Blockchain and the Inevitability of Disputes: The Role for Online Dispute Resolution

Blockchain seems to be everywhere these days. It is touted as the new foolproof technology, which can be used for everything from cryptocurrencies, through land registries to identity cards and health records. Enthusiasts have predicted that it will bring about deep change, ensuring data security and identity authentication, while doing away with traditional intermediaries. With blockchain we are told that it is the “new internet,” an application that will change the way we transact—strengthening commitments and ensuring seamless execution. At the same time, and at an alarming frequency, we hear about mass scale fraudulent schemes attacking cryptocurrency exchanges, resulting in the loss of many millions of dollars. Aside from fraud, other problems abound, resulting from misunderstandings between transacting parties, loss of passwords and privacy risks, to name a few. The gap between the promise of an infallible, dispute-less environment and the inevitable reality of having to deal with disputes in the blockchain setting lies at the heart of this paper. It is, we contend, impossible to enjoy high levels of human interaction without generating conflict. The inevitability of disputes is enhanced in a potentially lucrative environment of innovation and complexity, such as the blockchain. In such settings, unexpected developments are bound to occur, and expectations of interacting parties are likely to differ. Indeed, this was our experience with the internet of the 1990s as the e-commerce setting began to flourish. Initially, disputes were not the focus of attention and avenues of redress were difficult to come by. Over time it became clear, that for e-commerce to evolve there needed to be trust by users, and for trust to be sustained, e-commerce platforms needed to institutionalize avenues for addressing and preventing disputes. These processes have come to be known as “online dispute resolution” (or ODR). The lessons learned from the evolution of ODR are slowly penetrating the blockchain arena, as some entities are developing ODR tools and processes that are tailored to this environment. At the same time, for ODR to be adopted and used, some of the underlying assumptions driving the design and adoption of blockchain technology need to be relaxed, as they are in tension with the tenets of dispute systems design: recognizing the inevitability of conflict, understanding trust as a human construct, and assigning weight to individual needs alongside group ideology. This article establishes its main theses in the following order. Part II provides background on the history and evolution of the blockchain, highlighting its dominant applications and its principal features. We discuss governance and trust on blockchain, finding that despite a rhetoric of disintermediation and distribution of power, there are still some players that enjoy more power than others in the blockchain setting. Furthermore, we highlight the governance choices that can shape the extent to which power is concentrated, accountability is established, and avenues of redress are available. In Part III we briefly discuss the history of ODR and describe the leading ODR schemes that have emerged for the blockchain setting, illuminating similarities and distinctions among them. Despite growing interest in ODR for blockchain, the use of these initiatives has yet to spread. We explore the various barriers that stand in the way of ODR for blockchain gaining momentum in Part IV