A Proposal for Blockchain Dispute Resolution
Alex Gluchowski, co-founder and CEO of Matter Labs, outlined a new framework for handling smart contract disputes in a Sept. 2 post on X (Twitter). He termed the concept the “Ethereum Supreme Court,” drawing parallels to the United States Supreme Court. The system would enable blockchain participants to resolve disputes within a decentralized on-chain structure rather than resorting to traditional legal systems.
“The most important function of such a system will be to protect protocols against political inference from the outside. It will serve as a great deterrence mechanism, and will elevate the role of Ethereum as a powerful network state,” said Gluchowski.
Smart contract implementation risks remain the biggest unsolved problem of Defi. L2s are equally affected.
Let me pitch an idea: L1 Fork as the Court of Final Appeal.
First, why existing solutions don’t work:
1) Time-locked upgrades are great for scheduled changes, but… pic.twitter.com/EcaogkZBH9
— Alex G. ∎ (@gluk64) September 2, 2023
Structure of the On-Chain Court System
Gluchowski envisioned a multi-tiered arrangement of on-chain courts managing both standard disputes and emergency protocol upgrades. The system would culminate in an Ethereum layer-1 soft fork functioning as the “Court of Final Appeal,” serving as the ultimate decision-making authority.
Each protocol would maintain its own governance with designated normal and emergency upgrade mechanisms. A specific smart contract within each protocol would hold the power to trigger appeals to higher courts. When a protocol implements an emergency upgrade, a challenge period opens during which users may contest the decision by appealing to a higher court. Those filing appeals must post a pre-defined bail deposit.
Every court in the hierarchy would specify which court stands above it. The Ethereum Supreme Court would represent the final destination for all appeals across the system, Gluchowski explained.
Let’s chat. The main idea of the post: no human-driven court should be able to say the last word. The final appeal must always be an L1 fork.
— Alex G. ∎ (@gluk64) September 2, 2023
As an illustration of how this would operate, protocols such as Aave and Uniswap would first present disputes to intermediate courts like CourtUnchained or JusticeDAO. Should either side object to those courts’ rulings, the matter could then proceed to the Ethereum Supreme Court for final determination.
Conditions for Implementation
Gluchowski acknowledged that realizing such a system would require substantial community agreement across Ethereum participants. The costs of bringing cases before the courts would need to be high enough to prevent frivolous litigation. Gluchowski stated that only “truly extraordinary” cases should warrant the expense of appealing to the highest level.
Limitations of Existing Approaches
Several mechanisms currently exist to address smart contract crises, though Gluchowski contended that none prove fully adequate. Time-locked features built into smart contracts provide insufficient protection during genuine emergencies. Security councils can temporarily lock contracts and mandate token governance approval for emergency upgrades, but this approach carries significant drawbacks.
As Gluchowski described the problem: “A security council could only freeze the contract temporarily, requiring a token governance approval for an emergency upgrade. But now a malicious majority of undercollaterized stakers could perform an evil take-over upgrade and steal all the assets.”
Moving Forward
Gluchowski and the team at zkSync, an Ethereum layer 2 scaling solution created by Matter Labs, have indicated their readiness to fund research into developing this proposal.
