The Open Market: Reinventing Organizations in the Knowledge Economy

Abstract#

This paper proposes the Open Market, a market place for trademarks along with a valuation methodology based on R&D costs and market sentiment. This model aligns community efforts around shared identities and purposes, focused on future outcomes.

The Open Market is proposed as an economic model designed for open-source projects and free intellectual properties, effectively reinventing organizations in the knowledge economy by transforming the financial incentives. We analyze its core principles, mechanisms, and impacts on economic value creation and investment dynamics, contrasting it with traditional economic and financial systems.

The Open Market model challenges conventional notions of profitability by leveraging the non-rivalrous nature of intellectual property to foster a decentralized, liberal economy driven by investment in shared innovation. Built on principles of free markets and free knowledge, our model promotes non-extractive value creation to maximize the utility through efficient collaborative and decentralized innovation.

We propose tokenizing brand equity as a measure of a community’s innovation potential. Recognizing the value of an open-source brand as its ability to attract contributions, we introduce Brand Equity Tokens as a share in a project’s future investment in both money and effort. This model enables direct contributions to a project, aligning stakeholders on governance and quality. By leveraging crowdfunding and speculation incentives, the Open Market aims to commodify and tokenize open innovation value, shifting the focus of investors from marginal profits to durable investment and long-term commitment.

1. Introduction#

The Open Market emerges in response to the digital economy, presenting a paradigm shift from established economic frameworks.

Traditional capitalist frameworks centered on tangible, rivalrous goods, while the Open Market focuses on knowledge-based, non-rivalrous goods, addressing the unique economic dynamics of the knowledge economy. In digital projects, the traditional scarcity-based value proposition does not apply, and scarcity now stems from community curation.

The exploitation of intellectual property and labor as constrained means of production in the current dominant economy explains observed inefficiencies such as capital accumulation, worker alienation, decreased productivity, and lack of maintenance in digital commons such as open-source foundations and digital infrastructure. This model has led to a focus on value extraction rather than value creation.

We claim that today’s innovation is greatly inefficient compared to its potential and that open innovation is the solution. We observe that the lack of funding for open-source innovation actually comes from misaligned incentives. The Open Market model aims to implement an attractive, liberal, and progressive economic system that aligns the incentives of consumers, investors, contributors, and project governance organized in communities. We ground our ambitious assumptions in prior work and research, as well as facts and recent observations from the rise of decentralization and digitalization.

1.1. Traditional Capitalist Economy vs. Knowledge Economy#

1.2. Status quo#

The current economy is a complex system where commodities—including tangible and intangible assets, like stocks and equity—are traded based on supply and demand dynamics. Economic value is determined by scarcity, utility, and market perceptions, and underpinned by currency, which acts as a standard measure and store of value.

1.2.1. Commodities#

Commodities are fundamental units of trade. These include tangible or intangible assets traded on various markets, with their value driven by supply and demand dynamics, including securities such as equity, debt, and derivatives. Equity, such as stocks, represents ownership stakes in an enterprise, encapsulating not only present value but also the speculative future worth of an enterprise. This system hinges on the foundational concept of scarcity—the limited availability of physical goods and services—which confers value.

1.2.2. Utility#

Utility measures the satisfaction or benefit derived from consuming goods or services. It forms the basis of the theory of consumer choice, influencing how resources are allocated in a market economy. Utility is subjective and varies across individuals and contexts, shaping the demand side of the market.

1.2.3. Value#

Value is multifaceted, comprising intrinsic value, market value, and perceived value. Intrinsic value refers to the inherent worth of a commodity based on its utility and the limited resources involved in its production. Market value, or exchange value, is determined by the equilibrium of supply and demand. Perceived value depends on consumer perceptions, brand strength, and other intangible elements.

1.2.4. Speculation#

Speculation plays a defining role in the current economic system, driving investment decisions and market movements. Investors make informed predictions about future market trends, investing in assets they believe will increase in value. Speculation contributes to market volatility and liquidity and plays an essential role in the price discovery mechanism.

1.2.5. Currency#

Currency facilitates trade by providing a standard measure of value and a mechanism for storing wealth. Modern economies predominantly use fiat money, deriving its value not from physical properties or commodity backing but from the trust and credit of the economy. Any medium of exchange in an economy can serve as a currency.

1.3. The Knowledge Economy#

The knowledge economy represents a paradigm shift in economic models, transitioning from reliance on tangible, physical goods to prioritizing knowledge-intensive activities, characterized by innovation and driven by human capital and intellectual property.

1.3.1. Intangible Assets and Innovation#

The knowledge economy trades in non-rivalrous, knowledge-based goods such as intellectual property and digital content. Unlike physical goods, these assets do not deplete through use and can be reproduced at minimal cost.

1.3.2. Skilled and Specialized Workforce#

The workforce in a knowledge economy is highly skilled, requiring specialized skills to meet global market needs. This shift emphasizes intellectual and creative jobs over manual labor, marking a service-oriented and post-industrial transition.

1.3.3. Economic Growth through Human Intelligence#

Economic development in the knowledge economy hinges on human intelligence, an environment where knowledge is acquired, created, disseminated, and applied to drive both economic and social advancement.

1.3.4. Digitalization and Information Technology#

The rise of digitalization and information technology has led to unprecedented expansion in the creation, storage, and global dissemination of information. The knowledge economy has evolved into a network economy, characterized by interconnected knowledge networks and social entrepreneurship.

1.3.5. Scarcity comes from Curation#

In the knowledge economy, scarcity arises uniquely from the curation of abundant information. While knowledge and data are plentiful, the ability to effectively curate, contextualize, and derive value from this information is limited. Curation involves discerning relevant from irrelevant data and presenting it in a meaningful, accessible manner.

1.4. Free Software#

The free software movement is grounded in the concept of freedom, not in terms of price, but regarding user rights and community benefits. Given the anticipated role of software in governing human lives, software freedoms have been claimed as fundamental rights.

The role of markets in modern economies is to incentivize and allocate available human and natural resources to enable the greatest good for the greatest number. Conversely, closed-source knowledge has proven to slow down innovation and oppose market roles.

Aligned with this utilitarian objective, the free software movement proposed its philosophy to equilibrate competition forces in the markets by accounting for software’s special nature. Both the free markets and free software movements share a fight for competition, benefiting users and opposing monopolies.

1.4.1. Fundamental Freedoms#

1. Freedom to run the program for any purpose: Users can operate the software in any manner they choose, without restrictions.
2. Freedom to modify the program: Users can adapt and adjust software to suit their individual or communal needs, requiring access to the source code and its documentation.
3. Freedom to redistribute copies: Users can share copies of the original software without restrictions, enabling broader dissemination and ensuring it reaches and benefits the widest audience possible.
4. Freedom to distribute modified versions: Improvements and modifications by individual users should benefit the wider community.

1.4.2. Copyleft Licenses#

The copyleft licensing approach mandates that any modified versions of copylefted software must also be distributed as free software. Copyleft legally ensures that the freedoms to use, modify, redistribute, and share improvements are preserved in all derivative works.

Copyleft licenses safeguard these freedoms, designed to prevent the monopolization of software. Thus, improvements and modifications not only can but must benefit the wider community.

1.4.3. Digital Commons#

The free software movement, born from early internet philosophy, organically established digital commons: knowledge, infrastructure, and user-space software available to all for free to progress collective innovation.

Most modern infrastructure and innovation are built atop these digital commons. While big tech corporations are often praised for their innovation capacity, it is fair to assume that none of that would have happened without early public investment in the internet and digital commons.

Like any other commons, digital commons suffer a tragedy of the commons: despite acknowledging and benefiting from the immense economic value these digital commons create, no participant is incentivized to invest in building and maintaining them. In fact, the opposite is true: each individual is incentivized to act in a way that will ultimately be harmful to all.

1.4.4. Free Software has both Infinite and Zero Added Value#

The economic value indirectly created by some free software available as digital commons is immense. Multiple converging economic research studies, particularly in Europe, showed that Free and Libre Open-Source Software (FLOSS) had a x100 to x1000 leverage on economic value creation. This means that for each additional euro invested in open source, up to 1000 euros would be created in the EU GDP [19].

Meanwhile, on the markets, FLOSS has no or even negative added value. Added value is defined as the price-cost equation, and the price of free software is naturally zero.

Note this does not prevent for-profit Commercial Open Source Software (COSS) projects from sometimes generating substantial revenue and becoming an increasingly common strategy to enter busy markets with ’the open-source alternative to X’ products. However, history has shown that COSS suffer the same conflicting, destructive incentives leading to the Tragedy of the Commons described in 1.4.3. In particular, there are increasingly numerous instances of companies restricting the previously FLOSS License of their flagship software to a new one incompatible with the four freedoms outlined in section 1.4.1.

1.5. Philosophical Considerations#

1.5.1. Why Do We Work?#

Work in human society is not solely for survival or economic necessity; it also represents a pursuit of meaning, societal contribution, and personal fulfillment. Although individual motives might differ, all forms of labor and work contribute to a higher, society-level achievement.

1.5.2. Growth Is Not Progress#

Traditional economic models often equate growth with progress. In this paper, we distinguish between these two concepts, inspired by sustainable development principles and Raworth’s Doughnut Economics [12]. We assert that progress results from qualitative improvements in knowledge, innovation capacity, and shared well-being. While progress can sometimes correlate with growth, it is not necessarily tied to any form of quantitative growth.

1.5.3. The Role of Money, Price, Value#

Money serves as a medium of exchange, a unit of account, and a store of value. However, value varies based on individual perceptions. Price emerges as a consensus, representing a momentarily agreed-upon fair exchange value, often measured in terms of money.

1.5.4. The Value of Curation and Identity#

Curation is a crucial mechanism for value creation, especially in the knowledge economy, a world rich in information and ideas. The act of selecting and promoting specific content or projects becomes invaluable in this context. This process is intertwined with collective and individual identities, reflecting Bourdieu’s social capital theory [4], where value is derived from networks of relationships and shared meanings.

2. Curation Markets#

Introduced by S. De La Rouvière in 2017, Curation Markets offer a novel approach in the knowledge economy to assign value to intellectual contributions through tokenization and bonding curves. This model values intellectual property, especially in digital and open-source domains, as determined by community consensus and engagement.

Curation Markets are designed as a means for groups to coordinate around shared goals and interests and benefit from the value they collectively create, adding tokenized, skin-in-the-game signals to information curation [18].

2.1. Fundamentals#

The foundational elements of Curation Markets combine economic theory, blockchain technology, and community dynamics. This model aims to create a self-sustaining ecosystem where intellectual contributions are accurately valued and rewarded, fostering collaboration and innovation.

2.1.1. Tokenization#

Tokenization involves creating digital assets, or tokens, which represent ownership or a stake in a specific intellectual project or idea. These tokens are not mere digital representations; they embody the rights and interests in the curated content.

2.1.1.1 Re-fungible Tokens#

In the Curation Market model, tokens are fungible, meaning each token is identical and interchangeable, contrasting with Non-Fungible Tokens (NFTs), where each token is unique and not interchangeable. Fungible tokens can be traded like commodities.

2.1.2. Bonding Curves#

Bonding curves are mathematical formulas that set the price of tokens relative to their availability. As more tokens are minted, their individual price increases, incentivizing early participation.

2.1.2.1. Dynamic Pricing Mechanism#

The bonding curve dynamically adjusts token prices, making the system responsive to changes in demand and supply, reflecting the community’s evolving valuation of content.

2.1.2.2. Continuous Liquidity#

The model allows for continuous liquidity, enabling participants to buy or sell tokens anytime based on the current price set by the bonding curve.

2.1.2.3. Incentive Structure#

Early adopters benefit from the potential appreciation of their tokens, while later participants benefit from joining a more established and possibly more valuable project with less volatility.

2.2. Blockchain#

Blockchain technology is crucial to the functionality and integrity of Curation Markets, providing the infrastructure for decentralized, transparent, and secure market interactions.

2.2.1. Decentralization#

Blockchain’s decentralized nature is key to distributing power and control among all market participants, enabling for a fair and equitable environment without undue influence from any single entity.

2.2.1.1 Governance#

While token holders may gain decision-making rights, governance structures vary. Effective decentralized governance requires mechanisms that reflect the community’s consensus while maintaining efficiency and scalability.

2.2.2. Smart Contracts#

Smart contracts, self-executing contracts with terms written in source code, automate the minting and trading of tokens and govern participation rules in Curation Markets.

2.2.3. Transparency and Security#

Blockchain technology ensures a transparent and secure environment, where transactions and token ownership are visible and immutable, reducing fraud and manipulation risks.

2.3. Benefits and Challenges#

2.3.1. Benefits#

Curation Markets democratize valuation by enabling communities to collectively determine worth, decentralizing control. This model aligns the interests of creators, curators, and consumers, fostering a collaborative approach to content creation and curation. It also provides a flexible and accessible participation system for a broader range of individuals and groups.

2.3.2. Challenges#

Curation Markets may attract speculative behavior, leading to token price volatility and bubbles. Decentralized decision-making poses challenges in effective management and scalability as the community grows and diversifies. Additionally, the model requires technical understanding and access to blockchain technology, potentially limiting participation for those less familiar with it.

2.4. Governing the Commons#

Curation Markets align effectively with Elinor Ostrom’s principles for governing common-pool resources (CPRs) [10].

The Curved Token Bonding mechanism creates a self-regulating economic model, aligning with Ostrom’s concept of clearly defined boundaries by establishing a virtual boundary through the compounding token price.

In addition, Curated Tokens allow congruence with local conditions, as communities can independently govern their tokens and associated bonding curves, tailored to specific needs. The decentralized nature of Curation Markets facilitates collective-choice arrangements, enabling stakeholder participation in decision-making. Smart contract technology ensures efficient rule monitoring and enforcement. Conflict resolution is embedded in the decentralized and transparent nature of blockchain. Curation Markets inherently support the recognition of rights to organize, giving communities autonomy in forming governance structures. The concept of nested enterprises is mirrored in Curation Markets, allowing individual curation projects to integrate within larger blockchain ecosystems, promoting interconnected management of commons.

3. The Open Market: A Curation Market for Free Innovation in the Knowledge Economy#

We propose adapting the Curation Markets model to open-source innovation, particularly for free software development and maintenance. Open-source projects, exemplifying non-rivalrous goods in the digital knowledge economy, are characterized by their capacity for unlimited replication at marginal cost.

We present the Open Market as a decentralized marketplace to efficiently incentivize value exchanges between open-source project governance, contributors, consumers, and investors. These trades, driven by the underlying utility of the open-source projects, materialize the economic value creation of our proposed model.

Our assumption is that the lack of investment isn’t the fundamental root cause of the observed open-source funding challenges, but rather is the lack of aligned incentives.

3.1. Participants#

3.1.1. Consumers (Users)#

The primary participant in the Open Market model is the consumer. Utility exists if and only if an exchange of value ultimately provides satisfaction or benefit to an end consumer.

Consumers typically pay a certain price—trading value—for the received utility. This price could be in money or other valuables such as the user’s attention, contribution, data, knowledge, etc. The paid price must always be clear to the consumer.

3.1.2. Project Governance#

To include all governance models without requiring a specific one, we refer to “Project Governance” as the organizing body or process in charge of making decisions. The governance model might vary depending on the nature of the decision. For simplicity, we will always refer to an unspecified “Project Governance.” Each project will adapt the proposed mechanisms to their specific governance situation.

The Open Market model does not require any relation between project governance and the proposed economics. However, it is acknowledged that financial incentives might inevitably influence participants such as contributors and decision-makers in the governance model.

3.1.3. Contributors#

Contributors include anyone contributing time (effort, skills, talent) to a specific project. Contributors can be individuals or organizations, such as developers, designers, authors, architects, etc.

Contributors must be free in making their contributions, out of interest and goodwill.

3.1.4. Curators (Investors, Speculators)#

The Open Market is designed as a Curation Market.

In the Open Market model, all participants are investors. Consumers invest their money, Contributors invest their time, and Projects (governance) invest their influence.

Curators are equivalent to traditional investors. They invest capital with an expectation of higher returns (profit motive), returned in the same form (i.e., money).

Curators may be referred to as ‘Speculators.’ However, speculation often implies a negative role (especially when defined as an ill-informed investment). Providing capital ahead of time in the hope of financial returns isn’t necessarily a bad thing: in particular, speculation plays a systemic role of selection and promotion of specific content or projects. This is curation, hence ‘Curators’.

Curators make an informed decision in selecting and investing their capital, ahead of time, in projects that—they expect—will provide increasing utility in the form of faster innovation. The Open Market is a race to the fastest innovation, and Curators are betting on the winners.

3.2. Brand Value#

In our model, we view Brands as the ability of one project to attract more or fewer contributions than another. Contributions are traded-in valuables such as time and effort from contributors, or paid money from consumers and investors. Despite the free and reproducible nature of open-source projects, some have substantially more valuable Brands than others. The Brand can be leveraged to capture created economic value. However, being an intangible, Brand itself is difficult to capture directly.

3.2.1. Brand Curation#

A brand signifies a project’s identity and reputation. It is shaped by factors like the project’s utility, governance quality, contributor expertise, and public perception. Brands can be about marketing and also about a project’s ethos and community trust.

Brand is the intangible outcome of many intangibles; it is the result of a curation process. A dominant market position often translates to higher brand value. Brands with a loyal user base and positive public perception generally have higher valuations.

The strength of a brand lies in its ability to establish trust and recognition among its stakeholders.

3.2.2. Role of Trademarks#

Trademarks serve to legally protect a project’s identity. They ensure that the name and logo are used consistently and correctly, safeguarding the project’s reputation.

3.2.3. Brand Valuation#

Brand valuation is a complex process that aims to quantify the worth of a brand in financial terms. Multiple methodologies exist. Eventually, the estimated Brand or Trademark valuation can be used in corporate accounting to increase the worth of the assets owned by a company.

The top three approaches to brand valuation are:

1. Cost-based: This method calculates the brand’s value based on the cost invested in building it. It includes developmental costs, marketing expenses, and any other costs associated with establishing the brand.

2. Market-based: This method assesses the brand’s value by comparing it to similar brands that have been sold or valued in the market. It involves analyzing market transactions and financial data of comparable brands to estimate the value.

3. Income-based: This method focuses on the future net earnings attributable to the brand to determine its present value. This approach involves forecasting future revenue streams and discounting them to present value using an appropriate discount rate.

3.2.4. Brand Equity#

Brand Equity refers to the qualitative added value brought by the brand. It’s a measure of a brand’s ability to retain and attract customers, influence market perception, and command loyalty, often translating into competitive advantages.

Brand Equity is about the brand’s strength in the market and its potential to create value, while Brand Value is the realization of this potential in monetary terms.

3.2.5. Importance of FLOSS Brands#

Brand is a critical asset of FLOSS projects. In fact, FLOSS projects often have strict and restrictive Trademark policies to protect their Brands.

FLOSS projects effectively chose to put all their intellectual property in the public domain. However, their differentiating value indeed lies in their Brand Equity, in their ability to attract various contributions, to create a desirable identity and awareness.

3.3. Brand Equity Tokens (BET)#

In the Open Market model, we introduce Brand Equity Tokens (BETs), designed to assign a market value to the brand equity of open-source projects. These tokens are linked to the project’s research and development (R&D) spending. The idea is that as a project grows and develops, the value of its brand—and consequently the value of BETs—increases.

BETs are a type of financial asset in the Open Market. Their classification as securities depends on the legal regulations of different regions. This classification is important because it affects how BETs are traded and regulated.

We propose that each BET should represent a share in the project’s trademark. This means that owning a BET is like owning a part of the project’s brand. The intention is to align the interests of those who hold BETs with the success and growth of the project.

Further details on the technical aspects of BETs, including how they are traded and how they interact with other types of financial securities, will be addressed in a subsequent white paper. This will include a more in-depth discussion of how BETs fit into the broader financial ecosystem of the Open Market.

3.4. BET Bonding Curves#

In the Open Market model, the pricing of Brand Equity Tokens (BETs) is determined by a bonding curve, a mathematical function that sets the price of each BET. The specific parameters of this curve will be detailed in future discussions.

The bonding curve operates such that the introduction of a new BET slightly reduces the proportional ownership of existing BET holders in the project’s brand equity, a process known as dilution. However, each new BET is introduced at a price higher than the previous ones, effectively raising the overall market valuation of the brand equity. This increase in valuation means that the value of the existing BETs, despite the dilution, could be higher in terms of overall market worth.

The reliance on future R&D investments to develop brand equity makes this model speculative. BETs represent a prediction of the project’s future development and success. As such, the value of BETs is inherently linked to expectations about the project’s progress.

When BET holders sell or ‘burn’ their tokens, the action reduces the number of BETs in circulation, affecting the bonding curve and potentially lowering the overall valuation of the brand equity. This reduction reverses the dilution effect for remaining token holders, but at a possibly lower overall brand equity valuation.

While this buy-sell dynamic mirrors speculative elements seen in traditional stock markets, its unique aspect in the Open Market model is the direct connection to the utility and success of the underlying project. The value of BETs is not just speculative but also reflects the actual performance and perceived utility of the project associated with the brand equity.

3.5. BET Stakes#

The Open Market model incorporates the concept of staking BETs (Brand Equity Tokens) for crowdfunding specific projects. This approach involves contributors being rewarded with BETs in exchange for their valuable contributions to a project. Essentially, contributors earn a stake in the project’s brand equity.

This model is flexible regarding how contributions are made. Whether contributions come in the form of coding, design, documentation, or any other form of work beneficial to the project, the key criterion is that these efforts contribute to the development and enhancement of the project’s brand. In return for these contributions, individuals receive BETs, signifying a share in the brand equity they helped build.

The application of BETs is diverse. They can be used in various business models, such as bounties for completing specific tasks, general crowdfunding efforts, support for roadmap milestones, portfolio investments, accepting donations, offering subscriptions, or facilitating sales. This versatility allows BETs to adapt to various needs and strategies of different open-source projects, providing a flexible framework for rewarding contributions that enhance a project’s value.

3.6. Open Market Protocol (OMP)#

The Open Market Protocol (OMP) is the framework designed to implement Brand Equity Tokens (BETs) and their associated bonding curve mechanism. This protocol is foundational to the operation of the Open Market model, facilitating the issuance, trading, and management of BETs. The OMP defines the financial infrastructure and APIs of the Open Market.

We propose the use of blockchain technology as the underlying infrastructure for the OMP. Blockchain is chosen for its ability to provide a secure, transparent, and decentralized ledger, which is essential for managing the ownership and transfer of BETs in a permission-less trust-less environment.

In line with the principles of Curation Markets, the OMP is designed to support a decentralized and community-driven approach to valuing contributions and brand equity. The protocol will enable the creation of a market where contributors, users, and investors can interact directly, without the need for centralized intermediaries.

The OMP will be open-source, allowing anyone to review, contribute to, or use the protocol. This openness is critical to foster trust, collaboration, and continuous improvement from the community. Moreover, open governance of the protocol ensures that decisions about its development and operation are made transparently and with the involvement of its community of users and contributors.

A subsequent white paper is planned to provide a detailed and comprehensive implementation proposal for the OMP.

3.7. Open Market Exchange (OME)#

In the Open Market infrastructure, Open Market Exchanges (OMEs) implement the Open Market Protocol to allow participants to efficiently and properly trade BETs.

OME responsibilities include:

• Ensuring transparent and equitable governance of the market.
• Maintaining the liquidity of BETs and the efficiency of the market.
• Safeguarding the interests and rights of both projects listed on the exchange and their contributors and investors.
• Providing access to the market in a legal and equitable manner.
• Adhering to all relevant legal and regulatory requirements.
• Resolving disputes among market participants.

OMEs may choose different business models, such as imposing trading fees or offering subscription services.

3.8. Open Market Foundation (OMF)#

We propose the Open Market Foundation (OMF) as a non-profit, open-governance entity tasked with federating the Open Market Exchanges that run the Open Market Protocol.

We recommend that Open Market Exchanges should interoperate exclusively with other exchanges recognized by this governing Foundation.

The responsibilities of the OMF include:

• Establishing and enforcing transparent and fair governance in the market.
• Defining and updating the Open Market Protocol.
• Developing and advising on compliance frameworks.
• Providing educational resources and documentation about the Open Market.
• Advocating for policies that support free innovation in discussions with regulators and institutions.
• Facilitating communication and resolving conflicts among different OMEs.

As part of this ecosystem, OMEs are expected to contribute a membership fee to support the operations of the OMF.

4. Incentives Analysis#

This section analyzes the incentive structures inherent in the Open Market model, examining the motivations and behaviors of various stakeholders within this new economic framework.

The Open Market is envisioned not as an end-to-end solution itself, but as the financial infrastructure for a new economy. The Open Market Exchanges APIs interface this new financial system with existing payment and funding solutions to enable high-utility open-source projects to leverage various monetization strategies.

The Open Market model introduces Brand Equity Tokens (BETs), an emerging asset class. These tokens are designed to align the interests of various stakeholders with the long-term success and sustainability of community projects. We will demonstrate how the transformative systemic game incentives created by the Open Market aim to resolve the typical funding challenges faced by open-source projects, particularly the infamous Tragedy of the Commons.

4.1. Stakeholders#

4.1.1. Consumers (Users)#

• Strategy: Consumers choose to engage with projects that offer the highest utility.
• Incentives: The decision to engage is driven by the quality of the project, the level of innovation it presents, and the strength of the community around it.
• Outcome: The consumer’s engagement is modeled as a positive feedback loop, where higher project value increases consumer participation, further enhancing the project’s appeal and utility.

Note: The Open Market model does not clearly outline how to capture value at the user level. Further recommendations will be provided in a subsequent white paper. Potential strategies may include incorporating users as curators through crowdfunding or roadmap-backing models integrated directly into the end product, along with various subscription models.

4.1.2. Projects Governance#

• Strategy: Governance bodies make decisions to enhance the project’s value and attractiveness to other stakeholders.
• Incentives: Their focus is on increasing the project’s brand equity, attracting more contributions, and elevating BET values.
• Outcome: Decisions by governance are aimed at balancing project mission, sustainable growth, ongoing investment and contributor involvement.

4.1.3. Contributors#

• Strategy: Contributors are inclined to support projects that offer the best mix of rewards, both monetary (like BETs) and non-monetary (such as recognition and personal growth opportunities).
• Incentives: The primary motivators are the value of BET rewards and the intrinsic value gained from contributing to a thriving project.
• Outcome: Contributors gravitate towards projects where their efforts are most valued and which show promising growth trajectories.

4.1.4. Curators (Investors)#

• Strategy: Investors strategically place their resources in projects with high potential for growth and appreciation in the value of BETs.
• Incentives: The primary driver is the financial return potential, coupled with the desire to support impactful innovation.
• Outcome: Investment decisions are based on a balance of risk and potential reward. An equilibrium is achieved when investors can accurately assess the long-term viability and growth potential of projects, avoiding overvaluation and bubbles.

4.2. Nash Equilibrium#

Focusing on the strategic interactions among the Open Market model stakeholders, we can identify Nash Equilibria: stable states where stakeholders have no incentive to unilaterally change their strategies.

• Consumers: Choose to engage with projects or not, based on perceived utility.
• Project Governance: Develops strategies to maximize project value.
• Contributors: Decide whether to invest their skills and time.
• Curators (Investors): Allocate financial resources towards projects, influenced by potential returns and project viability.

4.2.1. Nash Equilibria Analysis#

4.2.2. Open Market Game Incentives#

• Interdependence: The Open Market ecosystem is characterized by a high degree of interdependence among stakeholders. The strategies and actions of one group significantly influence the behaviors of others.

• Engagement and investment: Active engagement from consumers and strategic investment from governance and curators are pivotal in maintaining the equilibrium of the market.

• Symbiotic relationships: The relationships among stakeholders are largely symbiotic. Cooperation and mutual benefit are required for maintaining a healthy and productive ecosystem.

4.3. Economics#

4.3.1. Tokenization and Brand Equity#

Tokenizing brand equity incentivizes early investment and fosters a sense of ownership among stakeholders. This results in a dynamic market where the value of contributions and brand equity is continuously evaluated and adjusted.

4.3.2. Bonding Curves#

The Open Market model encourages early participation and investment, as entry costs increase with growing interest and investment in a project. This approach has the potential for speculative bubbles, counterbalanced by the intrinsic value of open-source projects.

5. Conclusion and Future Directions#

The Open Market Model provides a viable complement to traditional economic frameworks, particularly suitable for the digital, knowledge-based economy. It focuses on immaterial, innovation-led growth driven by mass retail investments, offering a transformative approach to innovating and creating value.

5.1. Integration with Traditional Economic Models#

The Open Market complements traditional economic models, especially in sectors dominated by non-rivalrous goods. We propose a mixed economies approach, combining various economic systems for optimal outcomes, keeping using traditional economic frameworks for cost-led physical goods and services and using the proposed Open Market model for investment-led innovation.

5.2. Differentiating from Speculative Crypto Bubbles#

5.2.1. Rooted in Real Utility#

Contrary to many speculative crypto projects driven by market hype and short-term gains, the Open Market is grounded in the substantial utility of open-source projects. The value of tokens in the Open Market is inherently linked to tangible R&D work. This work increases the utility, adaptability, and community contribution of these projects. This emphasis on real-world applicability and innovation ensures that the market dynamics are based on actual substance rather than mere speculation.

5.2.2. Sustainable Economic Framework#

While speculative crypto bubbles often lack a sustainable economic model, leading to volatile cycles of booms and busts, the Open Market is designed as a sustainable economic ecosystem. Growth in this model is propelled by long-term collective innovation and participation. The evolution of the market is predictable and reality-based, with funds raised being invested in substantial, tangible work within curated open-source projects.

5.2.3. Diversification of Investment and Risk#

The Open Market diversifies investment and risk across a broad spectrum of projects and contributions. This diversification not only mitigates risks but also encourages a wider range of innovation and development. Contributors and Curators are encouraged to diversify their risk by contributing to a multiple and diverse range of projects.

5.2.4. Transparency and Regulatory Compliance#

The Open Market prioritizes high levels of transparency and compliance with regulatory standards to prevent opacity and oversights that could lead to manipulation and fraud. We champion a centralized decentralized approach—fundamentally decentralized but evolving into regulatory hyper-structures. We advocate for a transparent, open, and accessible protocol, allowing anyone to copy, run their own protocol fork, and join existing networks based on consensus. The Open Market Foundation, proposed as a non-profit entity, would serve as the highest regulatory body.

5.3. Future Work: The Open Market Foundation and Protocol#

We propose establishing the Open Market Foundation and an open community task force to define the Open Market Protocol. We suggest implementing federated Open Market Exchanges that adopt the protocol and become members of the Foundation. These exchanges will protect and defend the licenses and intellectual property of their listed projects, enforce market rules, and ensure market liquidity. Additionally, they will facilitate the market’s interconnection with the main, traditionally cash-powered economy or other economies, such as cryptocurrencies.

6. References#

1. Anderson, C. (2009). Free: The Future of a Radical Price.

2. Becker, G. S. (1962). “The Economic Way of Looking at Life.” Nobel Prize Lecture.

3. Benkler, Y. (2006). The Wealth of Networks. Yale University Press.

4. Bourdieu, P. (1986). “The Forms of Capital.” In J.G. Richardson (Ed.), Handbook of Theory and Research for the Sociology of Education.

5. Coase, R. (1974). “The Lighthouse in Economics.” Journal of Law and Economics.

6. Csikszentmihalyi, M. (1990). Flow: The Psychology of Optimal Experience. Harper & Row.

7. Hayek, F. A. (1945). “The Use of Knowledge in Society.” American Economic Review.

8. Keynes, J. M. (1936). The General Theory of Employment, Interest, and Money. Harcourt Brace.

9. Maslow, A. H. (1943). “A Theory of Human Motivation.” Psychological Review.

10. Ostrom, E. (1990). Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge University Press.

11. Polanyi, K. (1944). The Great Transformation. Farrar & Rinehart.

12. Raworth, K. (2017). Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist. Chelsea Green Publishing.

13. Samuelson, P. A. (1955). Economics: An Introductory Analysis. McGraw-Hill.

14. Schumpeter, J. A. (1942). Capitalism, Socialism, and Democracy. Harper & Brothers.

15. Sen, A. (1999). Development as Freedom. Oxford University Press.

16. Stiglitz, J. E. (2002). “Information and the Change in the Paradigm in Economics.” American Economic Review.

17. Favre, T. (2018). Continuous Organizations. White Paper. Fairmint.

18. De La Rouviere, S. (2017). Curation Markets. White Paper.

19. European Commission & Fraunhofer Institute (2021). Study about the Impact of Open Source Software and Hardware on Technological Independence, Competitiveness and Innovation in the EU Economy.

Contributing#

Join the conversation: mailinglist@openmarketfoundation.org.

Explore this paper on GitHub and propose changes: https://github.com/openmarketfoundation-org/openmarketfoundation.org/.