[Kleros] LTIPP Application - FINAL

SECTION 1: APPLICANT INFORMATION

Provide personal or organizational details, including applicant name, contact information, and any associated organization. This information ensures proper identification and communication throughout the grant process.

Applicant Name: Kleros

Project Name: Kleros v2 Neo, new protocol pre-launch on Arbitrum Mainnet

Project Description

Kleros stands at the forefront of decentralized arbitration systems, utilizing blockchain technology to deliver swift, secure, and transparent dispute resolution across various industries and applications. Currently, Kleros is set to transition its five-year-old Version 1 protocol from Ethereum to the newly developed Version 2 protocol on Arbitrum. Throughout 2024, we will initiate a series of campaigns to encourage the testing and migration to this new deployment.

Kleros has established itself as a pioneer in decentralized arbitration since its inception in 2017, successfully resolving over 2,000 disputes across Ethereum and Gnosis Chain. Our portfolio of innovative products underpinned by the robust Kleros Court includes:

  • Curate - A leading decentralized token-curated registry (TCR) utilized by major industry players like Etherscan, Ledger, Metamask Snaps for contract metadata curation.
  • Governor - An advanced optimistic governance tool, integrated with Gnosis Guild’s Zodiac and Snapshot SafeSnap, trusted by 1inch, Pather Protocol and Rhino.fi.
  • Proof of Humanity - The OG soulbound token protocol, which has created nearly 20,000 verified profiles on Web3.
  • Moderate (Susie) - The pioneering decentralized Telegram moderation bot, leveraging Kleros Court to adjudicate user disputes.
  • Harmony - A ChatGPT bot that incorporates Kleros Mediation Bridge principles, demonstrating our commitment to innovation.
  • Metamask Scout - A cutting-edge contract insights Snaps extension that was part of the genesis batch of Snaps. It provides Metamask users with unique smart contract insights from our contract metadata TCRs.

Moreover, the core functionality of Kleros Court has been adapted across over a dozen industries, illustrating the versatility of Kleros as a subjective oracle solution (details at https://kleros.io/industries). Our partner ecosystem has flourished, growing from just a handful to more than 170 collaborators in just two years (further information available at kleros.world).

As we will mentionned many times the “juror” side of Kleros protocol in this post, please find below some explanations:

What is a Juror?

A juror in Kleros is an essential participant in the dispute resolution protocol. Jurors play a crucial role in reaching consensus on decisions regarding various cases submitted to the Kleros Court. They contribute to ensuring fairness, transparency, and impartiality in the resolution process.

How to Participate?

Participating as a juror in Kleros is open to anyone interested in contributing to decentralized justice. Users can become jurors by staking the Kleros protocol token PNK and actively engaging in the arbitration process.

Duties as a Juror

  1. Arbitrating Disputes: Jurors review evidence presented in disputes and provide their judgment based on predefined rules and guidelines.
  2. Maintaining Impartiality: Jurors are expected to remain unbiased and make decisions solely based on the evidence presented, without any external influence
  3. Ensuring Transparency: Jurors’ decisions are transparent and accessible to all parties involved in the dispute, promoting trust in the arbitration process.

Kleros Academy

Participating as a juror in Kleros offers the opportunity to contribute to a decentralized ecosystem of justice while earning rewards for their involvement.

Educational workshops showcasing Kleros version 2.0 on Arbitrum Sepolia have been held recently:

Team Members and Roles

  • Federico Ast - CEO
  • Clement Lesaege - CTO
  • JB - Dev Lead @jaybuidl
  • Guangmian Kung - Integrations Lead @daisugist
  • Alexandre Perez - DAO Lead @0xAlex

Project Links

Contact Information

Point of Contact

Point of Contact’s TG handle

Do you acknowledge that your team will be subject to a KYC requirement?

YES

SECTION 2a: Team and Product Information

Team experience

Federico Ast

Federico Ast earned degrees in economics and philosophy from the University of Buenos Aires and holds a Ph.D. in management from IAE Business School. He is co-founder and President of Cooperative Kleros, a leading legaltech company that utilizes game theory and blockchain technology for dispute resolution.

A pioneer in the field of decentralized justice, Federico Ast has lectured at prestigious universities, including Harvard, Stanford, and Oxford, and spoken at international organizations such as the United Nations. He is passionate about leveraging exponential technologies like artificial intelligence, crowdsourcing, and blockchain to drive social innovation.

Clément Lesaege

Clément is the CTO of Kleros where he works on distributed and smart contract enforced dispute resolution. He has an engineering degree from UTC (France) and a Master of Science in Computer Science from Georgia Tech (US). He worked as a smart contract security freelancer doing audits and finding vulnerabilities in smart contracts.

JayBuidl / @jaybuidl

Jaybuidl holds a M.Sc. in Electronics Engineering from a French Grande Ecole. He has been the Lead Developer at Kleros for 3 years. In a previous life, Jaybuidl has been the CTO for a hedge fund in the APAC region, implemented quantitative trading strategies, managed on-premises and cloud infrastructure, and was in charge of cyber-security. With nearly 20 years in professional software and systems engineering, Jaybuidl has cultivated a long-time interest in web3, automation and opsec.

Guangmian Kung / @daisugist

Guangmian is the integrations lead at Kleros and oversees all the ecosystem and go-to-market activities for the Kleros Cooperative. He has a BSc in Aerospace Engineering from Technical University of Delft (Netherlands), an LLM in IT Law from University of Edinburgh and an EMBA from Quantic School of Tech and Business (US). Prior to Kleros, he has 7 years of experience in both consultant and management roles in the Fintech industry.

Alexandre Perez / @0xAlex

0xAlex holds a M.Sc. in Management from emlyon Buisness School. He is currently DAO Lead at Kleros and has been participating in the ShutterDAO governance with Kleros Labs. On the side, he is also an active member of a VC DAO - Blockchub and a delegate in Paladin DAO.

What novelty or innovation does your product bring to Arbitrum?

Kleros fills a notable gap in the Arbitrum ecosystem by introducing a decentralized arbitration system. This addition provides essential arbitration services for DAOs, prediction markets, and insurance protocols on Arbitrum, including the possibility for the Arbitrum DAO itself to utilize a native dispute resolution system. Kleros’s integration aims to offer a practical solution for decentralized dispute resolution, enhancing the ecosystem’s efficiency and reliability.

Is your project composable with other projects on Arbitrum? If so, please explain

Yes, Kleros is an open protocol designed to be inherently composable with other projects on Arbitrum, serving as a foundational layer that other DApps can rely on for establishing subjective information on-chain. For onchain integrations, any protocol may:

  1. Request a Kleros arbitration onchain by implementing the IEvidence interface and pay dispute fees depending on how many jurors they want to draw.
  2. Receive a Kleros ruling onchain by implementing the IArbitrable interface.

For example the Kleros optimistic governance solution composes the Kleros arbitrator with the Safe multisig ecosystem, particularly the Gnosis Guild Zodiac framework and Snapshot SafeSnap.

Many projects consume data curated in a decentralized way by Kleros. Proof of Humanity is an onchain sybil-resistant identity solution which can be made avaible on Arbitrum once Kleros v2 is live. Other use-cases are possible in combination with EAS (Ethereum Attestation Service). Offchain integrations include Etherscan, Ledger, Blockscout, TokenLists.org which can be imported into various DEX frontends such as Uniswap.

Kleros also composes with various oracles, such as Reality.eth for factual verification, and utilizes VRF (Verifiable Random Function) random number oracles from Randomizer.ai and Chainlink, demonstrating its adaptability and interoperability within the Arbitrum ecosystem.

Please find more details of all our ecosystem partners there: kleros.world.

Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?

Previously, the Aragon Court was a fork of Kleros and a competitor on Ethereum but it has been deprecated since. There was also 1Hive’s Celeste court on Gnosis chain.

Currently, within the Arbitrum ecosystem and other blockchains, there are no protocols that offer a comprehensive arbitration court system with integrated appeals and evidence review processes similar to what Kleros provides. The most analogous protocol might be UMA, which also utilizes a Schelling-point mechanism to resolve subjective questions on-chain. However, UMA’s approach differs in terms of latency and security trade-offs, making Kleros unique in its offering of a full-fledged decentralized court system. Quick tldr from the article of the strenght and weakness of each project:

Strengths Weaknesses
Kleros - Appeals system and juror engagement suitable for complex cases.
- Robust mechanism for dispute resolution with evidence submission.
- The resolution process may take longer due to the detailed evaluation and appeal round.
UMA - Optimistic oracle approach favoring speed and simplicity.
- Efficient for uncomplicated questions with clear timelines.
- Less suited for complex disputes requiring detailed evidence considerations and deliberations.

How do you measure and think about retention internally? (metrics, target KPIs)

Internally, we assess retention through specific metrics and KPIs for both jurors and Ecosystem Partners engaged with Kleros.

For juror retention, a key indicator is the amount of PNK tokens staked in the Kleros Court. A steady increase in staked tokens—rising from 20% to 30% of the total market cap from last June to the present—signifies strong juror engagement and retention, likely driven by the growing number of disputes and our juror incentive program.

The PNK token enables the Kleros protocol to create the right incentives and preventing Sybil attacks. To be able to attack Kleros court, one needs to get selected enough times to be a juror for the same case in order to change the outcome. Generally, this means that the attacks need 51% of the total (staked) tokens

PNK enhances the security of Kleros by making any attack extremely hard to achieve, expensive and also enable Kleros to be forked in the extreme case of a successful 51% attack.

Using native token (PNK) Staking ETH to be draw as juror
Cost and difficulty of obtaining 51% PNK market becomes quickly illiquid as try to buy up 51% of all tokens. Attacker pays on average well above the initial market price, may not be able to find enough for sale at all. ETH market is liquid, so purchase will only move price per ETH slightly off of market price. Probably not that hard to find enough ETH on exchanges.
Self-inflicted economic harm to attacker By attacking, undermine system and dramatically reduce the value of PNK - which attacker has half of. Attack on Kleros has minimal effect on value of ETH. Attacker can sell off ETH afterward paying only the spread (which isn’t that much as ETH is relatively liquid).
Last ditch defence in case of 51% attack Fork PNK to remove attacker’s holdings. Disruptive but provides path forward if absolutely necessary. No apparent way out of attack.

On the Ecosystem Partners side, we track the growth in the number of partnerships, which serves as a measure of our protocol’s adoption and value within the ecosystem. The expansion from 20 partners at the start of 2022 to 174 at the beginning of 2024 illustrates a substantial increase in commitment and utilization of Kleros’s arbitration services, reflecting positive retention and engagement from our partners.

Relevant usage metrics

The ‘Community’ category in OBL Chart 23 is probably the best category to consider Kleros under. While not all the metrics are relevant or well-suited for evaluating protocols like Kleros, we have tried to answer them as well as we can, as well as providing some addition metrics unique to the Kleros ecosystem.

:bar_chart: Interactive Dashboards

Daily Active Users

Number of active jurors: 737 (Ethereum), 113 (Gnosis chain)

Among the key players in the Kleros court are the active jurors (wallets with PNK staked). It’s worth mentioning that in the graph below, only active jurors are accounted for, but other participants are also crucial for the ecosystem. For example, users submitting items into Kleros Curate or registering in Proof of Humanity, etc.


Daily User Growth

As was mentioned above, the growth rate of active jurors is considered as the metric to follow, but there are other participants in the Kleros ecosystem that are not considered. The graph is shown monthly to make it more clear.

Daily Transaction Count

The following graph shows the monthly amount of transactions on the Kleros court for each chain. While the most common transactions are captured, not all of them are included in the graph at the moment. If requested, a more detailed graph could be generated. We have chosen a monthly summary because, on a daily basis, the length of the time series leads to extreme noise.

Daily Protocol Fee

The Kleros protocol serves as a public good within the Web3 ecosystem, distinguishing itself by not imposing fees on its users. Instead, it operates on a model where the protocol compensates jurors for their contributions to dispute resolution.

Daily Transaction Fee

To quantify the economic activity associated with Kleros, we can examine the cumulative rewards distributed to jurors since the protocol’s launch. These rewards amount to 401.3 ETH on the Ethereum Mainnet, which translates to nearly $1.4 million at current market prices or $330,000 when considering the ETH price at the time of payment. Additionally, jurors have received approximately 24,000 XDAI on the Gnosis Chain.

Kleros’s mission extends beyond just dispute resolution; it aims to make the process more cost-effective, swift, and secure for all involved parties. The transition towards gas-efficient environments like Gnosis Chain and, prospectively, Arbitrum, is a strategic move to allow for lower cost disputes. This enhances the protocol’s accessibility and efficiency, further aligning with its goal to benefit the community without extracting value from users.


Daily ARB Expenditure and User Claims

This is not yet relevant as we have not yet given out incentives in ARB.

Incentivized User List & Gini

Kleros does not have incentive programs targeted at generating dispute volume at the moment. Kleros does have a staking incentive program but it does not apply to this arbitrum deployment until the full-scale launch later this year (cf. roadmap in section 2b and KIP-66). In the current phase of the Kleros v2 project, there is a cap on the amount that each user can stake and on the total amount which can be staked on the protocol (2M PNK), which is expected to achieve a fair engagement level among the users (Gini coefficient close to 0).

Do you agree to remove team-controlled wallets from all milestone metrics AND exclude team-controlled wallets from any incentives included in your plan:

YES we will remove the team-controlled wallets from all milestone metrics.

As for the incentives, in order not to exclude or impact the privacy of team members while making sure no funds of the grants ends up being paid to team members, the Kleros Cooperative will exclude team members from the divisor of the rewards and buy an amount of ARB equivalent to rewards given to team members. For example, assuming 100 ARB to be distributed over a period, 120 people staking, including 20 team members, each wallet will receive 100/(120-20) = 1 ARB. With 100 ARB being covered by this grant and 20 ARB being bought by the Kleros Cooperative. We think that this method is preferable compared to asking our members not to claim any rewards since it would leave a distinct fingerprint onchain (e.g. anyone who staked but didn’t claim their rewards must be a team member).

Did you utilize a grants consultant or other third party not named as a grantee to draft this proposal?

NO

SECTION 2b: PROTOCOL DETAILS

Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.

Is the protocol native to Arbitrum?

The legacy protocol v1 comes from Ethereum, however for the new Kleros v2 we wanted from the outset to provide a cheaper experience, to lower the dispute fees (impacted by gas prices) without sacrificing on security. By choosing a L2 chain as opposed to an alt-L1 chain, Kleros v2 inherits from the security of Ethereum. We identified that Arbitrum is ahead with its fraud proof mechanism, making it an obvious choice.

The plan for Kleros v2 is for it to be the main deployment and targetting 50% of the PNK market cap to be staked on the Arbitrum court in the long term (KIP-66).

The protocol’s token PNK is native to Ethereum and bridged over to Arbitrum.

On what other networks is the protocol deployed?

Both Kleros 1.0 deployments with an onchain history of 5 and 3 years are planned to be phased out and replaced by Kleros 2.0 on Arbitrum over time.

2019: Kleros 1.0 launch on Ethereum

Five years ago in March 2019, the Kleros court 1.0 was being deployed on Ethereum.

2021: Kleros 1.0 expansion to Gnosis chain

In July 2021 we launched a Kleros 1.0 court deployment on Gnosis chain as a strategic expansion to explore new opportunities around high volume low value use-cases which were priced out of Ethereum. The Gnosis court was not intended to replace the Ethereum court but rather intended to coexist side-by-side with the Ethereum court.

Key indicators of this successful expansion include:

  • Positive feedback from users who benefit from the lower fees,
  • Improve efficiency of some use-cases: Token Curated Registry used by MetaMask,
  • New use-cases: integration with one of the biggest CEX in LATAM: Lemon,
  • Strong increase in overall transactions, with recent high gas fees in the last 6 months Gnosis Courts did 20 times more transactions than Ethereum ones (around 6300 vs 300 for mainet).

We expect to see a similar trend for the Kleros 2.0 court on Arbitrum as it is set to replace both courts 1.0 on Ethereum and Gnosis chain over time. Our partners on Ethereum and Gnosis chain will continue to receive our arbitration services through our cross-chain solution.

2024: Launch of Kleros 2.0 on Arbitrum

Arbitrum has been selected as the home for Kleros 2.0’s primary deployment, which is why we have been experimenting on the Arbitrum testnets for over a year. The new protocol has been designed to ensure that the rulings issued on Arbitrum can be effectively communicated to other networks where our ecosystem partners operate. This is facilitated through the development of an optimistic message bridge named Vea, along with ongoing efforts to integrate with bridge aggregators such as Hashi, enabling the protocol to interact with multiple networks beyond its main deployment on Arbitrum.

What date did you deploy on Arbitrum mainnet?: [Date + transaction ID. If not yet live on mainnet, explain why.]

Mainnet

We were waiting for the Dencun HF to deploy. Below are the deployment artifacts deployed on March 14th 2024. More details can be found here. The app can be found at v2.kleros.builders. Note that staking is currently paused until we have communicated effectively with the Kleros community with regards to this incentive campaign.

Testnet

Kleros has been operating several testnet deployments for over a year on Arbitrum Goerli and Arbitrum Sepolia. More details on these testnet deployments can be found here.

Do you have a native token?

Yes, it’s called the Pinakion (PNK), and its allocation can be seen here.

It has been live on Ethereum for 6 years at: 0x93ed3fbe21207ec2e8f2d3c3de6e058cb73bc04d

The Arbitrum bridged PNK token can be found at: 0x330bd769382cfc6d50175903434ccc8d206dcae5

Past Incentivization: What liquidity mining/incentive programs, if any, have you previously run?

We have been running a juror incentive program since 2021 under KIP-37. Since the first implementation of KIP-37, there has been a 70% increase in PNK staked into the Kleros protocol (from 123M in March 2021 to 213M in Dec 2023). The program has been recently revamped under KIP-66 with the aim of reaching 50% of the token market capitalization staked into the protocol by October 2025.

Current Incentivization: How are you currently incentivizing your protocol?

Beyond the juror staking incentive program, the primary motivator for jurors in the protocol is the opportunity to earn arbitration fees through voting for rulings that coincide with the majority (i.e. the Schelling point).

Additionally, there’s a built-in mechanism to ensure careful and thoughtful participation: jurors who don’t vote or vote incoherently (i.e. against the majority consensus) face the possibility of financial penalties through the slashing of their stakes. This framework is designed to promote diligent and judicious engagement in the arbitration process.

Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program?

No.

Protocol Performance

Metric Ethereum Mainnet Gnosis Chain
Numbers of cases 1640 236
Jurors payments for voting 401.3 ETH (almost $1.4M) 24k xDAI
Active Jurors payments for voting 401.3 ETH (almost $1.4M) 24k xDAI
Average number of rounds in chain 1.11 1.31
Average dispute resolution time 11.9 days 10.8 days

Protocol Roadmap

Our roadmap for the protocol v2 includes two types of milestones: migration milestones targetting existing integrations from Ethereum and Gnosis chains to integrate natively with our new deployment on Arbitrum, and continuity milestones targetting those integrations with Kleros v1 which cannot be migrated directly, in this case an interoperability solution will be deployed to relay their arbitration request from Ethereum or Gnosis chain to Kleros v2 on Arbitrum, and then to send the ruling back to them.

Protocol iterations

The v2 protocol is deployed progressively throughout the v2 Neo and the v2 Agora iterations.

Here is an overview of their differences:

Features V2 Neo V2 Agora
Court hierarchy :heavy_check_mark: :heavy_check_mark:
Anyone may be a juror
(permissionless staking)
:heavy_multiplication_x: :heavy_check_mark:
Anyone may stake
as much PNK as they want
:heavy_multiplication_x: :heavy_check_mark:
Anyone willing to pay disputes fees
may create a dispute
:heavy_check_mark: :heavy_check_mark:
Any IArbitrable contract
may create a dispute
DisputeResolver
only
:heavy_check_mark:
Anyone may submit evidence :heavy_check_mark: :heavy_check_mark:
Random juror sortition :heavy_check_mark: :heavy_check_mark:
Juror voting :heavy_check_mark: :heavy_check_mark:
Hidden votes via
2-steps commit/reveal
:heavy_check_mark: :heavy_check_mark:
Appeals rounds with 2n+1 juror :heavy_check_mark: :heavy_check_mark:
Appeals rounds crowdfunding :heavy_check_mark: :heavy_check_mark:
Ruling execution onchain :heavy_check_mark: :heavy_check_mark:
PNK juror rewards/penalties :heavy_check_mark: :heavy_check_mark:
Dispute fee juror rewards 100% 100%

Milestone within the scope of LTIPP

  • Kleros v2 Neo, the pre-launch on Arbitrum mainnet with the above subset of functionalities capable of supporting the entire dispute lifecycle, drawing jurors and issuing a ruling.

Milestones outside the scope of LTIPP

  • Migration of the existing arbitrated dapps including the Kleros Escrow, Curate, Reality Proxy, Governor, Dispute Resolver, Proof of Humanity.
  • Kleros v2 Agora (with feature parity with v1), code freeze, reviews, testing and audit.
  • Kleros v2 SDK release, enabling developers to build contracts arbitrated by the v2 protocol.
  • Kleros v2 Agora full launch on Arbitrum.
  • Launch of the Vea bridge between Arbitrum/Ethereum and Arbitrum/Gnosis
  • Interoperability solution for those non-migratable legacy v1 integrations on Ethereum and Gnosis chain.
  • PNK staking migration from v1 to v2 on Arbitrum.
  • New v2 functionalities such as hidden votes auto-reveal with Shutter’s DKG (instead of a 2-steps commit/reveal), sybil-resistant juror sortition via Proof of Humanity or equivalent, new voting mechanisms as described in the Kleros Yellow Paper.
  • Progressive sunsetting of the legacy v1 dapps starting.
  • Launch of the Vea bridge between Arbitrum and other EVM L1s and L2s (starting with OP L2s and Polygon PoS), allowing the Kleros v2 protocol to reach arbitrated protocols beyond Arbitrum, Ethereum and Gnosis chain.

Audit History & Security Vendors

For V2 of the protocol, it is currently in the phase of thorough internal reviews and testing. A detailed external audit is planned for Q2 to coincide with the launch of the fully-featured protocol. Additionally, we anticipate establishing a bug bounty program with Hats Finance for V2, similar to what was implemented for version 1.

Regarding version 1, it underwent significant internal reviews but did not undergo an external audit. Despite this, the protocol has maintained a strong security record, with no hacking incidents reported over its five-year operational history on the blockchain. There is an ongoing bug bounty program for version 1 here, as well as on Hats Finance, providing an avenue for identifying and rectifying potential vulnerabilities.

Security Incidents

Version 2 of the protocol is relatively new and, to date, has not experienced any exploits. As for version 1, it has maintained a solid security track record with zero exploits over its five-year history on the blockchain.

However, there was a notable incident involving an attempted governance attack on the Proof of Humanity DAO’s Governor. An attacker tried to pass a malicious proposal to withdraw 46 ETH (approximately $150,000) from the DAO’s treasury. This attempt was thwarted by the protocol’s optimistic governance mechanism, where a community member identified and challenged the proposal, leading to a Kleros dispute that concluded in favor of the DAO, preventing the theft. Details of this incident have been documented in a published article.

SECTION 3: GRANT INFORMATION

Requested Grant Size

42,000 ARB

Justification for the size of the grant

Grant Matching

No

Grant Breakdown

The funds will be used to incentivize the community of Kleros users to start staking on the new Kleros 2.0 Neo on Arbitrum and therefore get a chance of participating as jurors when disputes are created.

The 42,000 ARB rewards will be distributed over 12 periods of 1 week, with a reward pool of 3,500 ARB per week (=42000/12).

Week 1 example:
If 350 users have staked for the entire 7 days, then they receive 10 ARB (=3500/350) each.

Week 2 example:
If 1000 users have staked for the entire 7 days, then they receive 3.5 ARB (=3500/1000) each.

With Kleros 2.0 Neo representing a prelaunch ahead of the full-scale launch later this year, we are keeping the training wheels on for now and are placing a cap on how much can be staked into the court in total. This cap is set to 2M PNK. There is also a cap per address of 2000 PNK to protect from whales concentrating most of the stakes. A whitelist of 3859 users having previously interacted with Proof of Humanity or the Kleros court is also applied and serves as a semi anti-sybil measure.

Funding Address

0xDc657fac185d00cDfA34a8378Bb87d586bf998F7

Funding Address Characteristics

The funding address is a Safe multisig 2/4 set up with the CompatibilityFallbackHandler module to receive ERC-721 tokens.

Treasury Address

Cooperative treasury: 0xe979438b331b28d3246f8444b74cab0f874b40e8

Contract Address

TBD - a new deployment of our MerkleRedeem contract which is used routinely as part of our Kleros 1.0 incentive programs.

SECTION 4: GRANT OBJECTIVES, EXECUTION AND MILESTONES

Clearly outline the primary objectives of the program and the Key Performance Indicators (KPIs), execution strategy, and milestones used to measure success. This helps reviewers understand what the program aims to achieve and how progress will be assessed.

Objectives

The primary objective of this grant is to incentivize a subset of our existing community members to participate in Kleros 2.0 Neo on Arbitrum. These community members are already engaged with the Kleros protocol, having staked PNK on the Ethereum Mainnet, Gnosis Chain, and Arbitrum Testnet.

It is valuable to Kleros that our users familiarize themselves with this new version, deployed on a different chain than version 1.0. These early users will also provide valuable feedback.

The grant will support the launch of Kleros 2.0 Neo on Arbitrum, representing one more step towards the full migration away from the 1.0 version later this year and is part of a broader strategy to fully launch our protocol on Arbitrum, as it is set to become the central hub for our cross-chain arbitration capabilities.

Execution Strategy

The execution strategy for the launch of Kleros 2.0 Neo on Arbitrum is about prioritizing community engagement and ensuring alignment with the project’s goals.

Community engagement

To this end the community of users who are participating in our existing products (Kleros 1.0 and Proof of Humanity), as well as our Kleros 2.0 testnets early users are whitelisted for access to Kleros 2.0 Neo. The list consisting of 3,859 eligible addresses can be found here.

The interactions resulting from the team member addresses will be excluded from the reported metrics.

PNK staking on Arbitrum

Using a Galxe.com campaign, our users will have the opportunity of minting a free “Kleros 2.0 Neo Early User NFT”, which is a prerequisite for staking on Kleros 2.0 Neo. The users will either bridge PNK tokens from Ethereum to Arbitrum using the canonical Offchain Labs bridge, or will swap on a liquidity pool (LP) which is being set up on Uniswap and Camelot. For better user-experience we have also integrated with LIFI’s crosschain swap SDK so that users don’t need to leave the Court frontend. The users can finally stake these PNK tokens on the Kleros 2.0 Neo court on Arbitrum and get a chance to be randomly drawn as a juror on a dispute.

ARB rewards claim

The grant plays a crucial role here, as it is intended to offer incentives of at least 42 ARBs to a user who stakes for the entire 12-weeks period.

At the end of each week, the users will be able claim their ARB rewards from our Kleros frontend. We will set up a Merkle drop mechanism similar to the one already implemented for the monthly Kleros v1 staking rewards.

Whale protection

To ensure a wide distribution and prevent a few whales from “packing the court”, we are implementing a cap of 2000 PNK that can be staked per address. This strategic approach aims to foster a diverse and committed participant base in our courts, utilizing the grant to catalyze engagement while managing risk through controlled token distribution and stake limits.

Anti-sybil considerations

The whale protection measure above would not be effective without some form of sybil protection which is provided by the address whitelist. This approach doesn’t strictly adhere to anti-sybil principles where each address correlates exactly with one unique human user. Instead, it operates under a broader criterion: every address represents either a human verified by Proof of Humanity (PoH) or an address of an actual court juror. In practice it does safeguard against potential sybil exploitation of the ARB rewards, ensuring a more secure and fair distribution mechanism.

Parameter changes during the 12-weeks period

We do not expect the need for any tweak to the key parameters (max total staked, max stake per address, whitelist). Under-utilization is unlikely with the whitelist containing almost 4000 addresses. If only ~25% of these addresses stake 2000 PNK (~$100), the court will hit the 2M PNK max total staked cap.

While it is tempting to lift the cap beyond 2M PNK, we need to balance inclusiveness with security. Firstly we need to carefully monitor this new version of the protocol soon to be audited before scaling the value staked on it. Secondly the ARB incentives offered by Kleros 2.0 Neo effectively vampire-attack Kleros 1.0 and represent a security risk before the time comes for the full migration.

What mechanisms within the incentive design will you implement to incentivize “stickiness” whether it be users, liquidity or some other targeted metric?

The incentive design for Kleros on Arbitrum diverges from typical DeFi protocols due to the lack of alternative yield opportunities for PNK holders within the Arbitrum ecosystem.

With no other options available, the staking rewards in ARB tokens create a compelling incentive for PNK holders to participate. We believe this exclusivity will drive strong initial engagement in the Kleros 2.0 Neo program. An additional benefit is that ARB rewards are likely to be re-invested into other protocols within Arbitrum, further boosting activity and liquidity.

Specify the KPIs that will be used to measure success in achieving the grant objectives and designate a source of truth for governance to use to verify accuracy

Our main KPI will be the percentage of the 2M cap of PNK tokens staked on Kleros 2.0 Neo, given that a cap of 2000 PNK per address is in place. The goal here is to seed our protocol with different individuals and not just a few whales.

On one hand we are aware that it might take time to reach the 2M staked PNK and that the users may unstake at any point. On the other hand a low staking participation would mean more attractive ARB rewards as they are distributed among fewer users during that week, which is expected to boost participation and create a virtuous circle.

We are aiming for a 90% reach of this 2M cap to consider this program successful.

Grant Timeline and Milestones

The grant should cover all the periods planned in the LTIPP proposal for 12 weeks. The ideal milestone for us would be to reach 50% of our 2M cap by the 6th week of the incentive program. The last milestone that would make us consider this as a success will be if we reach the cap of 90% by the end of the 12 weeks.

How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem? [Clearly explain how the inputs of your program justify the expected benefits to the DAO. Be very clear and tangible, and you must back up your claims with data]

The Kleros grant benefits the Arbitrum ecosystem in multiple ways:

  • By introducing a new decentralized arbitration system to fill a clear gap in dispute resolution services on Arbitrum. Kleros’ integration can be leveraged by DAOs, prediction markets, insurance protocols and others that need on-chain arbitration.
  • By incentivizing an initial core of engaged Kleros users to participate on Arbitrum specifically, kickstarting activity and providing user feedback on v2 based on its existing community. Past staking incentives (with <10% APY) have grown staking in our court by 70% in less than two years.
  • By helping to establish Arbitrum as the home chain for dispute resolution and arbitration for all EVM chains, with Kleros on Arbitrum as a cross-chain protocol and the support of the Vea bridge.

Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream?

YES

SECTION 5: Data and Reporting

OpenBlock Labs has developed a comprehensive data and reporting checklist for tracking essential metrics across participating protocols. Teams must adhere to the specifications outlined in the provided link here: Onboarding Checklist from OBL 21. Along with this list, please answer the following:

Is your team prepared to comply with OBL’s data requirements for the entire life of the program and three months following and then handoff to the Arbitrum DAO? Are there any special requests/considerations that should be considered?

Yes we are.

Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread that reference your OBL dashboard? [Please describe your strategy and capabilities for data/reporting]

We will be reporting both cumulative and active number of users who are participating in the campaign on a biweekly basis, as well as the ARB distributed alongside those numbers.

First Offense: *In the event that a project does not provide a bi-weekly update, they will be reminded by an involved party (council, advisor, or program manager). Upon this reminder, the project is given 72 hours to complete the requirement or their funding will be halted.

This is noted.

Second Offense: Discussion with an involved party (advisor, pm, council member) that will lead to understanding if funds should keep flowing or not.

This is noted.

Third Offense: Funding is halted permanently

This is noted.

Does your team agree to provide a final closeout report not later than two weeks from the ending date of your program? This report should include summaries of work completed, final cost structure, whether any funds were returned, and any lessons the grantee feels came out of this grant. Where applicable, be sure to include final estimates of acquisition costs of any users, developers, or assets onboarded to Arbitrum chains. (NOTE: No future grants from this program can be given until a closeout report is provided.)

Yes, this is noted.

Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream?

Yes

4 Likes

Hello @jaybuidl ,

Thank you for your application! Your advisor will be SeedLatam Gov @SEEDGov

Please join the LTIPP discord and ping your advisor in the general chat so they can create a new channel and start communicating with you.

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@jaybuidl go Arbitrum LTIPP

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I have just joined :saluting_face:

Our application can be marked as Final @cliffton.eth @raam, thanks!

Hey there, I’ve amended the title to reflect that this proposal is now FINAL. All the best!

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