In this paper, we explore novel ways for decentralized economies to protect themselves from, and coexist with, competitive markets at a global scale utilizing decentralized technologies such as Blockchain.

Article: The Wolf and the Caribou: Coexistence of Decentralized Economies and Competitive Markets. By Andreas Freund and Danielle Stanko. J. Risk Financial Manag. 2018, 11(2), 26

Michel Bauwens: There are several interesting aspects to this article. First the authors are from Tata Industries, who are reportedly very concerned about the future of their industrial verticals and actively looking for successor systems. Second this article is very liberal in quoting the work of the P2P Foundation about the institutionalization of peer production. And third, it examines how our models fit with the emerging possibilities of the blockchain , tokens and programmable organizations, i.e. ‘Distributed Autonomous Organizations’.

However, in doing so, it also does something very problematic in our view, ie it assumes that the current wave of crypto projects conform to these generative, commons-based vision of our economy, while they clearly don’t. While current crypto-based projects are interesting new models, most of them are extractive to people and the planet, and use the commons and open source in the context of achieving value capture. Without a clear distinction between generative and extractive economic modes, we justify the worst excesses of the current crypto-based economy.

Abstract

Andreas Freund and Danielle Stanko: “Starting with BitTorrent and then Bitcoin, decentralized technologies have been on the rise over the last 15+ years, gaining significant momentum in the last 2+ years with the advent of platform ecosystems such as the Blockchain platform Ethereum. New projects have evolved from decentralized games to marketplaces to open funding models to decentralized autonomous organizations. The hype around cryptocurrency and the valuation of innovative projects drove the market cap of cryptocurrencies to over a trillion dollars at one point in 2017. These high valued technologies are now enabling something new: globally scaled and decentralized business models. Despite their valuation and the hype, these new business ecosystems are frail. This is not only because the underlying technology is rapidly evolving, but also because competitive markets see a profit opportunity in exponential cryptocurrency returns. This extracts value from these ecosystems, which could lead to their collapse, if unchecked. In this paper, we explore novel ways for decentralized economies to protect themselves from, and coexist with, competitive markets at a global scale utilizing decentralized technologies such as Blockchain.”

Excerpt

“Based on available research, decentralized socioeconomic models, also often referred to as a Decentralized Autonomous Organization (DAO) or Commons6 structure typically have three main components (Giotitsas and Ramos 2017; Filippi et al. 2007):

• Entrepreneurial Common (EC): An EC is the commercial interface with external ecosystems and gives funds it raised from selling goods and services or other activities such as investments in other ecosystems in the form of tokens to the For-Benefit Common (FBC) and receives goods & services to market and sell from the Production Common (PC) in return. This requires exchange between an EC token and Fiat and a PC token that is governed by the FBC. Tokens generally represent a unit of value as defined by the participants of a DAO, and there may be many tokens within a DAO. In addition, the EC is responsible for financial and monetary policy in the DAO since issuing a token is effectively creating a currency with all the accompanying complexities. We will discuss this in more detail when we discuss our proposals for the coexistence of decentralized economies and competitive markets;

• Production Common (PC): A p2p group that produces goods and services collaboratively based on the purpose of the ecosystem as established in the FBC. A participant’s contributions are valued in PC tokens which can be exchanged to EC tokens or other tokens through an exchange utility, as detailed out in one of our four proposals below. Assets created in this common are held in common by the FBC with claims rights by the contributors based on their value contribution to the asset in order to enable a fair sharing of value generated both commercially and through reputation;

• For-Benefit Common (FBC): The FBC is the governance common that is responsible for setting the DAO vision and impact goals, sets consensus rules and incentives for the DAO commons, sets the exchange rules for the EC and PC Tokens within the commons and externally to other ecosystem tokens and fiat, sets the ownership/membership and sharing rules for the DAO commons, defines and enforces reputation also in relation to non-DAO reputation measurement and management models, sets collaboration and giving rules with internal and external entities, and acts as the interface to not-for-benefit entities etc.

This three-zone model is designed to

• Insulate the economically vulnerable FBC and PC from extractive external markets through the EC commons by limiting token exchanges between the common markets that have direct interfaces to competitive markets.

• Enable social impact results through the FBC without a strong dependency on market results. The FBC decides the use of funds coming from the EC. As a result it is independent of “shareholder value” as defined by external and extractive markets; therefore it is accountable to the PC and EC participants.

• Allows the EC to focus on raising funds for both the FBC and PC either through selling products and services or raising funds for future products and services and social impact efforts.

• Enables the PC to focus on core competencies to create new products and services aligned with the overall DAO values independent of the EC.

It is worth noting that decentralized economies as described above typically have three characteristics in common (Commons Transition Primer 2018, Commons-Based Peer Production Directory 2018, 2017):

• Open Value Accounting: An accounting system that allows one to record not only tangible assets and assess their value in a unit of value measure, but also to record tangible and intangible value contributions from participants to an asset and subsequent value translation into a unit of value measure such as a token in a decentralized socioeconomic model;

• Decentralized Commons Market: A decentralized marketplace for the free exchange of assets and services governed by business rules established by a governing commons through participant consensus. The decentralized marketplace is transparent and has verifiable and marketplace transactions. In order to motivate participation in a decentralized commons market (DCM), a DCM has an incentive model for both tangible and intangible value contributions and open asset ownership representation through a set of defined unit of value measures such as tokens. The rules for DAO membership and voting are normally based on consensus processes;

• DCM Reciprocity: Reciprocity in this context means that the return on investment beyond a certain value7 is capped but not frozen by requiring reciprocity contributions to the DCM in the form of tangible or intangible value contributions that equal or exceed returns. Example: For a return of a 100 token investment in a DCM asset beyond say 10 tokens, an actor needs to make a value contribution after applying an exchange rate of token to utility token quantifiably equivalent to 1 utility or 1 reputation token for every token earned beyond 10 tokens.

As we will see below, this is in stark contrast to competitive markets.

Central to making the three zoned model operate is effective governance. There is an evolving literature on the governance of decentralized markets discussing issues and challenges creating inefficiencies and potentially additional costs as well as benefits and efficiencies.” (http://www.mdpi.com/1911-8074/11/2/26/htm)

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Labor productivity has never been greater but the rewards from this are not being evenly distributed. In fact, artificial intelligence, robotics, and smart devices are wreaking havoc on labor markets and generating growing calls for basic income to help avert even worse income inequality in the coming years. Aside from rampant inequalities, we seem to be stuck in making real progress on climate change and losses of biodiversity. In short, many of us have begun to question whether market-based capitalism as we know it is capable of improving conditions for planet and people.

Throughout the past several years I have been conducting research on a range of sustainable entrepreneurial initiatives around the globe, interviewing hundreds of inspiring entrepreneurs along the way. What I have come to realize is that there is a new wave of entrepreneurial organizing around the world, oriented toward making things better for the 99 percent. Yet much of this organizing does not fit the mold of traditional, capitalist approaches to startups, venture finance, growth and exit.

In my latest book, I refer to this phenomenon as post-capitalist entrepreneurship. For me it is something more than just entrepreneurship that also seeks to balance social and/or ecological impacts. Post-capitalist entrepreneurship (PCE) instead is about changing the underlying logic of entrepreneurial organizing, governance models, legal structures, approach to intellectual property, perception of consumption and production and of course the ultimate objectives and metrics of success.

In my view there is somewhat of a continuum of PCE from those closest to our current understanding of market-based entrepreneurship to more extreme versions of PCE:

For-benefit (B Corps)

On the surface, B Corps may seem like mere representations of responsible market-based entrepreneurship. After all, the majority of B Corps are for-profit enterprises, frequently with board of directors, closed, intellectual property models, private ownership and often receive traditional investment from angels and venture capitalists. Some B Corps are even publicly traded on traditional stock exchanges (e.g. Etsy, Natura). What makes B Corps the starting point for PCE is that they are legally bound to embrace social and ecological concerns. If “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits” as the famed economist, Milton Friedman wrote in Capitalism and Freedom, then companies who legally bound themselves to something beyond profits, as B Corps do, are something different than what we think market-based enterprises are about.

Platform Cooperatives

The media has offered plenty of coverage of the platform capitalist business models like Uber, Airbnb and Task Rabbit. Yet, what has been underexplored so far is the emergence of alternative models of sharing economy platforms which embrace ideas like the commons and cooperative governance. The platform cooperative movement is picking up steam with support from the Platform Cooperative Consortium, as well as a growing number of innovators embracing the Occupy Movement´s values, but leveraging technology to turn their activism into collective entrepreneurial action.

Peer Production and Consumption

While most of the sharing economy, including platform cooperatives, are primarily oriented towards recirculated goods and skills in society more efficiently, there is something potentially even more impactful happening mostly in cities around the globe. The maker movement is picking up steam around the globe, supported by the 1100 Fab Labs, platforms like Etsy which connect makers with distributed customers seeking unique, instead of mass-produced products made in China, and numerous other democratized technologies making innovation more affordable for the 99 percent.

Loic Le Goueff, a 27-year-old Swiss national agrarian, and his partner launched a startup called Aquapioneers. Through access to Barcelona’s Green Fab Lab, the pair had managed to design and build a closed loop aquaponics device which can be used by homeowners and renters to produce their own vegetables at their homes with minimum investment and low operating costs. What makes Aquapioneers so interesting is that they have committed to the maker community and to open source hardware. In fact, they are making their design freely available for downloading and printing at the more than 1,100 Fab Labs around the world.

The Fab City initiative encourages member cities to commit to producing at least 50 percent of everything consumed in the city by 2054. More than a dozen cities around the world including Amsterdam, Barcelona, Boston, Detroit and Santiago, Chile, have already made the ambitious commitment. To achieve these goals cities such as Barcelona have been supporting a grassroots maker movement of producers and consumers for everything from energy and housing to furniture and food. Sometimes cash changes hands while in others, alternative currencies, even local, social, cryptocurrencies are being used to encourage value exchange.

Distributed Autonomous Organization (DAOs)

Still mostly a dream, the idea behind DAOs is that you could have platforms connecting users for exchange without an intermediary monetizing the transactions. Think Uber without Uber in the middle, Airbnb without Airbnb. DAOs would be blockchain-enabled platforms facilitating exchange through smart contracts and distributed ledgers but no ownership of the platform. Essentially DAOs are like open source software supported by developers around the globe designed to take out the platform capitalist intermediaries and their venture capitalists. One of the most advanced experiments in the DAO space is OpenBazaar which essentially aims to be like eBay without eBay.

Conclusion

I am not so naïve as to suggest that capitalism is dead or perhaps that it could die anytime soon. Instead, what I am saying, is that capitalism, and the short-termism that frequently emerges, does not appear to be capable of addressing the world´s most pressing problems. But rather than just protest in the street like the Occupy Movement did, we are starting to witness a new, collective movement of entrepreneurs and citizens aiming to take matters into their own hands by creating new organizational models (or remaking old ones like the platform cooperativism movement) to challenge the status quo and to create a new kind of economy, one that it is frequently more local but at the same time interconnected globally. Can the post-capitalist entrepreneurship movement operate in parallel with, and successfully compete against venture capital-backed and publicly-traded traditional enterprises? Will the PCE movement help us create a more circular, sustainable and just economy in time to avert even worse crises of inequality and climate change? I do not have clear answers to these questions, but I prefer to be optimistic about their chances. How about you?

Originally published in Triple Pundit.

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