How Do Decentralized Arbitration Systems Work for Smart Contracts?

Decentralized arbitration systems, like Kleros, use a crowdsourced network of jurors who are incentivized to review evidence and rule on disputes. Parties submit a dispute, and jurors are randomly selected and compensated for making correct, consistent rulings.

This provides a human layer of judgment for complex disputes that cannot be resolved by code alone, without relying on traditional courts.