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Chapter1
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Chapter 1: The Background to this Study
The P2P Foundation’s study of the commons and the commons transition
When we began working as the P2P Foundation in 2006-2007, we started out with a basic premise of what was wrong with the current political economy of capitalism. We claimed that the system combined strategies of artificial scarcity and pseudo abundance in a way that increased social injustice and inequality.
The idea of pseudo abundance is based on the mistaken premise of infinite material growth on a finite planet, where natural resources are actually fundamentally limited. Artificial scarcity refers to the strategies that prevent the sharing of technological and scientific progress because of excessively restrictive intellectual property rights. A sensible alternative is, of course, to recognize the limits of what we can use from the world of nature, of which we are an intrinsic part, and to allow for the sharing of all knowledge that can contribute to living within the limits of this ‘biocapacity.’ Right now we have a production system where competitiveness is achieved by externalizing human costs to nature and society as a whole. Capitalism has become a scarcity-engineering machine that prohibits the occurrence of natural abundance.
From this beginning, our theory of change was based on the idea that the seed forms of a new system grow within the old one, usually embedding an alternative logic to systemic crises.
We would point out that before capitalism became a fully dominant system, there were inventions like
• double entry accounting, which focuses on the rational expansion of private capital (Gleeson-White, 2013)
• ideological innovations like the new Catholic concept of Purgatory,1 which allow Christians to lend money while buying back their sins through indulgences, and which authorize ‘sinful’ commercial activity (Legoff, 1981)
• the printing press, which enabled the rapid production and distribution of knowledge, bypassing the knowledge monopolies of the Church and the guilds
These new patterns and solutions, which created a proto-capitalist subsystem (dominant at first in the Italian cities and new medieval city-communes) (Spufford, 2002), were paradoxically first used by forces in the dominant feudal society, such as the monarchy, for their own ends. However, due to this allegiance and investment the seeds of the new system were allowed to grow under the direction of the "capitalists"2 themselves. Seed forms emerge and slowly find each other to form more coherent subsystems, which eventually become the new dominant norm. This is not a smooth or conflict-free process. Nevertheless, it is important to pay attention to the emerging forces rather than merely focussing on the established power structures and struggles. Today, this requires giving priority to analysing and supporting post-capitalist forms of human activity, rather than only paying attention to the fights for redistribution within the old system, or just ‘anti-capitalism,’ that is, waiting for a ‘final overthrow’ of the system as a whole. These last struggles remain an important part of reality, which must be honoured and understood, but which are not creating the necessary seed forms; however, it is important that forces of resistance also become prefigurative in their demands.3 What we propose is to construct seed forms that concretely solve social and environmental challenges, and a kind of politics that seeks to initiate policies that are able to replicate or scale such solutions.
According to De Angelis (2017), both the commons and social movements are enabling environments where individual emancipation takes place. They interrelate insofar as the commons provide alternatives for which the social movements may strive. The process of social revolutions necessitates an alignment of the commons with social movements, synchronizing their respective sequences “to turn the subjects of movements into commoners and make commoners protestors” (De Angelis, 2017, p. 371). They thus become mutually reinforcing, through the expansion of the commons, which in turn forms a new basis for more powerful movements. Commons-Based Peer Production (CBPP) then serves as a driving force for the material recomposition of the commons. It enables the conditions to sustain livelihoods for the commoners and the deployment of social forces to reconfigure their relations to the current social systems, including capital and the state.
We also claim that the emerging world-system would be commons-centric, and that the existing state and capitalist market forms would be transformed under the new ‘dominant’ logic of the commons. What we saw emerging was a new mode of production and exchange, where communities create shared value through open contributory systems, govern their common work through participatory practices, and create shared resources that can, in turn, be used in new iterations. This cycle of open input, participatory process and commons-oriented output is a cycle of accumulation of commons,4 as opposed to the accumulation of capital. This mode of production, which Benkler (2006) called "commons-based peer production,” thrives in ecosystems comprising 1) contributory communities sharing knowledge and capacities; 2) entrepreneurial coalitions creating livelihoods around the commons; and 3) for-benefit infrastructural organizations,5 which support and guarantee cooperation in the ecosystem, allowing it to continue over time.6
Before this becomes a new form of civilization, it becomes apparent as distinct, new, hybrid ecosystems in which post-capitalist seed forms exist within a framework dominated by the old forces. This understanding imposes a double priority on our work as activist researchers: first of all, to document the emergence of these seed forms, as they are adapted and used by the current dominant forces for their own survival and benefit, but also to look at how we can strengthen and create more autonomy for these commons-based productive communities. Our strategy is to identify, understand and promote the commons-centric, post-capitalist logics present in these emerging new forms. In the commons economy7 that we notice emerging and want to strengthen, we see that the value created by open productive communities is translated into material resources for ‘social reproduction’ and livelihoods through ethical and generative enterprises, and that the common infrastructures maintained by democratic foundations bring the various stakeholders together in dialog so as to jointly manage the common infrastructure.
A very important distinction for us is the one between extractive and generative practices, and the institutional and ownership forms that enable it (Kelly, 2012).8 For example, every year that a farmer practices industrial and toxic agriculture, the soil is impoverished until it becomes exhausted for farming, but every year that an organic and biodiverse farmer works on the land, the land is enriched. From the point of view of the soil, the first mode is extractive, the second is generative. Extractive are, for example, the companies in the most often mis-named ‘sharing’ economy. While Uber and Airbnb scaled up the necessary mechanisms for ‘idle-sourcing’ (i.e., allowing the re-use of idle resources), they are socially extractive, destroying social welfare standards, creating precarity and insecurity, etc. The key issue addressed in this study is how to change a system which incentivizes and rewards extraction and dispossession, but cannot recognize and reward the wealth created by generative activities, towards a system which can reward and incentivize generative practices. Furthermore, we are looking for generative practices that are embedded inside the productive system itself, and do not have to be imposed on it from the outside. Our current system is extractive towards nature and human beings, and looks for corrective measures ‘after the fact.’ What we need are productive systems that are ‘organically’ or ‘institutionally’ generative.
[IMG: Place Figure 1 here]
In today’s context, we see, on the one hand, that the traditional, natural-resource based commons identified by Elinor Ostrom are under stress by the development of capitalism, while, on the other hand, we observe the growth of new types of commons. For example, we have seen the rapid emergence and expansion of open-source communities, co-producing shared knowledge, software and design. After the crisis of 2008, this was followed by the emergence of the platform economy, which brings supply and demand together in corporate-owned platforms, but also the emergence of alternative platform cooperatives that are co-owned and/or co-governed by their stakeholder communities. And as the crisis was felt concretely in the cities where most people now live, we saw the emergence of urban commons, where commoners start taking the infrastructures for provisioning into their own hands. In our study of the city of Ghent,9 we saw an exponential growth of urban commons in every area of human provisioning, e.g., food, mobility, habitat. However, except for the sectors of organic food and distributed energy, which have highly developed ecosystems with commons-centric forms of organization, most of these urban commons pertain to a different distribution of the goods and services, and not to their production. Nevertheless, the last two examples point to a future where physical production itself could become commons-centric in its organization.
It is important to see what we are already capable of doing in terms of our techno-social capacities:
1) Open source communities are able to scale small-group dynamics by interconnecting tens of thousands of individuals and small groups, as well as larger groups, into large ecosystems for open coordination through ‘stigmergy’ (i.e., coordination through signalling), by relying on open and transparent systems; the creation of shared knowledge (Wikipedia), shared software (Linux), and shared design (Arduino), already operates that way.
2) Platforms allow for the easy exchange of idle objects and services, using massive person-to-person interaction on a global basis.
3) Urban commons communities are able to organize access to resources that are more equitable and ecologically responsible.
The next step in the evolution of the ongoing transition to commons-centric ways of producing and distributing value is therefore ‘physical production’ itself. The central concept of the P2P Foundation in this context is ‘cosmo-local production’10 or DGML:11 design global, manufacture local. This means that the technical, social and scientific knowledge needed to organize production is available through global open design communities, but that a large part of production for human needs can be relocalized through distributed manufacturing. What we favour is the subsidiarity12 of material production, in other words, to produce in order to minimize the huge costs of transportation currently necessary under neoliberal globalization. In this new model, ‘economies of scale’, that is to say, bringing down the costs of production per unit by a massive scaling up of productive capacity through centralization, which necessitates ever more natural resources and transportation, are replaced by 'economies of scope,'13 that is, making global knowledge and innovation instantly available to all nodes of the network, which can then apply circular economies, biodegradable materials, and more, to produce more directly for local need, as needs emerge, without necessitating constant over-production and the constant promotion of over-consumption. With economies of scope, the object of production becomes ‘doing more with less,’ creating value through variety rather than through volume.
[IMG: Place Figure 2 here]
The socio-technical requirements for this shift are essentially the following:
• We need open and shared supply chains to instantiate a perma-circular economy,14 so that all the players in the ecosystem can plan and coordinate their production and distribution activities. The circular economy refers to ‘circular’ production systems, where the output of one process becomes the input for another, thereby drastically reducing waste. The ‘perma’ qualifier refers to the need to stabilize the growth of our usage of matter and energy so as to make these processes sustainable over the long term. The limit to material growth has been calculated to be a maximum of one percent per year.15
• We need shared accounting systems and distributed ‘ecosystemic’ ledgers, so that value streams can be exchanged. These systems need to allow permissionless contributions, and need to reward these contributions in a fair way. Open and contributive accounting will be discussed in chapter 3.
• The open and shared accounting systems also need to reflect an integrated or ‘holistic’ knowledge of the actual ‘metabolic streams,’ i.e., thermodynamic flows of matter and energy, and create a context-based sustainability for all the players in the ecosystem. What this means is that the limits to the usage of resources should be directly visible in the ecosystems that create and distribute the particular product and service. Solutions for this will be discussed in our third chapter. As James Gien Wong explains: “Here we have the concept of localizing planetary boundaries down to a granular level. There should be thresholds that signal that a value exchange is coming close to exceeding a regional boundary. We need to have multi-scale set points alert us that we are within acceptable ecological footprint boundaries.”
The aim of this study is to offer an overview and synthesis of the seed forms that are emerging to make this a real possibility in the coming decades. The concepts, prototypes, experimentations and actual practices already exist; with some exceptions, many of the seed forms have been developed, but they are still fragmented and have not yet created generative ecosystems.
The next step in the creation of such budding ecosystems requires paying attention to the technical structures being put in place as we speak, for example the extraordinary developments around the deployment of distributed ledgers for shared accounting and coordination of production. The key issue that needs to be solved in order to achieve truly sustainable production for human needs is whether what we produce is compatible with the survival of our planet and its beings. It is equally necessary to pay attention to the distribution of value. Indeed, most models developed today involve using open source and the commons to establish highly unequal extractive capitalist market forms, and do not use generative ones that would help strengthen the autonomy of the commons and the commoners.
Technology is, of course, not neutral, since its design reflects human intentions, material interests, and a particular balance of power between developers, funders, users, etc. We have a four quadrant model to explain this value-driven design in technology.
[IMG: Place Figure 3.1 here]
A first model involves enabling P2P behaviours (both commoning and P2P-forms of market exchange) through centrally owned and controlled corporate platforms: think Facebook/Google and Uber/Airbnb as prototypes for this. This model, which also includes state actors that aim to control internet communication and platforms, could be called Leviathan, since it is about surveillance, the control and nudging of human behaviour, and the capture of value from commoners.
The second model, which is the one that will be most discussed in this study, is the model of distributed capitalism. This is made up of formally decentralized systems that aim to create permissionless usage by avoiding centralized gatekeepers (we will amend this over-simplification later on). We call this model Mammon,16 as the aim is to extract profits, despite the usage of open-source technologies and code commons.
The third model involves creating commons for local provisioning (this is the dominant model amongst urban commons) that do not aim for profit-maximization. Enzio Manzini has characterized these models as Small, Local, Open, and Connected, or ‘SLOC.’17 This model type can share global knowledge over common platforms, but still aim to operate locally, in other words, the global serves the local.
Finally, there is a fourth model based on global open design communities that aim to create global common goods and are organized beyond the local. In this model, the global is recognized as a priority in its own right. These projects are often managed by non-profit and democratically-run foundations, but at present only rarely complemented by not-for-profit18 entrepreneurial coalitions.
For the third and fourth models, we tend to use the name of Gaia, the Greek Goddess of the Earth, since these projects are most often geared towards sustainability. The third model in particular is specifically “generative” in its orientation towards local communities and ecological and social goals. In the fourth model, the ecosystems are generative towards the creation of global common goods that are universally available.
This means that we are not merely discussing competing models and platforms in the name of efficiency or profitability, but also worldviews with different social and political priorities.
[IMG: Place Figure 3.2 here]
In the context of the P2P Foundation’s own views, this means that we look at how to transform the functions of the central corporate platforms, into platform cooperatives19 and open cooperatives20 that do not merely capture the value created by their users, but can also be co-owned and co-governed by their stakeholder communities. In the case of the infrastructures of distributed capitalism, such as the blockchain, this means we will try to tweak and transform them so they can be used to expand socially equitable and ecologically regenerative models of production to fit human needs, thus serving the requirements and interests of the commoners. In this context, we explore the concept of ledger coops.21 The third quadrant calls for urban provisioning coops. In the fourth one, the generative global quadrant, we call for ‘Protocol Cooperatives.’ A protocol coop is basically a governance form for global open design depositories, collectively managed hubs of software that endeavour to assist in the deployment of local systems for the mutualization of provisioning systems. In this scenario, leagues of cities could, with other allies, cooperate in the setting up of such common infrastructures, for instance, in order to replace the extractive model of Airbnb with generative models such as Fairbnb, thereby avoiding duplication of effort. Please note that we use the concept of ‘cooperative’ in a generic way here, to indicate all institutional forms that are not geared towards profit-maximization but towards generative purposes.
[IMG: Place Figure 4 here]
The first law of thermodynamics, regarding the conservation of matter and energy, states that no matter/energy can get lost, only transformed. This can be linked to the development of the idea of liberalism and the generalization of support for growth-oriented capitalism, that is, an economic system based on the idea of material abundance and infinite growth, since indeed, nothing can be lost.
The second law, on the dissipation of energy from high levels of order to lower levels of order, i.e., entropy, introduces the idea of scarcity and a demand that basic needs should be covered, before they are unequally distributed. This new insight could be seen as reflected in the socialist aims of the labor movement.
But as Yochai Benkler (Benkler, 2011) and others have described, for the last few decades a much deeper appreciation of how human cooperation (and that of other living beings) as well as synergy lead to negentropic effects. This means that life and society create temporal and territorial exceptions to entropy and lead to domains where order and complexity increase over time (some have argued this should be construed as a third law of thermodynamics). The new generations of technology should reflect this understanding, and become ecosystemic and ecological in their approaches to producing and distributing value. This is only happening partially, in that our emerging systems are becoming ecosystemic but not truly ecological yet.22
The next two sections outline what we have discovered about value streams in the commons economy, and introduces the issue of externalities.
[IMG: Place Figure 5 here]
[IMG: Place Box 1 here]
[IMG: Place Box 2 here]
Value in the Commons
This report builds on our findings in previous research reports.
The P2P Value research project23 showed that a majority of the 300 peer production projects under study were engaged in using, prototyping, or experimenting with contributive accounting, i.e., forms of accounting not based on hourly labor but recognizing all other ways of contributing in these open and permissionless production communities.
Our study, Value in the Commons Economy (Bawens & Niaros, 2017), based on different case studies of advanced peer production communities such as Enspiral and Sensorica, outlined the following concepts and practices:
• The new peer production communities are directly oriented to the production of use value, not exchange value, and make claims to ‘value sovereignty,’ in other words, the right to determine context-based value regimes that differ from the sole recognition of commercial value under capitalism. This allows for an autonomous flow of value within the communities and for the recognition of all kinds of contributions, not just paid ‘commodified labor.’
• These new communities create a membrane between the commons and the market, which enables them to regulate the flows of value between income from the market and state-based value models, as well as the internal flow within the commons, which can be differentiated from each other. In other words, it is possible to accept revenue from outside the commons, while distributing according to the norms of a particular commons.
• We recognized three models: one in which the commons and the market are clearly demarcated, allowing free, unpaid contributions and free usage within the commons, which is thereby protected against contamination by market exchange logics; a second model in which contributions are rewarded by a different value equation, which are then funded post hoc by income from the market and the state; and, finally, a third one that more intimately and directly links commons contributions to market income.
• These communities practice and experiment with reverse cooptation of market income and investments, i.e., ‘transvestment’.24 While investment concerns using capital to obtain more capital, transvestment uses market and state investments, but translates them into the growth of commons assets and infrastructures. For example, capital is attracted and even remunerated, but increases the common stock of free software, or commonly-owned land in a land trust, etc. One of the techniques is to create a wall between investments and the purpose-driven generative entities creating livelihoods for the commoners.
• A few are experimenting with new forms of licensing, halfway between the ‘free-for-all’ copyleft licenses and the privatizing copyright licensing models. In copyfair models, the sharing of knowledge remains entirely free, but commercialization is conditioned by some forms of required reciprocity with the commons.
A landmark study for us has been our research publication about the ‘Thermodynamics of Peer Production’.25 In this study, we show the vital impact of mutualization of infrastructures of production and consumption, to the lowering of humanity's footprint, which is already visible, among other places, in the local commons-centric food economy. This is also obvious in the sharing of resources, for example, in car-sharing that follows non-profit or cooperative modalities (but DOESN'T use models like Uber, which augment resource use), where every shared car can replace from 5 to 15 private cars,26 thus dramatically reducing the needs for matter and energy expenditure.
These advantages were confirmed in our study of the urban commons in Ghent, where we were able to determine that, for every single provisioning system in the city, there are now no longer just choices between private and public models (say private housing vs state-sponsored social housing), but also commons-based alternatives (such as commons-based cooperative housing modalities). Various studies have confirmed, at least for car-sharing, that this type of mutualization effectively overcomes Jevons Paradox, which states that lowering cost and efficiency often leads to higher consumption. Our challenge is to place the advantages of mutualization in lowering the human footprint in a sufficient systemic change effort, so that gains in one sector are not undone by higher consumption in other sectors.
We cannot stress this enough: putting commons center stage, i.e., shared resources self-managed by their stakeholder communities, is a vital necessity in any social and ecological transition. This is confirmed by the HANDY study,27 which compares resource crisis moments of hundreds of past civilizations, starting from the Neolithic period. Far from being exceptional, HANDY shows that civilizational collapses are a regular occurence in class-based societies, where ruling classes are perforce engaged in competition with their peers and, driven by this necessity, over-use their local resource base to the point of collapse.
The study shows that inequality is a vital part of accelerating and deepening such collapses: the more unequal the society, the more egregious the over-use, the deeper the fall, and the longer it takes to recover. Equality mitigates these crises, and can perhaps even avoid them. Mark Whitaker28 has produced a comparative study of more recent collapses and resets in China, Japan, and Europe, and has shown the vital role of mutualization in the revival of these societies. Notice the parallel between the role of pan-European exchange of knowledge by Christian monastic communities, the mutualization of their production infrastructures in the monasteries, and the relocalization of production in the feudal domains, with the current emerging reactions: the creation of vast open-source and open-design communities, new forms of mutualizations of infrastructures in the models of coworking and makerspaces, as well as the ‘sharing economy,’ and the increasing experimentation with cosmo-local models of distributed manufacturing.
Changing class dynamics and structures within society is an important part of any systemic change. The shift from the Roman system, based on conquest and slavery, to the feudal system, based on local production in local territory, was a shift from slavery to serfdom and from slave-holding to feudal status. The shift from feudalism to capitalism was a shift from serfdom to working in factories, from land ownership to ownership of investment and financial capital.
In our analysis, the current evolution involves a shift towards netarchical capitalism, i.e., the direct exploitation and capture of value, not from commodity labor in factories and offices, but from peer to peer exchange in platforms and from participating in commons-based peer production. In other words, the new capitalism is a commons-extracting capitalism, which directly enables, but also exploits, human cooperation.29 One could say that we have evolved from a Marxian capitalism, with surplus value directly extracted from labor as a commodity, to a Proudhonian capitalism, since the latter argued that surplus value was derived from the extra value generated by human cooperation.30
In this particular conjuncture, we see increasingly larger parts of the working class evolving, at least in Western countries, from a subordinate salariat to a condition of generalized precarity (some call it ‘the precariat’) (Standing, 2011),31 but this also involves the growth of post-subordinate autonomous workers who are simultaneously involved in networks, commons, and markets.32 These workers need to participate in networks to create connections, expertise and reputational capital, and are often passionately involved in contribution-based and permissionless digital commons; but they often operate as freelancers in the market. They frequently have a strong desire for and demand autonomy and free cooperation. In many ways, this ‘cognitive working class’ is at the forefront of social change today, becoming an active agent in the transformation of the system, largely due to their vital place in the knowledge ecosystem. This is evident in the growth of open source economies tied to the urban commons and other areas beyond what is usually perceived as "knowledge work." In this report we will concentrate on the growth of systems of production and distribution of value using distributed ledgers, or what is now known as the blockchain or cryptoeconomy.
For the last year, one of the authors has been closely involved with a large European platform cooperative, SMart (.coop), which is also called a labor mutual. In a labor mutual, formally independent workers, who in the best of cases have a passionate life project that allows them to filter their work engagements, are able to create solidarity by converting their invoices into salaries, thereby gaining access to the social protections of the welfare state. These autonomous, post-subordinate workers, also represent a convergence model between the precariat and the salariat, and are prime candidates for the emerging commons economy, They have a big role in the creation of the post-corporate ecosystems that we will be describing in one of the chapters of this report. Please note that we do not see these new types of workers as the sole actors in transformation, but we do believe they play a very important role in this particular transition. To the degree that the laboring classes start to see themselves not as merely adversarial to the current system, but as active commoners in the creation of new life forms, they are also joining the new commoner or ‘hacker class.'33
[IMG: Place Box 3 here]
The emerging crypto economy as a signpost for the cosmo-local transition
If we look at the evolution of contemporary commons, from the emergence of the immaterial ‘digital’ commons for knowledge, software and design, via the mostly redistributive provisioning systems of the urban commons, we now see the emergence of a new phase that involves bringing the use of the open-source and commons models straight into the physical production processes. For example, the Economic Space Agency speaks of a shift from open-source software production methodologies, to open-source economic spaces, i.e., from the mere production of knowledge, code and design, to full-scale economic cooperation around the production and distribution of all kinds of value so as to secure livelihoods.
The emergence of the distributed bitcoin currency, and most importantly its underlying infrastructure broadly discussed as blockchain technology, is a very important signpost in this regard, as we explain further in this document. In this chapter, we aim to provide a short explanation of this emergence, critiquing the current models from a P2P and commons-based point of view, so that we can suggest the main tweaks and transformations that are necessary for the support of a true, solidly commons-oriented mode of production and exchange in the sphere of physical production. This would combine our priorities for open and freely shared knowledge, respect for the biocapacity of the planet, and fair distribution of the rewards for common work.
The aim of this work is to see how, in our management of the production and distribution of value, we can ‘internalize’ what is presently ‘externalized,’ i.e., not accounted for and not cared for.
The design, emergence and success of bitcoin was a very important first pivot. Over the last decade, there has been an increasing number34 of locally-based complementary currencies, but with limited numbers of local users and turnover. To date, they very rarely achieve scale even in their local contexts.35 By contrast, bitcoin was the first attempt for a globally scalable currency that was based on social sovereignty, instead of corporate or state-based rule. The trust of the community was ensured, not by mediating third party institutions but by trust in the integrity of cryptographic rules. For the first time in recent history, we have a currency that was created autonomously and gained the trust of a global community, while achieving tangible and spectacularly recognized levels of market value. Following bitcoin, many other cryptocurrencies are also achieving relative success, even amid the speculative frenzy. We can observe a surge of permissionless creation of currencies, with a relatively autonomous capacity to allow value flow outside of the traditional banking channels, which gave rise to the idea of crypto-assets. These value flows are coordinated in more decentralized ways, even if new types of intermediaries may be facilitating this. Cryptocurrencies have thus been envisioned as a store of value and a kind of global reserve backing, like gold, but their usability in day-to-day exchanges in real marketplaces has not been realized, except very marginally. At any rate, cryptocurrencies introduce the idea of pluralist value streams and the circulation of assets in decentralized P2P networks.
However, even if the bitcoin code is open source and supported by a global community, there are also huge issues that do not make it an appropriate currency for the commons economy. Essentially, the commons are subsumed here to social and ecological extraction. On the one hand, social extraction, because the particular design means that early entrants can sell bitcoins at a higher price later (since production is designed to slow down and even stop over time, while demand grows without set limits, thereby structurally stimulating demand over supply).36 This has made bitcoin into a tool for financial speculation.37 On the other hand, ecological extraction, given that its production necessitates exponential energy usage.38
Value in bitcoin is created through the monetary mechanism itself, not by the creation of productive value. In fact, bitcoins are created through an extremely resource-intensive process called “mining,” which is extremely capital- and resource-intensive, as it requires huge computational capacity. Bitcoin thus relies essentially on capitalist mechanisms for its existence. Furthermore, almost the entirety of bitcoin mining has gradually been taken over by vast mining plants, specially designed to afford enormous processing power, making it almost impossible for single users to engage in any mining themselves.39 Hence, bitcoins for them can only be acquired in exchanges, again via the capitalist market (or by working for the owners).
Most cryptocurrencies are traded as financial assets on open markets, that is to say, their price is based on supply and demand, and is denominated in regular fiat currency. Value flows from one currency into another, but the currency is a representation that does not create value by itself any more than a balloon creates ‘volume.’ In other words, bitcoin owners extract rent from productive value creators in the rest of the economy: it is a distribution of rent-seeking.40 Bitcoin is most certainly a currency of and for the market, more specifically a currency for decentralized capitalist market dynamics, specifically for market forms that seek to escape governmental and societal control.
Beyond bitcoin and other cryptocurrencies, a second generation of blockchains introduced autonomously executed computer processes broadly known as “smart contracts.” These are software programs stored on a blockchain and employ a set of predefined rules that may be enforced automatically once certain conditions are met. Multiple parties in a distributed network can access and interact with smart contracts, but they are largely autonomous and very difficult to reverse once deployed.
Ethereum was the first initiative supporting the deployment of smart contracts on a blockchain. It envisioned a potential use of blockchains that goes beyond the storage or reference of transactions, but may include any type of information that allows users to define the functionality of decentralized applications (dapps). Ethereum also implements its native cryptocurrency called “Ether” that, much like bitcoin, is allocated to miners through a similar process and can be transferred in the network.
Smart contracts gave rise to an ever-increasing number of potential uses of blockchains, on every domain where formal agreements have to be encoded and enacted, including financial transactions, insurance and securities, and intellectual property rules. Probably the most ambitious deployment of smart contracts has been new types of decentralised organisations, commonly referred as “Decentralized Autonomous Organizations” (DAOs), which rely purely on blockchain code and the distribution of tokens to enforce their rules to control decision-making and operations. The DAOs have stimulated discussions and experiments around the provisioning of digital services and transactions that take place with little or no direct human action, while they arguably cede agency to non-human subjects, including machines, objects or even natural ecosystems.
It is especially in this light that the blockchain, or more broadly ‘Distributed Ledger Technology’ (DLT) has been acknowledged as an even more radical innovation. We note that accounting and civilization have developed together. Writing was invented as a by-product of accounting, when temple-state, class-based civilizations emerged in Mesopotamia, to keep track of the coming and going of commodities in the temples' storage places, as well as to record debts. These first forms of accounting accompanied the birth of class-based civilization and the accompanying state forms. When the Franciscan monk Pacioli standardized ‘double entry’ Venetian bookkeeping in the year 1494,41 it announced the birth of capital accumulation which would eventually engulf the whole world a few centuries later. Today, next-generation accounting models, such as Resources - Events - Agents42 abandon double-entry to favor ecosystem- and network-based accounting flows. What we get is something that goes beyond closed corporate accounting and potentially announces and accompanies a huge civilizational shift away from atomized institutions that compete with each other, and instead points towards a more networked structure based on much higher levels of collaboration over joint platforms.
The blockchain encodes and shows the viability of open and shared accounting in representing the multitude of transactions and actions occurring during physical production.
This is historic, as it allows us to move from corporate and nation-state accounting (which, even as they are publicly regulated and accessible to the public, are ‘privative’ accounting internal to bounded entities, in which externalities are invisible), to ecosystemic accounting in networks with multiple participants and in an environment of permissionless contributions. In other words, it allows for large-scale mutual coordination of physical production, and makes practical the scaling of circular economies. It is an extension of the principles of the open source economy, to physical production.
Distributed ledgers furthermore allow both the recognition of a variety of contributions, i.e., open and contributive accounting, but also the capacity to integrate directly the visioning and management of physical flows of matter and energy.43 This differs from the previous approaches such as Ecological Economics, that converted resources in price signals.44 The combination of distributed and shared ledgers, as well as the capacity to integrate externalities, constitute a radical innovation.
Presently, the production of immaterial value, i.e., knowledge, software and design, enables ‘stigmergic coordination’45 between permissionless contributors, who can access open and transparent depositories that represent the flow of work. With shared accounting, this capacity for mutual coordination moves to the physical plane. But because physical production calls for specific reciprocity in terms of material capital (which otherwise would get depleted), and not just the principle of free universal usage, it requires that distributed ledgers add this layer of value exchange.
To use the 19th-century language, for example, as used by Marx:
• As far as immaterial production is concerned, we already have the principle of ‘communism’ at work in the very heart of the capitalist economy (in its original sense of ‘everyone can freely contribute and everyone can freely use’), which some authors like Richard Barbrook have called cyber-communism (or ‘cybernetic communism’, Barbrook, 2015),46 because of the ‘abundance’ of digital knowledge which is easily and cheaply reproducible, and thereby overwhelms the scarcity dynamics of supply and demand, moving the market functions to the periphery of open-source production communities, with the commons in the middle. Paradoxically, this cooperative coordination is largely incorporated in the corporate economy, inspiring some scholars to speak of the ‘communism of capital.’47
• In physical production, however, we need reciprocal flows to avoid depletion of non-renewable resources, either through market exchange (but not necessarily capitalist exchange) or through contributory recognition (‘to each according to his/her contribution;’ this was defined by Marx as ‘socialism’).48 Capitalist markets are nominally based on the idea of equal exchange, but in their actual practice they are based on the constant extraction of surplus, from nature and other humans, in order to accumulate capital in private hands.
Ethical and generative markets use monetary signals, but are not focused on profit maximisation. Many pre-capitalist markets were socially embedded, as Karl Polanyi has shown. We will later show that we need to move from pricing signals, which reflect current supply and demand – but not the necessities of protecting and maintaining resources in the long term – to monetary signals, i.e., to currencies that are directly related to the status of the natural resources we need to maintain and replenish.49 If such a linkage between the amount of natural reserves that are sustainably available and a corresponding monetary mass could be achieved, then the monetary signals themselves would be a technique for responsible material production.50 An example of this is the Fishcoin project, in which the amount of coins that can be spent reflect the stock of fish that can be used without endangering the reproduction of the fish.
So, the blockchain, like bitcoin, has received extensive attention and a huge wave of investments, viewing it as a new infrastructure layer for a more distributed economy. And precisely because it is linked to the design philosophy of bitcoin, it shares some of its fundamental limitations. Bitcoin's design and infrastructure are based on an individualistic understanding of the economy that combines elements from the marginalist traditions, Austrian Economics, and ‘anarcho-capitalist,’ ‘propertarian’ philosophy. It is based on ‘methodological individualism,’51 the premise that society consists of individuals seeking maximum advantages in a competitive game in which every human being is seen as an entrepreneur, which contracts with others in order to conduct his or her business.
For example, when blockchain projects talk about governance and ‘consensus,’ what they emphatically don’t mean is collective governance based on democratic deliberation, but they merely mention the coordination of individual actions with common intentions.52 Because liberalism believes that the common good results from individual and corporate competition, it has no clear concept to articulate it other than the accumulation of individual gains, and it does not see the interdependence between the market and a whole host of societal and environmental realities. The commons and open-source dynamics are often appropriated to emphasize individual freedom, mostly restrained to a ‘one dollar, one vote’ context, disregarding the elements of social fairness and ecological sustainability.
As Arthur Brock has argued, there are no people and communities in the blockchain design, no community governance, ‘only transactions organized in blocks linked to a chain”;53 there is no organic connection between the blockchain and the open-source communities and commons that undergird it.54
Furthermore, bitcoin and blockchain are not truly distributed, that is, consisting of equipotent peers that voluntarily create nodes through their free and open cooperation, but they are rather decentralized. This means that while they avoid the domination by vertically integrated oligarchic companies, they are still based on major power blocks, such as influential ‘miners,’ large investors, etc. Bitcoin’s inequality coefficient,55 measured by the Gini metric, is higher than the inequality in the sovereign currencies that it aims to replace. Blockchain has an oligarchic design,56 as most mechanisms used to reward contributions (the ‘proof of work’ mechanism) and resources (the ‘proof of stake’ mechanism) reward those that can already provide the most.
Sam Pospischil writes that “blockchains are too slow and expensive for a large variety of use-cases. If you look at something like, say, OriginTrail, they've built a separate overlay network to store structured graph data and document attachments. Pretty much everyone has something similar, with varying levels of "decentralised-ness" ranging from traditional SQL databases to networks that anyone can spin up and participate in just like a (public) blockchain.”57
Different layers of the blockchain ecosystem are routinely dominated by a small group of dominant players, even if they have to contend with the other layers in the system: miners, developers, users.
What matters in this report therefore, is not necessarily the blockchain idea in the narrow sense, but the generic concept of distributed ledgers.58 Nevertheless, it would be a mistake to underestimate the innovative features of the blockchain design, which Sarah Manski has summarized.
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Sarah Manski has also analyzed the underlying political visions of the blockchain designs, resulting in five possible futures:59
• The first one is the individualist future, based on anarcho-capitalist visions of the world, in which every individual is seen as a competitive entrepreneur.
• The second one is the corporate vision, which can use ledgers for a variety of for-profit and surveillance and control uses.
• The third one is the vision of particular state forms with a desire for control and surveillance.
• The fourth one is the technocratic future, expressing the fear that such technologies can become automatic and sovereign, beyond human control.
• But the fifth one is the cooperative future, in which distributed ledgers are used for the commons. This is the vision that animates this report.
Rachel O’Dwyer also provides an extra warning: If we design distributed ledgers following the values and processes of ‘methodological individualism,’ then we also end up generalizing and socially reproducing these neoliberal mechanisms.60 As Salvatore Iaconesi warned, distributed ledgers may end up transactionalizing our entire lives (scenarios 1 and 2 from Manski).61
At the very least, though, the new distributed capitalism can create more capacities for what Adam Arvidsson (Arvidsson, forthcoming 2019), following Giovanni Arrighi (Arrighi, 2009), calls ‘industrious capitalism’ (or rather, ‘industrious modernity,’ as it can also be non-capitalist).62 This is a vision of capitalism and markets seen in the context of a ‘class struggle’ for markets, whereby workers and a multitude of small firms use market forms for their own benefit, until today mostly in rather invisible informal economies. Distributed capitalism may put these forms on steroids.
The interesting White Paper by Outlier Ventures, a venture capitalist firm founded by Jamie Burke which exclusively invests in ‘decentralized infrastructures’ is very illustrative on the proposed relationship between open-source commons, in the form of blockchains and tokens, and how it fits in a new vision for capitalism. Their paper on Community Token Economies63 argues that ‘siloed innovation’ is inherently wasteful, on the one hand, because of its endless duplication in the creation of common infrastructures, but also because, in case of failure, which is the norm rather than the exception, valuable innovation is lost each time the Intellectual Property is lost. Therefore, businesses must massively mutualize their common infrastructures, and community tokens serve to align the various stakeholders, while also providing a funding mechanism for open-source developments. While there is an obvious call for more inclusion and fairness in the ecosystem through decentralization, there is no questioning of the primacy of profit maximization. Thus, blockchain capitalism is indeed a new form of capitalism in which the commons are embraced, but also to a large degree instrumentalized.
Our Vision
We stand for a different vision.
First, we want to make these distributed networks truly cooperative, much more egalitarian, and sustainable, i.e., we want to
• Embed different values in the design of the shared ledgers, such as through replacing the blockchain with the holochain
• Replace the principles of trustlessness with a web of trust, that is, integrate real human relationships in trust-scaling technologies64
• Replace smart business contracts with Ostrom contracts65 that reflect the principles that govern the commons, i.e., have smart contracts respect the ethical principles of a sustainable and more socially just economy
• Replace competitive game incentives, based on purely individual motivation and desire for gain, with cooperative game mechanics
• Diminish the attraction and rewards of extractive activities by rewarding generative activities, etc.
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Our proposals reflect the conviction that we can tweak and transform the general idea of the distributed ledger to make it into a set of tools for production for the common good. More importantly, even if we also want to use distributed ledgers, the aim of their use is to recognize all contributions to the common good and by specific projects, not just the commercial value acknowledged by the capitalist market. Not only do we want to recognize them but also make them visible. Just as importantly, we aim to integrate the limits necessary to preserve our planet and its multitude of beings for a long time, including a future for our children and the next generations by making visible, in our distributed accounting systems, the thermodynamic flows of matter and energy, creating a context-based sustainability framework66 for all participants in these networks.
Automating some of these functions may help managing them. Expanding our capacity to integrate commons-based, permissionless and passionate contributions in our productive system, however, is equally important. Even as we want to create ethical and generative livelihoods for all contributions, this does not mean necessarily directly linking commons activities to market income. As we explained above, the solution is to create a membrane which regulates the relation between market and commons. This is of supreme importance if we want to avoid a hyper-rationalisation of our behaviour, and avoid a transactionalization of all aspects of life. We don’t want to subsume the commons to the market and its logic, but to embed and subsume the market into the necessities of human and non-human commons. By automating some of the aspects of human cooperation, we want to create more space for non-market commoning.
And thus, despite these limitations and our critique of the current blockchain, the qualities and advantages that the blockchain has brought into the world are of paramount importance. What matters is not just the flawed technology, but the patterns of thought and interaction that it makes possible.
• First of all, it has enabled the flow and exchange of crypto-assets and forms of value, outside of the control of the existing and centralized financial system. It is now possible to finance open source network infrastructures, in ways that go beyond the prior dependency on the banking, payment, and financial- and venture-capital based entities.
• This enabled a different line of thought on value and money. Alternative value systems can be embedded in currencies, as money is a social construct: imagined and designed by humans. While local complementary currencies have shown the potential for creating local solutions, the new systems show that socially sovereign currencies are scalable, and can be used by global virtual communities.
• Blockchain economies subsume bounded firms under the logic of the network, based on the use of open-source commons and autonomously created monetary tools. Corporations become codependent on multi-stakeholder networks and commons.
• Token-based blockchain economies have the potential to shift the balance of power between labor and capital. They may allow a bigger part of the surplus value to flow to workers and other stakeholders, avoiding domination by venture capital demand for an equity stake.
The question is: will these techniques, which favour a particular fraction of the labor aristocracy of developers and technical-cognitive labor, also be applied to the wider commons economy? Our position here is positive: all commoners can and must learn about how this has been achieved, and whether it can be properly replicated elsewhere.
The specific design used in the creation of tokens is also paramount. Tokens allow for the expression of multiple forms of value, which can eventually allow for the value sovereignty we call for. The issuing of tokens for use as a medium of exchange/store of value within communities can be done in a way that incentivizes preferred behaviours and reinforces preferred values. That is, it creates a direct break of the dominant perception of money as commodity and opens up the possibilities for other types of perceptions of value. Most importantly, blockchains enable and ascribe the general consensus to such subjective perceptions among communities, while facilitating the interaction among them. Simply put, when a group of people agree that a certain activity has merit, they can create a permanent and tamper-proof record of this agreement. Let’s imagine for instance an energy cooperative building small-scale wind-turbines. Its members may collaborate and create a set of rules for the issue of tokens to engage more people in their cause (e.g., energy engineers, households that want to reduce their dependence on fossil fuels, etc.), and interact with other groups that may provide resources or support services (e.g., a group of smart-grid experts, an impact finance firm, etc.).
Moreover, crypto-tokens allow for crowdfunding or direct crowdsales, either through utility tokens (a right to purchase the assets created by a blockchain project) or through market-based tokens, which allows stakeholders to partake in the surplus value realized in the market. This allows founders, developers and workers to go around the centralized banking and venture capital system and find their own funding more directly. These crowdfunding campaigns, based on the sale of tokens that are open to all types of buyers, are called Initial Coin Offerings.
Speculative ‘Initial Coin Offerings’ can also be initial community offerings, as in the crowdfunding campaign by Holochain. If the crowdfunding is successful, projects can go ahead outside the control of Venture Capital, which expects equity, i.e., co-ownership, in return for its investments. By contrast, tokens and Initial Token Offerings, allow for the direct funding of the workers, developers and other stakeholders. If the project is successful and the token-price moves upward, the work-related tokens rise in value, directly benefiting the workers, who partake in the surplus value that was previously captured by the funders.
As Fred Ehrsam of Coinbase expressed it:
“So how do you get people to join a brand new network? You give people partial ownership of the network. Just like equity in a startup, it is more valuable to join the network early because you get more ownership. Decentralized applications do this by paying their contributors in their token. And there is potential for that token (partial ownership of the network) to be worth more in the future”.67
We believe that the organization of a crypto economy for the common good, based on enabling commons-based peer production, which combines a recognition of a wider variety of contributions, and helps achieve biocapacity accountability, will be based on
1) a better integration of free and cooperative mutual coordination, exchange and
2) the mobilization of resources through a fair and generative ethical market, and
3) fall within a planning framework that reflects a protection of planetary boundaries, and regulates access to the flows of matter-energy in order to determine the bounds of usage through thresholds and allocations of natural resources, as well as societal priorities.
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