Introducing GenLayer: A Crypto Protocol That Specializes in Arbitrating On-Chain Disputes

What if there were a crypto protocol that specialized in arbitrating on-chain disputes?

Imagine if, whenever prediction markets like Polymarket settled in a controversial manner, users had a formal way to appeal through a sort of neutral on-chain court system. Or if decentralized autonomous organizations (DAOs) could rely on an efficient, knowledgeable third party to help them make decisions. Or if insurance contracts could automatically execute payouts when specific real-world events occurred.

That’s essentially what Albert Castellana Lluís and his team are aiming to create with GenLayer, a crypto project that markets itself as a decision-making system, or trust infrastructure.

“We're using a blockchain that has multiple AIs coordinate and reach agreement on subjective decisions, as if they were a judge," Castellana, co-founder and CEO of YeagerAI told CoinDesk in an interview. "We're basically building a global synthetic jurisdiction that has an embedded court system that doesn’t sleep, that’s super cheap, and that’s super fast.”

The demand for such an arbitration project may spike in the coming years with the development of AI agents — sophisticated programs powered by artificial intelligence that are capable of carrying out complex tasks in an autonomous manner.

When it comes to crypto markets, AI agents can be used in all kinds of ways: for trading memecoins, arbitraging bitcoin on exchanges, monitoring the security of DeFi protocols, or providing market insights through in-depth analysis, to cite only a few use-cases. AI agents will also be able to hire other AI agents in order to complete even more complex assignments.

Such agents may proliferate at an unexpected rate, Castellana said. In his view, most crypto market participants could be managing a handful of them by the end of 2025.

“These agents, they work super fast, they don’t sleep, they don’t go to jail. You don’t know where they are. Are they going to pass anti-money laundering rules? Are they going to have a bank account? Can they even use a Visa card?” Castellana said. “How can we enable fast transactions between them? And how can trust happen in a world like this?”

Thanks to its unique architecture, GenLayer could provide a solution by allowing entities — human or AI — to get a reliable, neutral opinion to weigh in on any decision in record time. “Anywhere where you normally would have a third party made of a bunch of humans… We replace them with a global network that provides a consensus between different AIs, a network that can make decisions in a way that is as correct and as unbiased as possible,” Castellana said.

A synthetic court system

GenLayer doesn’t seek to compete with other blockchains like Bitcoin, Ethereum or Solana — or even DeFi protocols such as Uniswap or Compound. Rather, the idea is for any existing crypto protocol to be able to connect to GenLayer and make use of its infrastructure.

GenLayer’s chain is powered by ZKsync, an Ethereum layer 2 solution. Its network counts 1,000 validators, each one connected to a large language model (LLM) such as OpenAI’s ChatGPT, Google’s Bert or Meta’s Llama.

Let’s say a market on Polymarket settles in a controversial manner. If Polymarket is connected to GenLayer, users of the prediction market have the ability to raise the issue (or, as Castellana put it, to create a “transaction”) with its synthetic court system.

As soon as the transaction comes in, GenLayer picks five validators at random to rule on it. These five validators query an LLM of their choice in order to find information on the topic at hand, and then vote on a solution. That produces a ruling.

But the Polymarket users, in our example, don’t necessarily need to be satisfied with the ruling: they can decide to appeal the decision. In which case, GenLayer picks another set of validators — except this time, their number jumps to 11. Just like before, the validators issue a ruling based on the information they gather from LLMs. That decision can also be appealed, which makes GenLayer pick 23 validators for another ruling, then 47 validators, then 95, and so on and so forth.

The idea is to rely on Condorcetʼs Jury Theorem, which according to GenLayer’s pitch deck states that “when each participant is more likely than not to make a correct decision, the probability of a correct majority outcome increases significantly as the group grows larger.” In other words, GenLayer finds wisdom in the crowd. The more validators are involved, the more likely they are to zoom in on an accurate answer.

“What this means is that we can start small and very efficiently, but also we can escalate to a point where something very, very tricky, they can still get right,” Castellana said.

The average transaction