Dispute Resolution Token

Token holders must stake their DRTs to be eligible for jury duty in dispute cases. This mechanism ensures participants have skin in the game, aligning incentives with honest participation. The selection process is often randomized from the pool of stakers to prevent manipulation.

• Example: In Kleros, jurors stake PNK tokens to be drawn for cases.
• Purpose: Staking acts as a security deposit, which can be slashed for malicious or incoherent rulings.

Selected jurors use their staked tokens to vote on the outcome of a dispute. Voting is typically blind in early rounds to prevent herding. The system uses game-theoretic mechanisms, like Schelling points, to reward jurors whose votes align with the majority.

• Core Mechanism: Jurors are financially incentivized to converge on the objectively correct or most plausible answer.
• Finality: A ruling is executed automatically by the smart contract once a supermajority is reached or arbitration rounds conclude.

The tokenomics are designed to penalize bad actors and reward honest jurors. Jurors who vote with the consensus majority earn arbitration fees from the dispute. Those who vote against the majority may have a portion of their staked tokens slashed.

• Reward Source: Fees paid by the parties initiating the dispute.
• Sybil Resistance: The cost of acquiring and staking tokens acts as a barrier to launching sybil attacks on the court.

DRTs are integral to escrow smart contracts. Funds in dispute are locked in escrow until the jury's ruling. The token-governed protocol then automatically enforces the ruling, transferring the escrowed assets to the winning party.

• Trust Minimization: Removes the need for a trusted third-party arbiter.
• Use Case: Common for decentralized marketplaces, insurance claims, and oracle data disputes.

Beyond individual cases, DRTs often confer governance rights over the dispute resolution protocol itself. Holders can propose and vote on changes to key parameters, such as:

• Arbitration fees
• Staking requirements
• Appeal period durations
• The creation of new specialized courts (e.g., for DeFi, NFTs, or real-world events).

In decentralized oracle networks like Chainlink, DRTs are used to secure price feeds and other off-chain data. When a data discrepancy is flagged, token holders are called to vote on the correct answer. This process, known as dispute resolution, ensures the final data pushed on-chain is accurate. Honest voters are rewarded from a staking pool, while those supporting incorrect outcomes are slashed (penalized).

Platforms like Augur and Polymarket use DRTs for finalizing market results. After an event occurs, reporters submit the outcome. If challenged, a dispute round is initiated where DRT holders vote to determine the truthful result. This creates a cryptoeconomic security layer, making it costly to falsely report and ensuring payouts align with real-world events.

Decentralized insurance protocols (e.g., Nexus Mutual) utilize DRTs for claim assessment. When a member submits a claim for a smart contract hack or other covered event, token holders are selected to review evidence and vote on its validity. This peer-to-peer governance model replaces traditional insurance adjusters, with voter incentives aligned to uphold the protocol's solvency and fairness.

DRTs power decentralized arbitration services like Kleros. Users stake tokens to become jurors in crowdsourced courts. When parties dispute the outcome of a smart contract (e.g., a freelance gig or a product delivery), a panel of jurors is randomly selected to review evidence and vote. The mechanism relies on game-theoretic incentives where jurors are rewarded for voting with the majority, promoting honest rulings.

The core economic function of a DRT is to align incentives through staking and slashing.

• Staking: Users lock tokens to participate, signaling commitment and skin-in-the-game.
• Rewards: Voters who align with the consensus outcome earn fees or newly minted tokens.
• Slashing: Voters who are consistently wrong or malicious have a portion of their stake confiscated. This cryptoeconomic penalty is the primary deterrent against attacks.

A functional DRT system requires several integrated components:

• Dispute Initiation: A mechanism to formally challenge a reported data point or outcome.
• Jury Selection: A verifiably random or reputation-based process to select voters from the token pool.
• Voting & Revelation Periods: Timed phases for submitting and revealing votes to prevent coercion.
• Consensus Algorithm: Rules for determining the final outcome (e.g., majority vote, super-majority).
• Settlement & Payout: Automatic execution of rewards, slashing, and resolution on-chain.