Considerations for Blockchain-Based Online Dispute Resolution

Considerations for Blockchain-Based Online Dispute Resolution

Madhvendra Singh, Nitya Jain
Copyright: © 2022 |Pages: 19
DOI: 10.4018/978-1-7998-8641-9.ch013
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Blockchain is an indestructible ledger technology with a permanent digital footprint which is bringing about disruptions in almost every aspect of life. Since its inception, blockchain was deployed to eliminate human cost and effort and bring in decentralisation of power and control. With the overburdening of cases in national court systems, alternate dispute resolution is today the preferred mechanism for resolving private commercial disputes, outside of courts, especially arbitration. Resolution of commercial disputes plays a major role in the economic growth of any nation. Success of any system calls for a comprehensive approach consisting of five building blocks: the legal basis, the organisational setup, human excellence, communications, and management of change. It is also a hypothesis that the courts in the future will be more like a service rather than a location, with courtrooms being online/virtual, and customer-centric providers leading the market space. Resolution of commercial disputes will become more competitive and differentiated on the international front.
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Emergence of Online Dispute Resolution as a Mechanism for Resolving Disputes

Today, Online Dispute Resolution (ODR) has emerged as a preferred form of dispute resolution that utilizes technology and the internet. Initially, ODR programs were focused on relatively small claims and simpler issues. With rapid innovation in the virtual spectrum, ODR is now being applied to large-scale disputes, where participants can conduct the proceedings online through video conferencing platforms like Zoom, Google, Microsoft, and Cisco, which have tailormade suites to meet the requirements of its category of customers. They use real time transcription, break out rooms, document management with OCR search, online document forensics and cloud services for ease of access. They now ensure GDPR compliance, conduct statistical audits and execute digital payments, for which they now have integrated technology suites bringing together blockchain, artificial intelligence, smart contracts, and cloud servers.

ODR has no standard description. Several use the word only to apply to private conflict settlement structures, while others provide courtroom technologies, such as e-filing case management applications, video conferencing and electronic record production as permitted by the UNCITRAL Arbitration Rules. In its 2017 Technical Notes, The United Nations Commission on International Trade Law (UNCITRAL), described ODR as follows:

ODR encompasses a broad range of approaches and forms (including but not limited to ombudsmen, complaints boards, negotiation, conciliation, mediation, facilitated settlement, arbitration and others), and the potential for hybrid processes comprising both online and offline elements. As such, ODR represents significant opportunities for access to dispute resolution by buyers and sellers concluding cross-border commercial transactions, both in developed and developing countries (UNCITRAL, 2017).

In brief, ODR methods, its templates and implementations differ widely, but they all use innovative technologies to achieve more effective dispute resolution. Today, most arbitral institutions aim to implement strategies for greater cost and time efficiencies in arbitration and virtual evidencing, and hearings are increasingly preferred. The onset of COVID-19 pandemic and social distancing measures have resulted in physical court systems to function at sub-optimal capacities. ODR has magically emerged just at the right time as the panacea for the problems that were being faced by the clients seeking efficient resolution of their commercial disputes.

Owing to the need for secure storage of data and saving time and cost, blockchain started to emerge as a technology in 1991. It came to be known as a credible solution after the publication of white paper on Bitcoin by Satoshi Nakamoto (Nakamoto, 2008) in 2008 (Anderson, 2018). It is deemed to be the most groundbreaking technologies that will fundamentally reshape how we live, work, and interact. Blockchain technology has today helped form a safe, secure, and automated platform for exchange of data and money.

Blockchain can be described as a peer-to-peer network of computers, encrypted and decentralized ledger systems for sharing data (Döngel, 2020). It stores data in immutable records, called blocks that are chained together. It can be portrayed as an interlinked platform that maintains accounts wherein the blocks are interconnected and encrypted to safeguard the security and privacy of data in the blocks. Essentially, blockchain is used to eliminate the need of a third-party intermediary by forming a distributed and verifiable data system (Aayog, 2020). It creates a universal database which is present and spread across the computers of all users, called as nodes. No individual node can alter or change this database until it gets consensus and approval from all other nodes in that network (Weinstein et al., 2019, pp. 1-17). Each user or node has its own copy of the data and if one node changes its local copy, the other nodes can reject it. This makes a blockchain system virtually hack- proof or impossible to corrupt the information stored as that would need hacking all connected computers at simultaneously. It can be used for vast purposes including banking, sales, management of information, collecting evidence etc. Blockchain is premised on certain principal characteristics that result in synchronized and decentralized construction of an immutable and anonymous database of transactions (Valentina et al., 2018).

Blockchain however suffers from low efficiency, and that is the reason it isn’t implemented widely except for the cryptocurrency trade. As an example, the number of transactions performed by Bitcoin is smaller than 6, whereas, PayPal and Visa performs 193 and 1,667 transactions per second respectively. The efficiency could be increased by utilizing relay network, directed acrylic graph, increasing block-size, witness segregation, cross-chain swap, side-chain, state-channel as in the lightening network for Bitcoin, and transactions information compression technique like Mimblewimble. Private or consortium blockchains can bypass efficiency bottlenecks as compared to the public blockchains.

The advantages of decentralisation by Blockchain are largely weighed down due to concerns of efficiency, privacy, reversibility, certainty, scalability and overnance. The cost of these concerns can be mitigated from the way the blockchain is implemented. Though in many cases, these costs can be completely eliminated, it is unlikely for others. One important concern with respect to the implementation of blockchain is the paradox of privacy vs transparency. Most blockchain based consensus protocols necessitate a considerable amount of transparency for ledger contents and a possible trade - off with the user’s privacy. If a validating node cannot monitor the balance of an account or the internal state of a smart contract, it would be hard for the node to check if the account is overspent or even how the smart contract can respond when invoked. Person participants' level of data access varies as well. Both users in permissionless blockchains, such as Ethereum, may view all details. In permissioned blockchains, only validators have this extent of access, and some are limited by organisation or by function.

Key Terms in this Chapter

Smart Contract: An instruction based transactional code which is used to self-execute conventional contracts between two parties.

Tech Nation: A legal Tech startup in UK that supports and enables legal services and dispute resolution systems.

Interim Measures: Short term measures granted by a tribunal/ court until a final decision is made in a case in a matter being adjudicated.

ODR: Online dispute resolution is a technology assisted system of adjudication of disputes online either fully automated traditionally by private arbitrators and assisted by technology suites.

Cryptocurrency: Digital asset used as a method of exchange stored in an online ledger form.

CodeLegit: A program library for use in smart contract codes and used to legitimize software.

Kleros: Kleros is an open-source online dispute resolution protocol which uses blockchain crowdsourcing to adjudicate disputes.

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