be resolved through various methods, including negotiation, mediation, arbitration, or litigation in a court of law.

Last year alone there were more than 3.3 trillion USD globally transacted across the entire e-commerce ecosystem.(Mania, 2015) If 3–5% of that ends up in a dispute, that would be of 100 billion USD plus annually caught up and wasted in tedious and slow moving litigation — thats if the parties involved decide it’s worth the time and effort of the litigation process. The new economic reality we find ourselves in holds a large number of small international claims, thousands of dollars or less, which traditional systems simply cannot adequately handle. These disputes certainly aren’t just between buyers and sellers, disputes quite often arise when one party cannot or does not make good on e-service agreements. With our Decentralized Contractual Dispute Resolution System (DCDRS), or Decentralized Dispute Resolution System (DDRS) for short, VAIOT aims to not only corner this market but provide a framework for the efficient handling of these disputes.

Traditional legal systems often struggle to provide efficient resolutions for parties interacting in a decentralized, borderless manner. Methods such as court and international arbitration are ineffective for handling a large volume of small value claims across national borders. The transnationality of e-commerce combined with the requirements for shorter and cheaper procedures give reason to expect rapid growth of the online dispute resolution industry. From this perspective, the emergence of decentralized justice can be interpreted as an efficient institutional answer to the economic problem of coordination between agents, in such a way to reduce transaction costs (Deffains and Gabuthy, 2006). Modern e-commerce has brought a new category of dispute to the fore, namely small-scale transnational disputes. — As these traditional dispute resolution channels are poorly suited to this new category, blockchain-based “decentralized justice” platforms, such as VAIOT’s DDRS, provide a powerful alternative.

Smart contracts are “smart” enough to self-execute as written in their code, but even they alone cannot resolve situations that are open to interpretation by the parties involved. Litigation arising between two human parties reduces the speed and automation of the transactions’ execution resulting in high legal uncertainty and high transaction costs (Coase, 1960), often losing any value generated from the smart contact often. The more poor the smart contract code design and less clear it is, the higher the chance of losing all time and cost benefits in the lengthy litigation process.

Even in the context of international DAOs, which have provided even further efficiency in decentralized disputes, litigation can be slow, opaque, and jurisdictionally complex.(Schultz, 2002). Smart contracts and DAOs cannot account for lack of human foresight, and this is fine. These are the exact reasons why VAIOT and it’s AI Legal Assistant require a Dispute Resolution System for it’s contracts. Not only will users be able to generate, access, share, and learn about contracts via the Assistant, they’ll be able to handle possible disputes as well. Not only does VAIOT deliver ease-of-access to blockchain technology, it enables users to wield that technology with nuance and power.

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Introduction to Decentralized Justice

In the landscape of decentralized online interactions and digital agreements, the traditional avenues of dispute resolution have found themselves challenged by the complexity and speed of the digital age. Enter decentralized justice, merging blockchain technology, crowdsourcing, and game theory to craft resolution systems that are radically more efficient and fair than existing methods in dispute settlement.

At its core, decentralized justice is a revolutionary method of online dispute resolution, characterized by the fusion of blockchain’s transparency, crowdsourcing’s collective intelligence, and game theory’s strategic frameworks. It introduces a paradigm shift, envisioning digital courts supported by blockchain technology. These courts, also known as decentralized justice platforms, operate on a foundation of smart contracts, ensuring procedural integrity and legal certainty in every case adjudicated. Thanks to their innovative mechanism design, decentralized justice systems have the potential of providing a fast, cheap and fair dispute resolution method, especially suited to the resolution of claims in e-commerce, freelancing, crowdfunding and many other cases from the digital economy or either in more traditional disputes.

Central to this innovation are smart contracts, intricate computer programs executing predefined actions upon specific conditions’ fulfillment. These contracts are not just lines of code; they represent trustless systems, eliminating the need for human intermediaries. Through smart contracts, parties can ensure the automatic execution of legally mandated actions, ranging from asset transfers to votes on decentralized decision-making platforms.

Decentralized Autonomous Organizations (DAOs) further underline the potential of this system. Operating without a central authority, DAOs rely on rules encoded in smart contracts. This streamlined, transparent, and efficient structure finds its perfect match in decentralized justice, creating a synergy that propels dispute resolution into the future.

Decentralized dispute resolution (DDR) is the embodiment of this innovative approach. Unlike traditional methods, DDR leverages blockchain-assisted technology and a decentralized network of decision-makers. Parties engaged in disputes, particularly those arising from smart contracts, can now navigate a streamlined process that doesn’t rely on the cumbersome mechanisms of conventional litigation or private arbitration.

Notably, DDR can handle binary and even non-binary cases, offering a flexible solution to a myriad of disputes. While it doesn’t eliminate human involvement entirely, DDR distributes decision-making across a diverse group of individuals, ensuring a fair and impartial resolution process.

VAIOT’s Decentralized Contractual Dispute Resolution System (DCDRS) is a judicial system built for resolving disputes coming from legal relationships in a decentralized way utilizing blockchain through its transparency and efficiency in a DAO-like system — but on a level of effectiveness unlike ever before.

Despite everything that is promising about the concept of Decentralized Dispute Resolution, there are also several key issues that exist within the concept that make it rather difficult to built a system which can adequately address those concerns. By bringing in proprietary AI algorithms and our AI Legal Assistant into the fray, we seek to overcome these challenges by doing what we do best. Ensuring quality, efficiency, smart automation, and a flexible approach to all disputes by leveraging our artificial intelligence capabilities.

Advantages of VAIOT’s Decentralized Dispute Resolution System (DDRS)

In essence, VAIOT’s DDRS isn’t just a technological advancement; it’s a transformative force that will reshape the way disputes are settled in the digital age. Through a combination of inclusivity, security, efficiency, and automation, DDRS paves the way for a future where economic interactions are not just secure and fair, but truly accessible to all. Here’s how:

Enhanced Decision-Making Panel

DDRS boasts a diverse and extensive decision-making panel, countering the individual biases inherent in traditional decision-making processes. By incorporating a wide range of perspectives, DDRS ensures a more equitable and just resolution for all parties involved. Our program will be backed by the Decentralized KYC, not only ensuring anonymity, but ensuring that each person only votes once.

Unparalleled Security and Anonymity

Security and anonymity are paramount in any dispute resolution process. DDRS elevates these standards, providing increased security protocols and complete anonymity for jurors (voters). This safeguarding of identities fosters a secure environment for fair judgment.

Efficient Resolution of Small-Value Claims

Traditional methods often struggle with the sheer volume of small-value claims. DDRS, however, is engineered to efficiently handle a large number of these cases. By reducing costs and expediting the resolution process, DDRS offers a practical solution for disputes that might otherwise be overlooked.

Streamlined Evidence Presentation

VAIOT’s innovative evidence preparation and provision system enable the rapid presentation of materials to a wide group of voters. This streamlined process not only accelerates litigation but also ensures that jurors have access to comprehensive and well-organized information, enhancing the overall efficiency of the resolution process.

Automated Claim Resolution

One of DDRS’s standout features is its ability to automate claim resolution. Verdicts, once determined, can be seamlessly integrated into smart contracts, reducing the need for extensive human interaction in the enforcement process. This automation not only saves time but also enhances trust and efficiency in the entire system.
Each dispute will have a built in timer until which the decision has to be made by the voters; only after given date passes the end result would be presented to the wider public. The only exception to that would be if Parties and the DDR Pre-set phase would specify that the dispute has to be solved by at least x amount of voters. For such cases the timeline could be extended or made dependedant on the key requirement being the amount of votes.

Democratization of Economic Transactions

At its core, DDRS is a step towards democratization. By providing an autonomous and secure platform for economic transactions, DDRS levels the playing field, ensuring that every participant, regardless of their financial stature, has access to a fair and efficient dispute resolution mechanism.

Dispute Resolution Process Types in VAIOT’s DDRS:

1. VAIOT’s DDRS as a blockchain-based platform for carrying out semi-traditional forms of dispute resolution:

When arbitrators or panels of arbitrators are selected. These individuals are carefully chosen from VAIOT’s database of Trusted (KYC-verified) Arbitrators, ensuring a pool of professionals with diverse expertise. The arbitrators’ qualifications are verified through a comprehensive set of documentation, establishing their expertise in various knowledge areas.

Parties engaged in decentralized dispute resolution are presented with suitable arbitrator options via an automated matching mechanism, powered by VAIOT’s advanced AI algorithms. This intelligent system proposes arbitrators from the pool, guaranteeing a tailored selection process. Importantly, privacy remains paramount during this automated proposal phase, instilling confidence in the participants.

Arbitrators within DDRS are not mandated to be VAI Token holders. Instead, they are fairly remunerated in VAI Tokens or other approved cryptocurrencies, fostering inclusivity within the platform. To ensure arbitrator participation, parties initiating DDR processes lock up a specific amount of VAI Tokens, establishing a utility-driven token flow within the ecosystem. If this is the case, the evidence is provided to the selected arbitrators, and remuneration is distributed equally, irrespective of the voting result.

Once selected, arbitrators are presented with the evidence pertinent to the dispute at hand. Transparency is upheld throughout this process, ensuring the integrity of the DDRS framework. The evidence is meticulously analyzed, laying the foundation for informed decisions. Jurors cast their votes securely and transparently, contributing to the collective decision-making process. Blockchain technology ensures the irrevocable recording of votes, establishing an unassailable record of the proceedings.

Finally a smart contract is generated that, when applicable, executes the substance of the arbitrators’ decision automatically. Depending on the intricacies of the case and the programming of the smart contract, actions are executed seamlessly, minimizing the need for manual intervention and expediting the enforcement process.

2. VAIOT’s DDRS as a blockchain-based platform housing a wholly new dispute resolution process with a significant amount of jury members (voters) allowing for statistical mechanics to take effect that will differ from traditional litigation and arbitration.

DDRS harnesses the power of statistical mechanics, leveraging the diverse user base within the blockchain. Through a vast array of statistically differentiated users, referred to as voters or jurors, DDRS orchestrates a collective decision-making process, unparalleled in traditional litigation and arbitration. This process approach capitalizes on the inherent diversity of blockchain users, promoting unbiased and informed decisions.

This DDRS model closely mirrors a widely distributed jury trial, ensuring a high degree of privacy protection for the jurors. Each party involved in the dispute submits its position and supporting evidence to numerous voters via secure blockchain wallets. This decentralized process guarantees confidentiality and protects the integrity of the decision-making procedure. Voters meticulously evaluate the positions and evidence presented by the disputing parties, applying their expertise and impartial judgment. The voting process occurs securely on the blockchain, with results kept confidential until a predetermined time and date. This confidentiality ensures that jurors remain unbiased and immune to external influences, fostering an environment of fairness and equity.

DDRS integrates proprietary advanced AI algorithms to automate the jury selection process. These algorithms ensure that decision-makers are chosen in strict accordance with the requirements set forth by the disputing parties. By employing these mechanisms, DDRS guarantees the selection of jurors who possess the necessary qualifications and maintain an unbiased stance, thereby reinforcing the integrity of the decision-making process.
By combining statistical mechanics, decentralized decision-making, and AI-driven jury selection, VAIOT’s DDRS is an evolution of how conflicts are resolved, setting a new standard for efficiency and integrity in decentralized justice.

Executing Decisions born from VAIOT’s DDRS:

Our Decentralized Dispute Resolution System (DDRS) possesses a powerful automated mechanism for enforcing decisions, ensuring a seamless and automatic execution process through the power of smart contracts. Allowing parties to establish clear terms for automatic execution upon reaching a specific verdict.

Parties engaged in a dispute within the DDRS collaboratively define the terms that trigger automatic execution when a particular verdict is reached. This precision is achieved through predetermined agreements, where specific outcomes are automated based on the decisions rendered. For instance, if the decision aligns with option A, a smart contract promptly initiates action B, ensuring swift and precise execution. To facilitate this process, parties are required to delineate a set of pre-specified decisions and corresponding outcomes that can be automated. This meticulous planning enables a seamless execution mechanism, allowing for actions such as transferring funds into escrow accounts. Smart contracts, acting as reliable intermediaries, transfer funds according to the predefined outcomes, streamlining the financial aspects of the dispute resolution process. Additionally, this automation extends to covering legal fees associated with the resolution, ensuring a transparent and accountable financial framework.

Crucially, the obligation to execute a specific verdict, or the commitment to abide by a decision, can be formally documented. VAIOT’s AI Legal Assistant helps in drafting and validating this documentation, ensuring legal compliance and clarity. Parties have the option to incorporate these terms within formal agreements, which are then signed off, cementing the commitment to honor the DDRS decision.

In the setup phase of a dispute resolution process, the DDRS provides the flexibility to outline the possibility of an appeal in the mutually agreed dispute documentation, as prepared by VAIOT’s AI Legal Assistant. While the default stance is that DDRS decisions are final, there are provisions for potential appeals. For instance, if a decision garners less than 60% voter support, either party can initiate an appeal, ensuring that the democratic essence of the process remains intact.

The Pillars of Juror Integrity in VAIOT’s DDRS

The key issue to DDRS is to ensure that jurors/voters are reliable and the decision that they make is based on proper case analysis and minimum required skills and knowledge as well as that no malicious influence is executed over any group of voters; the decision-making process shall be objective and impartial. Voting/giving out a verdict, and more importantly reviewing the case and evidence, is considered by VAIOT as a piece of work done for the ecosystem, hence the “remuneration” for such work is to be given based on work’s quality.

Power of Statistical Oversight

By leveraging a diverse and substantial pool of jurors, personal biases and potential external influences are diluted. With a large and varied group, any individual biases, interests, or lack of expertise are effectively outperformed by the collective wisdom of the crowd. This statistical oversight acts as a robust safeguard, ensuring that decisions are made on the merit of the case rather than individual inclinations.

Incentivizing Quality Decision-Making

To incentivize quality decision-making, DDRS implements a rewarding system. Jurors receive rewards only when they correctly identify the majority-supported verdict. This approach ensures that jurors thoroughly review the evidence, critically analyze the case, and make informed decisions. There are no participation rewards; rewards are directly tied to the accuracy of the decision, emphasizing the importance of meticulous analysis.

Collateral Staking for Accountability

In an optional additional layer of accountability, parties engaged in the dispute resolution process have the option to stake VAI tokens as collateral. This financial commitment acts as a quality assurance measure, holding jurors accountable for their decisions. If a juror makes an incorrect call, a portion of their collateral is forfeited, reinforcing the need for careful consideration and diligence in decision-making. If the parties that begun a dispute using VAIOT’s DDRS add such a requirement in the DDR pre-set process, they might request that for that particular case that jurors stake VAI as collateral thus “raising the stakes” for that particular group of arbitrtators.

Long-Term Quality Assurance and Performance-Based Rewards

DDRS institutes a sophisticated long-term quality assurance system, maintaining a comprehensive voting history for each juror. VAIOT’s dedicated algorithms continuously assesses the quality of decisions made by jurors over time. Jurors are ranked based on their performance, considering factors such as alignment with the majority, accuracy, and the conclusiveness of verdicts. This performance-based ranking system allows jurors to advance in ranks, earning higher rewards for their decisions. By encouraging thoughtful and well-informed decisions, DDRS fosters a culture of excellence and diligence among its jurors.

Objective Decision-Making through Confidentiality

The integrity of the voting process is further ensured by maintaining confidentiality until the voting is finalized. Jurors are shielded from the current voting results, eliminating biases toward winning decisions and upholding objectivity in the decision-making process.

In essence, VAIOT’s DDRS not only revolutionizes dispute resolution through blockchain technology but also establishes a gold standard for integrity, objectivity, and reliability. By employing innovative mechanisms and robust quality assessments, the DDRS ensures that every decision made is a testament to the system’s commitment to fairness, transparency, and trustworthiness.

Safeguarding Jurors in VAIOT’s DDRS

While a meticulous vetting process guarantees the quality and reliability of the voting procedure, a robust set of safeguards has been meticulously integrated to preserve voters’ anonymity and security, instilling confidence in the integrity of the system.

zkSNARKs-based KYC/Vetting Process

VAIOT’s DDRS implements a cutting-edge zkSNARKs-based Know Your Customer (KYC) and vetting process. This state-of-the-art technology ensures the verification of competencies and identity information without compromising voters’ confidentiality. By utilizing zkSNARKs, the DDRS attains the necessary confirmations from voters/jurors while keeping all sensitive data securely encrypted. This method establishes a foundation of trust, allowing participants to engage in the voting process with confidence, knowing their identities remain confidential.

Privacy Preservation Through Anonymization

One of our DDRS’ key features is the anonymization of evidence and case information. By employing advanced anonymization techniques, all relevant data is stripped of personally identifiable information, ensuring voter privacy. This strategic measure mitigates the risk of interested parties or their proxies contacting voters with the intent to influence the voting process. Voters can deliberate and decide without undue external pressures, fostering an environment of unbiased decision-making.

This serves another crucial function as well, preventing any party from corrupting any juror with bribes or pressure in order to sway their decision making,

Scrapping Bots for Content Review

To further fortify the system against external manipulation, DDRS employs sophisticated scraping bots. These bots meticulously review internet content related to the involved parties, actively seeking out any malicious intent aimed at manipulating the verdict. By proactively identifying and neutralizing potential threats, the DDRS guarantees the purity of the decision-making process, shielding voters from undue influences.

Prevention of Incentive-Driven Compromises

A unique strength of VAIOT’s DDRS lies in its ability to preemptively prevent voters from being contacted by parties or their proxies seeking incentives to compromise the decision-making process. By anonymizing evidence and employing vigilant content review mechanisms, the DDRS eradicates the possibility of external parties coercing voters. This ensures that every decision made within the DDRS is solely based on merit, unbiased by external pressures or influences.

By integrating cutting-edge technology, stringent privacy measures, the power of AI, and proactive content review strategies, our DDRS empowers voters to participate in the dispute resolution process with unparalleled confidence, reinforcing the system’s commitment to fairness, transparency, and the sanctity of voter integrity.

Potential issues with the decision-making process:

In the intricate landscape of VAIOT’s Decentralized Dispute Resolution System (DDRS), potential challenges in the decision-making process are met with innovative and comprehensive solutions. The system acknowledges the complexities arising from terms like “best efforts,” “force majeure,” and “good faith and fair dealing,” which often introduce room for individual judgment in contractual design. VAIOT’s DDRS navigates these challenges adeptly through a multifaceted approach, ensuring fairness, accuracy, and reliability in every decision rendered.

Handling Ambiguous Clauses

a. Automated Ruling Process: In scenarios where contractual clauses like “best efforts,” “force majeure,” or “good faith and fair dealing” are invoked, parties have the option to employ a fully automated ruling process. If the algorithm can draw from a substantial pool of similar cases, it delivers a conclusive ruling. Should uncertainties persist, the case proceeds to semi-automated evaluation.

b. Semi-Automated Decision-Making: VAIOT’s advanced AI algorithms conduct an initial analysis of cases involving the aforementioned clauses. The outcomes are then presented to VAIOT’s skilled arbitrators. These arbitrators, possessing substantial legal expertise, meticulously review the analysis and provide a well-informed ruling.

c. Expert Arbitrators: In certain instances, decisions rest entirely in the hands of VAIOT’s skilled arbitrators. These experts, integrated into DDRS, leverage their legal acumen and experience to comprehensively analyze cases and deliver nuanced, contextually relevant rulings.

Ensuring Quality Evidence and Inputs

a. Evidence Verification Mechanism: The DDRS implements advanced AI algorithms to rigorously verify the evidence and inputs submitted by participating parties. VAIOT’s AI conducts meticulous analyses, identifying potential loopholes and issues in the material provided. This proactive approach empowers parties to enhance their documentation, ensuring the integrity of the evidence presented.

b. Holistic Decision-Making: Our DDRS recognizes that rulings cannot be solely based on the contents of a smart contract. If a smart contract plays a pivotal role in the decision-making process, it must be complemented by robust supporting evidence. This meticulous attention to detail guarantees that decisions are grounded in a comprehensive evaluation of all relevant information, fostering a transparent and equitable dispute resolution process.

VAIOT’s DDRS’s Dispute Resolution with Advanced Functionality

1. Decentralized Dispute Resolution Pre-Set Module

a. Details to be made public at a later date.

2. Decentralized Voting System

a. Details to be made public at a later date.

3. General Functionality

a. Virtual Case Presentations: Parties have the ability to present their cases virtually, leveraging a dedicated system that enhances the clarity and comprehensiveness of their arguments.

b. AI Legal Assistant’s Contract Generation: VAIOT’s AI Legal Assistant streamlines the setup process, assisting parties in specifying applicable laws, akin to traditional choice-of-law provisions in commercial contracts. This feature ensures the seamless integration of legal frameworks into the DDRS process.

c. Binary and Non-Binary Case Resolution: DDRS excels in resolving both binary and non-binary cases. Whether the decision involves two options or a spectrum of possibilities, DDRS offers a versatile and adaptive platform, accommodating diverse dispute scenarios with finesse.

In essence, VAIOT’s DDRS not only redefines the dispute resolution landscape but also provides a comprehensive, adaptable, and user-centric platform. Through a synergy of advanced technology, transparent processes, and tailored functionalities, DDRS empowers parties to navigate disputes with confidence, integrity, and unparalleled efficiency.

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4. Moreover, analysis has been made through the framework of Dispute Resolution Possibilities Frontier (DRPF) which mapped and described four institutional possibilities (private orderings, arbitration, courts and the regulatory state) in terms of disorder costs3 and dictatorship costs4 to see how existing dispute resolution mechanisms assist with smart contract disputes (Allen et al., 2019).



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