Open source hardware meets the p2p economy

We are at this particular moment in history when we can say with certainty that open source hardware (OSHW) is economically viable. The video below tells the success story of Adafruit Industries. Barely formed, this business model relying on OSHW might already be obsolete. A new model, the open value network, is already threatening to transform the landscape of the open source economy. This article explains why.

Most people find it counter-intuitive that companies that sell high tech open source products can survive in a highly competitive capitalistic environment, giving away their recipes, AND allowing (even encouraging) everyone else to copy them, WITH THE RIGHT TO MAKE COMMERCIAL USE. If you don't believe that this is possible stop wasting your time arguing against it. It is real, it is here, you better understand it fast before the world becomes a strange place for you.

The business around open source innovation cannot be learned in school. It belongs to a new economic paradigm. Old arguments don't apply because the semantics and the logic are not the same. Some time ago, we published the article How to play the open game in the present and future economy, which tries to capture the essence of sustainable open source innovation. This article is constantly revised, so we encourage you to revisit it from time to time.   

The most successful ventures built around OSHW, like Arduino, Adafruit, Sparkfun, etc., can only be understood within their larger ecosystem. We can identify two main structures: a commercial entity and a community. The commercial entity is a traditional legal form, usually a corporation or a co-op. It takes care of manufacturing, quality assurance, structures and integrates the feedback from the community into new products, nurtures the community, performs legal functions, integrates all the transactional logistics (storage, shipping, payment), and provides services. The community plays different roles: early adapters for products testing and providing feedback, consumers, propose new features, spread the buzz, educate new members of the community and even provide technical support, etc.

What we see in the case of OSHW is a greater integration between a commercial entity and its market. Traditional commercial entities maintain a provider-consumer relationship with their markets: some "smart" individuals within the firm study what consumers might need, pass that to a team of engineers to make it, and put it for sale with a team of marketing wizards who will make almost anything look like the perfect fit. If the firm was right about the need, which is not always the case, customers pay for it and take it, and ask for service if needed. Service is provided by the commercial entity in exchange of customer loyalty. In this approach, the consumer is educated about what he needs and wants, after the "smart guys" have made the market study, decided on the general need, and offered a one-fit-all solution. This is obviously the extreme case, or what was widely practiced 20-15 years ago.  Today, traditional corporations build communities around their brands, and they try to absorb more feedback from their consumers. In the case of OSHW, individual consumers drive design and development.

This integration between the commercial entity and the market in the prevalent OSHW models is made possible by the internet technology. But as we saw above, there is still a clear distinction between the commercial entity and the community. For example, a community member who proposes a new design that becomes commercially successful is not rewarded with a fair share of the profits made by the commercial entity. I call this the "candy economy", meaning that the members of the community around a OSHW company stick with it and contribute mostly for intrinsic motivations, and a small present (a candy) or a token of recognition from time to time.

Is this division between the commercial entity and the community necessary? Or is it an impediment for a better arrangement?

The open value network model abolishes the distinction between 

the commercial entity and the community!

The open value network is a model for commons-based peer production. See SENSORICA as an example.

read SENSORICA business model 2.0

The diagram above depicts the structure of an open value network. The physical and the virtual infrastructure, as well as the tools and the equipment used in R&D and in production are part of a pool of shareables, legally owned by a Custodian, which is bound by a promise to act in the interest of the community, obeying a set of predefined rules set by the community. All the information and the knowledge generated by the open value network become part of the commons (there is no intellectual property). Affiliates (agents) rely on their know how to create value (products), using these resources. This value (products) is exchanged on the market for some form of revenue. The revenue is redistributed among all affiliates in proportion to their contributions, using a contribution accounting system. The barrier to participation to production processes is very low. In that sense, the value network is open. Production is so widely defined that it encompasses activities usually performed by members of the commercial entity and the community, in the prevalent OSHW model cited above. Therefore, the two structures, the community and the commercial entity are merged together at the level of production.

The open value network model distinguishes between different types of agents, based on their degree of involvement/participation. Thus, we can distinguish between active affiliates (those who take part in value creation) and unaffiliated observers (those who know what's going on in the value network). If we go back to the prevalent OSHW model cited above, we can say that the owners and the employees of the commercial entity, as well as the community members who provide feedback and new design ideas, or who actively propagate information about products are ALL active affiliates.

We also need to note that active affiliates are those individuals who participate in value creation AND who decide to log their contributions within the contribution accounting system. Participation in the contribution accounting system is NOT mandatory. Someone can elect to contribute to the open value network without expecting something in return. Thus, the open value network integrates a gift economy with a market-oriented economy.

That is all fine on the production side, but what about the distribution side, or the market side?
All the transactional logistics (for the exchanges between the producing network and its market) and the legal aspects associated with it are moved into what sencoricans call the "Exchange firm", which can be embodied as a non-profit, with the sole purpose of serving the open value network.

So why is the open value network a menace to current OSHW business models? Because by abolishing the distinction between the commercial entity and the community, value networks like SENSORICA threaten to drain these communities associated with OSHW-based firms of their talent!   

More on the open value network model

The open value network model departs from capitalism for 3 main reasons:

• No division between owners and workers, between those who own the means of production and those who provide work. The commons takes care of that. 
• No clearly defined frontier between the system of design-production-distribution and the market, the system rewards every contributor to production in proportion to his/her contribution. The contribution accounting system takes care of that. 
• Re-appropriation of labor. Active affiliates who are involved in production are not exchanging their labor for wages, they are, in some sense, accumulating equity, which gives them rights to the future revenue generated market transactions. Thus the individual is always the owner of his work. 

The contribution accounting system allows open value networks to go beyond the gift economy AND beyond the candy economy.

By t!b!

By AllOfUs

Please donate!

Leadership? What's that?

I am trying to understand how networks respond to problems. I use the presentation below to structure my understanding. I am pursuing this reflection in the context of SENSORICA, which is an open value network. The presentation will continue to evolve...

See also the discussion on Next Edge.

By t!b!

By AllOfUs

Multitude, or p2p initiatives get funded in Europe

Collective Awareness Platforms for Sustainability and Social Innovation
Fabrizio Sestini By

AllOfUs

Revolution 2.0: structure and processes

On thestructureandprocessesofrevolution2.0 discussiondocument from Suresh Fernando

By AllOfUs

How value networks can articulate with the present economy - an example in food preparation and distribution

Yesterday I had a conversation with my friend Paul about the advantages of open value networks (OVN) over classical structures, including co-ops.

picture comes from this website

Context

Paul is involved in #occupy Montreal and they are now organizing a center for preparation and distribution of vegan food in Montreal. They also want it to be very local. This operation would require gathering products from different local farmers, cooking/preparing, packaging and distributing raw or prepared food. 

Question

Should they create a co-op or an OVN? 

My answer 

They can have a co-op embedded within a value network. 

The role of power relations in a p2p economy

The #occupy movement, which is a surface manifestation of a deeper Multitude movement, is in fact a refutation of power. Not only of the "power in place", i.e. big banks, governments, etc. but of what we call "instituted power", the kind of power your boss has over you. The consensus decision making process, a form of direct democracy that has been adopted by the #occupy movement, is the most obvious affirmation of this refutation of instituted power relations, which until now has been seen as a necessary structuring mechanisms of society. 

Where is this coming from? Was it there before? Is this pure Utopia? Or is there something fundamental happening, which makes instituted power relations lose their importance?  

We often hear that instituted power relations are tolerated by people because they are believed to be essential to organize us into efficient and effective groups, to achieve complex goals. Some say that without instituted power relations society would simply brake down, collapse. Go tell that to an anarchist... 

Value Networks, about commercializing their products

We take the example of a specific value network, SENSORICA.

The problem

One of SENSORICA’s main reason for existence is to provide for its members/affiliates the means of subsistence and well-being. This is to say that the surplus value that is created by the network must be exchanged on the market against other values, which are to be redistributed to participants based on their relative contribution. This redistribution is done according to the value accounting system, to which all members must adhere. The goal here is to establish a channel of distribution for SENSORICA’s products. The problem is that there are laws and regulations which makes it difficult for a non-legal entity like SENSORICA to sell certain products. Someone must take the blame if those products don't respect established standards, and our society doesn't know how to interface with things like SENSORICA.

Solution 

In the current situation, we need to create legally recognizable forms to channel products through them. This is actually the role Tactus Scientific Inc. plays for the Mosquito Scientific Instrument System, designed for the scientific instrument market segment.

Re-Occupation 2.0?

What do we do next?  The question for revolutionaries in North America is to figure out how to activate the anaesthetized. But why are we anaesthetized? There is a realization, at least to some extent, that we are the ones responsible for the global ills; the reification of individualism and the exporting of capitalism and ‘democracy’, yet the vast majority of people are too ‘comfortable’ to do anything more than nod their head when presented with the evidence. Why is this? In short, most people don’t feel enough pain on a personal level to motivate them to take risks... If this is so, do we need revolution?

Yes, because we are living within a lie, and this cannot be healthy...

         Read more...

By Suresh
(more notes by Shresh)

How to play the open game in the present and future economy

This is the fifth draft; it will evolve based on your feedback. First published on 6/19/12. Last modified on Jan 30, 2026. Come back later for more...  

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More and more solutions to our problems today come in the form of open artifacts, i.e open source software and hardware, created by online communities and networks. Traditionally, most of these communities have relied on voluntary participation, i.e. the developers do not expect a direct or immediate tangible reward for their contributions. These open artifacts have been regarded as marginal, mostly intended for amateurs and hobbyists. How can one expect serious things to come out of loose organizations that don't use the prescribed governance model and methodology, and don't have access to a large budget? At least this was the unadvised belief, until we realized that critical infrastructure, like the Internet, runs mostly on open source software, created and maintained by these unorthodox organizations. Ingenuity, the helicopter drone, part of the Perseverance mission to the planet Mars, operates on Linux, which is an open source operating system. Bitcoin, runs on open source software and is supported by an open group of people (miners), who can be practically anyone with a computer and an Internet connection. Since Bitcoin was launch in 2009, no one has hacked it, despite the astronomical reward, ranging in the tens of billions of dollars, if we only consider the abandoned accounts of Satoshi Nakamoto, the creator of the network. So some open artifacts developed by unorthodox organizations are pretty serious, highly secure, mission critical, or operating at global scale. There are also lots of crappy ones, as there are crappy products offered by serious companies.

What I call playing the open game is developing open artifacts (based on open source technologies) relying on unorthodox organizations and being able to make a living.

There are a few important components to the open game... 

 

First, there's the intellectual property regime. Open source means that no one can create a temporary economic monopoly on a particular solution, as it is the case with products based on patented technologies. If one cannot control the artifact how can one capture value or generate wealth? 

In the most simple terms, how can one make money developing open source technologies. My first reaction to this question is to point to the obvious: 

• IBM has invested billions of US dollars in Linux and other open source technologies. ref
• Google has gained mobile dominance by opening Android, the mobile operating system. 
• Tesla has engaged in a hybrid IP strategy, i.e. open source patented. 

The second order economic model 

It becomes possible to generate wealth while developing open source technologies, if the business model is not simplistic and/or linear. In most viable cases, whatever is open source is not the product, but by open sourcing some technology in the IP portfolio, these companies produce some effects within their ecosystem, which they can harvest or leverage for their core business. In the case of Google, opening Android increased its adoption rate, while propagating some core Google functionalities, thus putting Google services in billions of mobile devices, which then could be monetized using Google's core business model. We also see a second order kickback pattern with online services like Facebook, where free access is given to a digital service (search or connecting and interacting with people), while making money from selling users' generated data or attention. So we need to stop thinking about business as a simple and linear process, as simply transactional.

A similar example of second order economic model, extended to a whole community or ecosystem, is Tiki, an open source wiki CMS groupware? The wealth generation model is similar to Red Hat, the poster child, based on support, training, and consulting services around the core open artifact, which is offered for free. 

 

At this point, I find that is it important to raise to your awareness the fact that the wealth generation model is not the same when the technology is software or hardware. It is beyond the scope of this post to dive deeper into this distinction, but if you're interested, we can discuss in the comments.

Note that I have deliberately use the term open artifact instead of product and the expression wealth generation or economic model instead of business model, to avoid cognitive interference. When we say product people think about commodity, something that you can buy/sell on the market. But you cannot sell the Linux operating system (an open artifact), which defies the law of supply and demand, as it is an abundant, non-rivalrous resource, since its reproduction (copy/paste) and distribution (download) costs are negligible. The case of open source hardware is not the same, but similar. The costs for reproduction and distribution are high for material artifacts, but since everyone has access to the design, anyone can fabricated it locally, (see more on distributed fabrication and DIY - Do-It-yourself), making use of digital fabrication techniques (3D printing, CNC, etc.).

Beyond money

So what about the expression wealth generation? 

When we say wealth most people think about money. When engaging in open source development, people are seeking other forms of wealth, for what they are in themselves (or for a later conversion into money, monetization). For example, someone may want to contribute to an open source project to learn new skills, to develop new relations with people that have specific skills or that share specific values, or to build reputation. In some cases, when money is introduced as a motivation factor in open projects the social cohesion breaks down.

 

So playing the open game requires a renunciation of mechanisms of control of intellectual property, which entails the refusal to create a temporary monopoly and thus the adoption of more sophisticated economic models or the adoption of different forms of wealth or new forms of value. But the open games deploys within a very different organizational environment, to which we already alluded above, as most of the time the open artifact emerges from open organizations or networks. 

p2p as a new organization paradigm 

Recently, we have witnessed the emergence of new economic models that brake away from the gift economy, directly rewarding those who contribute (with time, financial capital, social capital, ...) to open projects. The open artifact is gradually becoming sustainable. The first step in this direction can be illustrated by Open Source Ecology, which designs open hardware for farming, construction and manufacturing. The designs are  entirely open and free, but the Open Source Ecology community is not interested in commodification, i.e. market exchanges, their designs made with DIY (Do It Yourself) in mind, destined to be produced by the user, or very close to the point of use. In the case of Open Source Ecology their model for subsistence is based on revenues in fiat currency, from donations or educational services.

Open crowdsourcing is another model in which designers, part of an (open) community, are rewarded to complete a project. This scheme doesn't only rely on donations or voluntary participation, since those who contribute are rewarded in exchange with some symbolic gifts (tokens of recognition), reputation tokens, job opportunities, etc. Arduino is an example of such model, a hybrid between the open (value) network OVN and a traditional business, which relies on a vast community of enthusiasts to propose new designs, find and eliminate bugs, engage in promotion, etc. 

There are also closed and non-transparent crowdsourcing initiatives, such as prizes, in which only the best contributors are rewarded. Contributors are often placed in competition against each other. The resultant designs or artifacts are closed and remain under the control of the initiator. We are definitely against this new form of human exploitation, as you can see in this post. 

Sensorica is based on a more radical model, referred to as an open value network (OVN), which implements commons-based peer design production. It is in fact a mix between a gift economy and a transaction-based, or market economy. Sensorica can produces open artifacts that can either be exchange on the market or disseminated as DIY open designs. Various forms of rewards (including revenue from market exchanges or donations) are redistributed to all contributors in proportion to their contributions, based on a Benefit Redistribution Algorithm, which is at the heart of the Network Resource Planning and Contribution Accounting system (NRP-CAS). 

P2P

a post by Poor Richard

What is peer-to-peer (P2P)  culture?
P2P culture is the post-capitalist framework that makes the most sense to me. It includes but transcends capitalism; and encompasses many hybrids of open and closed, public and private, hierarchical and egalitarian associations.

photo by Ian McCalister

P2P emphasizes cooperation, openness, fairness, transparency, information symmetry, sustainability, accountability, and innovation motivated by the full range of human aspirations even including, but definitely not limited to, personal financial gain.

I call p2p a “post-capitalist framework” because many of us are quite happy to abandon capitalism’s euphemisms and reductio ad absurdum altogether. However, other 99%-ers still consider it a major factor in lifting millions from poverty. They would rather reform and adapt it to humanitarian and ecological ends than to abandon it for something novel. I think it is entirely possible to craft forms of capitalism which “do no harm”, and I think there is ample room in the p2p community for such “diversity of tactics.”
Read more on Richard's blog... 

By AllOfUs