The (optional) Need for Arbitration
Assigning an Arbitrator is optional, however, as no data source that is external to the network can be guaranteed to be correct or incorruptible, it may be necessary in some cases to introduce a trusted third party arbitrator into the settlement process of a SmartPiggies option, particularly if that option contains a large amount of collateral.
Examples of a data source failure that would warrant arbitration:
- Human error
- Corrupt data records
- Corrupt reporting authorities
- Infrastructure failure
- Price manipulation
Employing an Arbitrator introducing it's own risks. An individual entering a contract should carefully consider whether an Arbiter is trustworthy as the assigned Arbiter could potentially collude to force the contract to settle in the counterparty's interest.
By entering a contract with an assigned Arbiter, a user is implicitly agreeing to the Arbiter's future actions or inactions.
In order to assist in a user's decision to agree to an assigned Arbiter, SmartPiggies application has a built in inspector to allow users to review the past behavior of an assigned arbiter.