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[00:00:02] Jarrad Hope: All right. Hi I'm Jared. This is logos podcast. And today we're speaking with Federico Ast, the founder of Kleros, a decentralised arbitration service. Welcome. Thanks for joining us.

[00:00:14] Federico Ast: Hello, Jared. I'm very happy to be here. Thanks for having me.

[00:00:17] Jarrad Hope: Great. Good stuff. So I'm kind of curious about, like, you know, how you got into crypto and how you started even thinking about doing something like Kleros, like, what's the what's the life journey that led you here?

[00:00:31] Federico Ast: Sure. So I'm. Well, I'm Argentinian, and my background is in economics and in philosophy, and I was starting I mean, I started my career in the online media, working for a newspaper, in the online business section. And, you know, when I was there, people started talking in those innovation kind of settings and people about talking about the Bitcoin, you know, the magic money of the internet, especially in Argentina, because people were used to like a bad currency, you know. Argentina has a history of very bad inflation, you know, bad governance. So I was like quite early, you know red pilled into bitcoin because of that background. And then I was like seeing that there was this new world economy that was being created, like if you were an Argentinian and you could just use YouTube to learn how to code and maybe sell your services as a freelancer to customers from the world. But then

[00:01:39] Federico Ast: You had a problem because you still could not be paid for your work through the traditional banking system, because very high, you know, fees and the government because of capital control stuff. We used to take all of basically half of your money because they would give you the official exchange rate while you know the real one was twice as high. So I mean, Bitcoin solved this problem in the sense that now you could be paid very cheaply through this new, you know, Bitcoin network. So you have like the internet had already gave you, gave you given you access to the world economy. Bitcoin give you access give you access to like the payment economy. But there still was one thing left for you to be fully integrated. You needed to have a way to resolve your your disputes. Because imagine you want to sell your services to like a customer in Germany, and the guy hires you to make a video. And then there is a dispute over that because he claims the quality was not good enough. He cannot go to Buenos Aires to go to court and sue you. Right? And he's not going to go to like a arbitration in traditional Settings, which only works for like $1 million cases. So if we could. Build like a arbitration tool. Low cost for accessible to anyone. I mean you could. Integrate everyone in Argentina and in all of the emerging world into the world economy. So that was kind of my the vision for me was, how can we build this global meritocracy in the sense that it doesn't matter where you are, it just matters what you can learn, how hard you can work, and then you know, and not where you were lucky enough or not to, to be born into. So that was the vision. And those were the main, you know I guess ideas that ended up, you know, in what Kleros is now.

[00:03:46] Jarrad Hope: Yeah, right. Okay. That's quite interesting because, like, I mean there's a very practical reason for needing dispute resolution in this case, right? Like I've always seen you from from a distance in some of your talks and understand you have like a political theory or political philosophical background to a lot of this, but it sounds like the the more the truth of the matter when it comes to clearance or arbitration is, is rooted in like, you know, something that's a bit more tangible and practical.

[00:04:18] Federico Ast: I mean, it's both because there is also on the other hand, there is another I mean, my, my background is in like economic institutional economics and also in political philosophy. So I also have a background coming from, from politics. And so and this is where these things like converge. So when thinking of how you could build like this arbitration system. So this is where all of the ideas coming from that side, I mean, came about because the most efficient way to build this and the best way to make it fair To make it affordable is to use the wisdom of the crowds. So now we we I mean, back then we already had like traditional, you know, resolution online platforms and also some, some platforms that we don't see as dispute resolution typically like content moderation in social media. I mean, if there is a dispute in content in social media, there is kind of a panel which is an employee of the Facebook or Instagram or whatever, making a decision if they want, they need to ban a user or not. But this was not like a fair in the sense that it's it's not. It's like just a like a administrative procedure done in like a black box setting. So the way to actually build this in the right way is to use the community and peers as those who should make the decisions about the cases. So use this combination between the crowdsourcing idea and we can. If you want, we can speak a lot about the ancient Greek philosophy and

[00:06:00] Federico Ast: How they thought about. But the main idea is if you can use collective intelligence approach into this very practical need for dispute resolution, then you can end up in a system that is both efficient and fair for

[00:06:17] Federico Ast: Everyone who is involved. So yeah, I mean, I will let you decide where which side you want me to continue.

[00:06:24] Jarrad Hope: Yeah. No. Absolutely. I mean both paths are really worth going down. I think they could be very useful to kind of understand where you're, where you've arrived at in terms of like the design of Claros. And then maybe we can go and understand a bit deeper, like what ideas, you know, went into that, that those specific design decisions.

[00:06:49] Federico Ast: Yeah. So basically kleros is an initial like a first instantiation of a field that we call decentralised justice. And decentralised justice is about the systems that use blockchains and economic incentives in order to make better decisions in conflict situations. So blockchain is important because this is an adversarial situation between like Alice and Bob. And so it's important that there is traceability in the process. It's important that every party that participates and will trust the system in the sense that nobody is tampering with the evidence, nobody is tampering with the jury selection process, and nobody is tampering with the vote counting process. So that is why blockchain needs to be involved into into the system. Also there is this idea of the crowds and economic incentives. So anyone can be a juror in Kleros. Right. So this idea of not censoring people is a big part of the architecture that makes this permissionless and makes it traceable by everyone. How do you make sure that this permissionless people like, who can be like just random people from the internet being jurors? How do you make sure that they're not going to like game the system? They're not going to just vote randomly. How are just going to be bribed or whatever. This is where the big innovation of kleros comes, which is economic incentives. So kleros is based on game theory and particular Schelling points in order to incentivise users to have to make decisions which are fair and which are like yeah, good decisions and behave honestly because they have to use a token to, to be drawn, they have to take the token.

[00:08:53] Federico Ast: And then if you take the token, it's like a lottery ticket. Then you are drawn and then your token stays locked. And if you vote in coherently with the rest of the of the users, you are rewarded. If you vote incoherently, then you are penalised. So there is a very sophisticated incentive system that we have developed that makes Kleros do these decisions in the right way through economic incentives just kind of aligns the individual incentive of each individual user with the idea of the system producing correct decisions for the cases it needs to to resolve. It's kind of a if you want to put it in a philosophical way, you know, Adam Smith had this idea of like markets and, you know, the invisible hand that people are looking for their individual, you know incentive benefit and still acting like that. They still have a behaviour that is beneficial to the market economy in general. So this kind of a clearance brings like this market idea into into solution. And yeah. So this is, this is how the system works. And as I was saying, so the transparency that blockchain brings, plus the efficiency and fairness from this crowdsourcing collective intelligence, incentive based method is what results in decentralised justice, like being this innovative way of resolving all kinds of of disputes.

[00:10:26] Jarrad Hope: Very cool. Yeah. Interesting. I guess, like I'm kind of curious how you think. I definitely understand, like, why you would want to disincentivize or incentivise everybody to to kind of vote in a similar manner. Right. But I think in some of your talks, you've also talked about, you know, the difference between, say, like institutions versus like moral character almost. Right. Like, or, you know, this sort of dichotomy between these. So you know, our technology can only take us like so far. My question is, is like around like in the case where, you know, you're almost incentivised to vote as everyone else is, doesn't that introduce some kind of game theoretic behaviour? That kind of makes you want to understand how other people are voting? And then what do you do to make that more fair or prevent that from happening?

[00:11:24] Federico Ast: That's a very good question. So this is how it works. So Kleros has a appeal system. So this idea of incentivising users to make decisions as the majority, it's not like a just like a simple majority, like we are three jurors and you have to to figure out, I mean, what the other two guys are going to vote and try to like, vote the same as they will vote. Because, you know, after this decision is made in the first round, people can appeal it. And then there's

[00:11:54] Federico Ast: Going to be a new panel with twice as many jurors plus one. So you go from 3 to 7 and then there can be appeal again to 15, 31, 63 all the way to 511 because of how the system is built. If you are a juror in the first round, you are rewarded not on your ability of voting coherently with the other two guys from your round, but on your ability to vote coherently with eventually the last panel that would make a

[00:12:25] Jarrad Hope: That appeal process.

[00:12:26] Federico Ast: At hand. So what this creates is for you the incentive of thinking, okay, if the community at large were to be picked to resolve this case, what would be the consensus of the majority where everyone looks at the same contract between Alice and Bob they are seeing? I mean, the same evidence and they are following the same rules of the court. It's not that jurors just vote like, oh, I think this it looks like to me he's right. No, they follow rules like a judge follows the law if you want. So this results in the following. You are a jury in the first round. So you have to try to empathise and try to figure out what would the community at large think about the case and try to vote coherently with that. So in some way, what Kleros does is try to simulate, you know, through game theory, this majority of the community consensus about the particular case without having to actually pull all of the community, which would be extremely expensive, paying 500 jurors, you know, to to make the decision. So this is kind of the kleros magic, you know, this simulating the community consensus only by pulling a small sample of that community. And we have seen this working once and again, has resolved about 2000 cases already, and,

[00:13:55] Federico Ast: It works very, very nicely. So, yeah, this is a yeah, it

[00:14:02] Jarrad Hope: Congratulations

[00:14:03] Jarrad Hope: On that 2000 cases. That's fantastic. Is there any, like, I guess, like, kind of a side tangent there? Like, out of those cases, what do you think are the most sort of like noteworthy stories?

[00:14:16] Federico Ast: Well, I mean, there are different types of cases and some of them are more consumer kind of cases about user in a fintech company, you know, the company has to decide if the user is right or not. But, you know, maybe fun cases. A few years ago, there was this prediction market called omen and there was a dispute. There are two important disputes came to Claros through through that market. So Claros was the default arbitrator for disputes happening in that in that prediction market. One of them was about what? There was like a Covid there was a prediction market, you know, a bet if there were going to be more or less than 1000 cases of deaths of Covid during some six month period and some sources when the market had to be cleared, some sources said, you know there were like 900. No. 98. And the others said, you know, there's more than one 1000. There was a dispute. I mean, who should win? Those who had placed their bets on the more or less than one 1000. So that was to be resolved by, by kleros. And there was another case, even maybe more fun for most people. About the US election in 2018 2020 and the Trump and Biden. You know, there was also this prediction market on who is going to win the election. So I think the market was needed to be clear in December 2020 and the final, you know, institutional like decision on who was the president was going to be taken in January. This was not a problem in a normal world, but we don't live in a normal world. So as you might remember, there were like allegations about fraud. And so and, you know, by the date the market had been cleared some people made the argument that still it's not clear that Biden won the election. So

[00:16:31] Federico Ast: Then the market should be ruled as invalid

[00:16:35] Federico Ast: And return the money to the people who made their their bets. And

[00:16:40] Jarrad Hope: Of crowd against another wisdom of the crowd decision. Almost right.

[00:16:45] Federico Ast: You know, it's a it was a it was a complicated case because it was a very high profile situation, very politicised, you know, case

[00:16:56] Federico Ast: Where people were like trying to make decisions about constitutional, you know, stuff that are extremely complex, even at the Supreme Court level, you know. So there was lots of, you know, discussions, lots of, you know, fun and all that, you know, accusations of everything because of how politically charged all of the environment was. So in the end the decision made by the, by the jury was that Biden should be declared as winner because like well, it was more likely that he would be elected as the winner in the January convention, I think, and the the spirit in which the bed was made, you know, made that Biden should. So

[00:17:46] Federico Ast: I mean, clearly, clearly

[00:17:47] Jarrad Hope: Right? Yeah. So

In this Logos Podcast episode, Jarrad Hope interviews Federico Ast, founder of Kleros, a decentralised arbitration service. Federico shares his journey into the crypto world, influenced by Argentina's economic challenges, and describes how he envisioned Kleros as a tool to globally democratise access to justice through low-cost arbitration.  They explore the mechanics of Kleros, emphasising its use of blockchain for transparency and economic incentives to ensure fair decision-making. The conversation also highlights Federico's thoughts on the necessity of blending historical governance insights with modern decentralised systems to create efficient and legitimate solutions. READING & COURSES: The Sovereign Individual: Mastering the Transition to the Information Age Yale Introduction to Political Philosophy Yale Power and Politics in Today’s world Oxford Very Short Introduction series 

Logos Podcast is a bi-weekly interview show about building sovereign communities: the people, philosophies, challenges, and solutions. We invite the world's foremost experts and radical thinkers to discuss how to emancipate from repressive systems through new social, political, and economic institutions.<section class="footnotes-container">&nbsp;</section>

Logos Podcast is a bi-weekly interview show about building sovereign communities: the people, philosophies, challenges, and solutions. We invite the world's foremost experts and radical thinkers to discuss how to emancipate from repressive systems through new social, political, and economic institutions.

Jarrad Hope

Logos Podcast

In this Logos Podcast episode, <a href="https://twitter.com/jarradhope_">Jarrad Hope</a> interviews <a href="https://x.com/federicoast">Federico Ast</a>, founder of <a href="https://x.com/Kleros_io">Kleros</a>, a decentralised arbitration service.&nbsp;Federico shares his journey into the crypto world, influenced by Argentina's economic challenges, and describes how he envisioned Kleros as a tool to globally democratise access to justice through low-cost arbitration.&nbsp;&nbsp;They explore the mechanics of Kleros, emphasising its use of blockchain for transparency and economic incentives to ensure fair decision-making. The conversation also highlights Federico's thoughts on the necessity of blending historical governance insights with modern decentralised systems to create efficient and legitimate solutions.&nbsp;READING &amp; COURSES:&nbsp;<a href="https://parents.simonandschuster.com/9781797103389">The Sovereign Individual: Mastering the Transition to the Information Age</a>&nbsp;<a href="https://online.yale.edu/courses/introduction-political-philosophy">Yale Introduction to Political Philosophy&nbsp;</a><a href="https://online.yale.edu/courses/power-and-politics-todays-world">Yale Power and Politics in Today’s world</a>&nbsp;<a href="https://global.oup.com/academic/content/series/v/very-short-introductions-vsi/?type=listing&amp;subjectcode1=1805239%7CSOC00010&amp;subjectcode1=1805239%7CSOC00010&amp;subjectcode2=1806191%7CSOC02270&amp;lang=en&amp;cc=us ">Oxford Very Short Introduction series</a>&nbsp;<section class="footnotes-container">&nbsp;</section>