Dispute Resolution: Blockchain's Biggest Boon
Blockchain has impacted countless industries already, yet the shape of the footprint it leaves behind is always different. The young technology has a lot of utility, and business applications are left to pick and choose which are most important to them. For finance, trustless decentralized transactions mean cutting overheads, while for retail the ability to track customer activity via the ledger has helped gain deeper insights into purchasing behavior. Not overlooked in the least, smart contract functionality is perhaps one of the most relevant uses for blockchain, and aids in a crucial business activity: dispute resolution.
Human Arbitration Approaches Extinction
The key to arbitration on the blockchain lies in the ledger—the large pseudo-spreadsheet shared between all participants in any decentralized network. Complex algorithms ensure that all nodes work in perfect harmony, and that any new transaction appears in the correct order on every copy of the ledger simultaneously. When someone buys a bitcoin, for instance, the ledger determines which place the transaction occupies in the queue, coordinates the collective power necessary to verify and process it, then records the details on the ledger. The same service applies to any exchange of data on the ledger, giving it the power to coordinate consensus between any number of machines for any purpose.
Because all participants can call on the ledger for proof of their interactions on the network, it becomes an ideal tool for the arbitration of contract disputes. The way this was accomplished before blockchain required much input from the parties involved, as there was no universal, standardized way of interpreting arguments besides paper or digital contracts. While the blockchain also uses contracts, it boils them down to the simplest ones and zeroes, which cannot be put to question. A smart contract on the ledger has no instructions other than to execute when its preset conditions are fulfilled—conditions that can’t be construed as something other than what they are.
Blockchain applications using smart contracts to organize the relationships between people in their system often make savvy use of arbitration as well, a trend that will bring better accountability to a wide range of industries. One of the most powerful examples of this is in the decentralized independent work platform called Coinlancer. The company offers a distributed job marketplace built on blockchain that seeks to demolish the obstacles suffered by workers and their employers in the current status quo.
Freelancers are some of the most susceptible to arbitration troubles, due to their increased financial exposure and lack of control over how any client will view their work. A particularly troublesome client might not be satisfied with work that fulfills all the requirements outlined in the original agreement, and withhold pay, only for an unqualified (and sometimes biased) customer service representative to be the final arbitrator. Coinlancer addresses this unfortunate reality by creating a smart contract at the outset of any work contract, which explicitly outlines the expectations of each party. Once the contract is minted, the client immediately deposits the full amount of CL tokens into escrow, to be released only when the freelancer delivers the project and the client approves it. It’s a more transparent, enforceable way to work independently without the risks inherent in today’s market.
For freelancers who are in many cases left with no recourse when invoices are unpaid or enforcing the stipulations set forth with employers on contracts, Coinlancer’s value proposition is empowering. The company’s model takes the leverage away from businesses seeking work, as it removes any need for trust. Contractors can take on a job with greater peace of mind knowing contracts will be honored, not because a client is honest, but because Coinlancer’s system prevents these freelancers from being defrauded.
Funds are released automatically when work is delivered, and more importantly are held in a type of escrow that ensures every contract is properly funded before work begins. By design, Coinlancer is changing the power dynamics inherent in freelancing. Coinlancer participants have a lot to look forward to, including an upcoming airdrop of 3 million CL tokens. Those who acquired CL between January 24th and February 21st, 2018 will receive a piece of the bonus when it arrives on April 30th.
Freelance isn’t the only sector that uses the technology as blockchain contracts can exist between other parties as well. Rental agreements, for example, are also highly relevant to the ecosystem and employ blockchain in platforms like Averspace. On Averspace, individuals can list images and descriptions of the space they have for rent (or for sale) and remotely handle all paperwork with interested tenants.
Establishing Standards for Disagreement
While people can effectively use the ledger to settle disputes on the blockchain, smart contracts are not perfect by any means. They’re great for illustrating proof of a transaction, but still need to be incorporated into global law to be fully enforceable. While traditional arbitrators like a judge aren’t free of mistakes, sometimes the human element is necessary to solve particularly complicated disputes. For this reason, the kind of business being done via smart contracts is still small peanuts compared with the big deals currently being inscribed in ink.
Still, smart contracts and their functionality are still one of the youngest blockchain concepts around, stemming from Ethereum in 2015. Just a few years old at this point, the design and architecture will likely encounter many more iterations before a truly airtight arbitration model arrives, yet progress is encouraging so far. Even with the inherent drawbacks, smart contracts have immense potential to positively change the face of business and contractual activities in ways that were previously unimaginable.