Saturday, January 3, 2015

The stateless economy, local economies, and the state

NOTE: This is the second draft. This post was motivated and informed by THIS discussion on Facebook. 

The Multitude movement enters a new era, where its processes can be supported by truly p2p infrastructures. Bitcoin is now a well-known symbol of a new breed of value exchange systems, called cryptocurrencies, money without the bank, stateless money, a new currency that looks and feels like your ATM card, but it is entirely decentralized, under the control of those who use it.

Peer-to-peer is a new pattern that emerges in almost all the spheres of human activity, from culture, to governance, to the creation and the distribution of goods and services. It is the underlying pattern of the current leap in the emancipation of the multitude (see the multitude manifesto). Bitcoin is the poster child of p2p exchange systems, but the same technology is now expanding and promising much more:
From Ethereum project: Satoshi Nakamoto's development of Bitcoin in 2009 has often been hailed as a radical development in money and currency, being the first example of a digital asset which simultaneously has no backing or "intrinsic value" and no centralized issuer or controller. However, another, arguably more important, part of the Bitcoin experiment is the underlying blockchain technology as a tool of distributed consensus, and attention is rapidly starting to shift to this other aspect of Bitcoin. Commonly cited alternative applications of blockchain technology include using on-blockchain digital assets to represent custom currencies and financial instruments ("colored coins"), the ownership of an underlying physical device ("smart property"), non-fungible assets such as domain names ("Namecoin"), as well as more complex applications involving having digital assets being directly controlled by a piece of code implementing arbitrary rules ("smart contracts") or even blockchain-based "decentralized autonomous organizations" (DAOs). What Ethereum intends to provide is a blockchain with a built-in fully fledged Turing-complete programming language that can be used to create "contracts" that can be used to encode arbitrary state transition functions, allowing users to create any of the systems described above, as well as many others that we have not yet imagined, simply by writing up the logic in a few lines of code. (See the source). 
For those who think that all this technology is nothing if it doesn't live on its own support, on a p2p Internet, take a look at the MaidSafe project, FNF and many others like them. MaidSafe is special because it comes with its own economy, it's own ways to incentivize the development and maintenance of its physical infrastructure, and has a cleaver launch and growth model which takes advantage of the existing infrastructure.  

We are creating new economic processes with their own exchange systems that know no borders, no political boundaries, and no central authority (which doesn't mean no rules or chaos). We are creating a stateless economy. How states respond to it? How does it relate to local economies?

One of the most interesting observations in relation with this new pattern that deploys globally on p2p infrastructures is the emergence of a global multitude. It is a very diverse multitude. This diversity is rooted in values and principles rather than in local customs. We speak about it as different cultures of online communities. These new social structures transcend the state, which has no effective means to control them. We are witnessing the emergence of new social structures, that come with their own support mechanisms.  

Will states turn against these trends as a reaction of self-preservation? Yes, see for example a list of states that ban bitcoins. I predict that this opposition will grow stronger in the near future, but no state can bury an idea whose time has come. No state can oppose something that provides value to virtually all its citizens, especially when the current economic model is evidently unsustainable, morally bankrupt, openly criticized, in decline. What should governments tell their youth looking for a job? The answers can be read in the daily news in Greece, Spain, Italy, France, USA, ... and the list is growing longer every year. 

There is antagonism between the state and this new Multitude outburst, with its p2p practices. Do we see a solution out of this standoff? Institutions are not eternal. They have a life cycle as any other thing. Nation-states were created in the 19th century. The state is an instrument for local communities. People are above the state. The proof is that we, the people, have outlived all the social structures that have existed throughout our history. In the future we will form new social structures and will find new ways to sustain our local communities. How are local communities adapting today?  

The stateless economy is not in contradiction with the local economy

I am drawing my conclusions from my work on the Open Value Network (OVN) model within the SENSORICA community, a pilot project for long tail peer production

Forces and mechanisms behind the emergence of local economies

The impact of human activity on our planet is now visible, measurable, which makes us realize that our way of living is outgrowing the Earth's capacity. Pollution and degradation of natural ecosystems, the energy crisis, and an unstable geopolitical situation are aligning to favor the development of diversified local economies. New technologies for renewable energy, for new materials, automation, robotics, and 3D printing, make local production for local consumption economically viable.  

The relevance of proximity and its role in the self-organization of local economies 

The Internet allows coordination and collaboration at the global scale. Design and simulation activities have been virtualized. Engineers can now collaborate online on designs that can be virtually tested and simulated. Innovation has gone virtual, it has been delocalized. This allows the existence of new modes of innovation supported by a new socio-economic structure, the open source community. But making stuff (manufacturing hardware for example) requires local physical resources (materials, tools and equipment, space,...), uses local processes (digital fabrication, assembling, ...), relying on local know how (which cannot be formalized, externalized, and easily passed to others through a medium like the Internet). The Internet doesn't obliterate the need for locality and proximity when it comes to production and distribution of material goods. Locality anchors processes to a specific location, the need for proximity ties different processes into a local economy.  

From global commons to local economies.
This is how the new economy is shaping. It builds on another new reality: 
Knowledge is abundant, know how and capacity of production are scarce and require proximity.
Knowledge is abundant because one idea becomes available to the entire planet as soon as it is shared on the Internet. That single idea can be shared with everyone on the planet at once. There is no limited quantity or debit, it can be accessed anytime and people don't need to take turns to access it. Everyone can have it, together with other ideas produced by other people. That's abundance. Thus, the Internet is a growing repository of ideas that people use to generate new knowledge, which is itself shared, and so on. Sharing is part of the process because it makes the whole system more efficient. Sharing is also imposed by a minority of individuals who have a natural propensity for it. Since ideas usually pop up in different locations at small intervals of time, someone will eventually share something, which obliterates someone else's wish to keep it a secret. This global swarm of ideas and knowledge building is actually a new mode of innovation, open source innovation, supported by a new social-economic structure, the open source community

Open source communities, which are virtual and stateless, are now the most innovative organizations. 3D printing has been democratized by open hardware communities, which continue to lead in 3D printing innovation, despite a few corporate successes. The same can be said for automation and control systems, with Arduino being the most popular example. DIY Drones is where the innovation in UAV technology happens. The dominant mode of innovation is now global, decentralized, stateless, increasingly using it's own physical infrastructure (a network of fablabs, makerspaces, co-working spaces), increasingly using its own funding mechanisms (crowdfunding and peer lending)

The abundance of knowledge goes hand in hand with the creation of a global knowledge commonsThis global knowledge commons gets materialized into local economies, using local know how and local capacity of production. This materialization requires a special type of infrastructure and new economic models. Let's illustrate this potential with two examples: 

Your local community needs adapted means of transportation? You can open a Local motors shop and grow a community around it to produce and distribute cars, locally. You continue to be plugged into the global Local motors community in order to benefit from the stream of open innovation that comes out of it. You can also join other similar communities like Wikispeed and the OScar in order to incorporate even more potential. There is no intellectual property around these car designs, they are open source and everything you build on top of these designs becomes open source by default, goes back into this global commons. Manufacturing a car, its distribution, and services around it forms a local economic activity. In order to make that happen, a tight and synergistic relation must be established between the global open innovation process for designs and the local production processes. This relation insures that the feedback (for product improvement, diversification) that comes from the consumer, in direct relation with the local manufacturer and service provider, is translated into technical problems and passed on to the global open source community of designers. The relation is established and maintained by channels of value between the local and the global/virtual layers. An example is a system of revenue sharing from the local to the global/virtual layer of innovation. This is what the Open Value Network (OVN) model is trying to achieve, with its value accounting system.  

You need to improve food production in your region? Join Farmhack, which provides open source solutions. Open source ecology offers tools not only for agriculture, but also for the construction of your farm and even for the construction of an entire village (see also Appropedia). There are similar online communities for indoor growing, automated greenhouses, hydroponics and aquaponics (see HAPI)... Name it, you'll find it. These sources for knowledge and designs are complemented by other tools and services for resource sharing and management, like landshare and shareearth (for land), neighborgoods (for tools and equipment), plantcatching (for plants and seeds), as well as more complex tools for mapping and economic modeling (localfoodsystems), etc. This new ecosystem needs to come tightly together into an open value network which allows value flows between different nodes. Local food systems are reorganizing along a different logic. 

New types of organizations are needed in order to orchestrate and incentivize the development of the global commons and to funnel it into sustainable local economies. I bet on the Open Value Network (OVN) model and on organizations like SENSORICA, because in my opinion they take into consideration how innovation, production, and distribution are restructuring. 

Within OVNs a need (local or not) is translated into a problem, which comes with its own incentive system (monetary or others), to be solved by a global, stateless community of developers, into open source solutions. The solution is materialized into a product or a service at the point of origin of the problem, and distributed to those in need, in exchange of some form of benefit/revenue. The revenue gets redistributed to ALL the participants in proportion to their contributions, using a value accounting system (records contributions) and a value equation (turns contributions into fluid equity). Since the solution is open source, others can also distribute it as is, or as a modified/improved/remixed version, also giving back to the original contributors in order to buy their loyalty and to sustain the open innovation channel, in order to sustain the link between the local economy organized around production, distribution and servicing, and the global and virtual layer of open innovation.

New infrastructures are required to support these organizations and their processes. OVNs are supported by a network resource planning and value accounting system (NRP-VAS). These tools will move on truly p2p infrastructures like Ethereum. It is important to realize that these new economic systems would be dysfunctional if they were obliged to use classical means of value exchange, or even Paypal. Imagine a project with thousands of participants and a long tail contribution distribution. The redistribution of revenue to all the contributors for every market exchange (every sale), as prescribed by the OVN model, would require thousands of micro-payments across the globe. Also, imagine thousands of individuals crowdfunding a new equipment used in a project. This would also require thousands of cash transfers from all the contributors into a unique bank account, from which the purchase is made. Bitcoin and other currencies built on the block chain technology improve the ability of OVNs to incentivize open innovation and to source its processes. 

Open source innovation has been proven to be the most effective mode of innovation. It is supported by open source communities, which are by nature open and decentralized, global and stateless. Innovation drives our modern economy, therefore open source innovation is here to stay, and the rest organizes around it. In order to close the cycle from idea to the market, new types of organizations have been created, based on the OVN model or others hybrid models (for more on these hybrid models see Open Source Hardware meets the p2p economy). New infrastructures have been created to tie everything together into self-sufficient value systems, into open value networks. These infrastructures are designed to support the p2p pattern, reducing the role of the state. Local communities have new alternatives for thriving, which require a radical redefinition of the state.  

Some states have banned cryptocurrencies, which reduces the ability of open value networks (tying global/virtual open source innovation systems to the local economy) to form and develop, which in turn takes away viable alternatives for local communities. 

Without embracing stateless p2p practices we don't actualize the full potential of the new digital technology in making our economy more effective, efficient, and sustainable. Without embracing stateless p2p practices we will see the collapse of our local communities, as the state gradually collapses. States that are fighting stateless p2p processes are essentially denying their local communities access to the p2p economy, an alternative that already shows clear signs to be effective.