Synthesized with AI from documents developed by Tiberius Brastaviceanu, with the help of Sacha Pignot
Introduction: The Global Economic Transition
We are witnessing a profound transformation in the architecture of global economic activity. The traditional capitalist system, rooted in firm hierarchies, proprietary assets, and market-based transactions, is giving way to a networked economy. This emergent configuration is typified by commons-based peer production (CBPP), open source collaboration, distributed knowledge networks, and peer-to-peer (p2p) collaboration. Examples abound: permissionless blockchains, distributed scientific research initiatives, decentralized media platforms, and open educational resources.
In parallel, the digital infrastructures enabling these formations are evolving. Initially celebrated as a breakthrough in decentralized coordination, blockchain technologies and Decentralized Autonomous Organizations (DAOs) are revealing inherent limitations when tasked with modeling complex economic processes and sustaining full-fledged economic organizations. In contrast, newer agent-centric approaches—such as the Open Value Network (OVN) model built on Resource-Event-Agent (REA) accounting, the Valueflows vocabulary, hREA logic, and Holochain as a distributed substrate—are showing greater promise.
This blog post draws from the experience of real-world p2p production networks such as Sensorica, and analyzes the foundational limitations of blockchain/DAO-based systems while advocating for a hybrid architecture of economic coordination.
The Limitations of Blockchain and DAOs for Complex Economic Processes
Smart contracts are finite state machines. While they enable conditional logic and self-enforcing agreements, they suffer from key constraints:
- Lack of agency: Smart contracts cannot initiate actions; they passively await external transactions.
- No adaptivity: They cannot learn or evolve in response to new contexts.
- Low expressiveness: They model narrow rule-based interactions but cannot handle rich workflows, commitments, or evolving plans.
- High operational cost: Every interaction incurs gas fees, limiting granularity and frequency of updates.
2. DAOs: Governance Without Production
DAOs were designed to manage funds and collective decisions. While conceptually intriguing, most DAOs reduce governance to token-weighted voting and budget allocation. They lack:
- A production grammar: DAOs manage treasuries, but not the economic processes that generate and transform valuables.
- Contextual roles and coordination: All agents are flattened to token holders; there is no representation of task-specific expertise or social embeddedness.
- Traceability of contributions: There is no natively supported way to account for who contributed what, how, and with what impact.
In essence, DAOs are governance shells with limited economic depth. They serve as digital cooperatives but do not embody operational infrastructures for economic activity.
3. Blockchain Architecture: Consensus Bottleneck and Global State
Blockchain relies on a globally shared ledger, secured by consensus. This introduces:
- Scalability issues: All agents must agree on the same state, which limits throughput.
- Privacy limits: All state changes are visible to all participants.
- Poor fit for diverse local contexts: Global rules enforced via consensus do not adapt well to context-sensitive collaboration.
This model is inherently brittle for complex organizations with multi-scale, asynchronous, and context-specific workflows. Moreover, blockchain-based architectures are grounded in a low-level computational model (deterministic, transactional, state-machine driven) that is ill-suited for expressing complex, adaptive, multi-agent economic systems. In formal terms, blockchains are positioned near the low end of a spectrum of computational expressivity. At best, they enable finite state automation with strict constraints on complexity, timing, and semantic nuance.
The OVN Alternative: A Better Model for Complex Economic Organizations
The OVN model, in contrast to DAOs, emerges from a different epistemology. It begins with a high-level computational model—inspired by relational, agent-based, and process-centric modeling paradigms. According to the computational model taxonomy, blockchain-based systems score low in agency, adaptivity, composability, and reflexivity, while the Valueflows + hREA + Holochain stack achieves high scores across all of these dimensions.
1. Economic Grammar Based on REA (Resources, Events, Agents)
Rather than model transactions, the REA ontology models the economic processes involved in the generation and transformation of valuables:
- Resources: Tangible and intangible inputs/outputs.
- Events: Actions that change the state or availability of resources.
- Agents: Participants that perform or are affected by events.
This triad allows us to describe flows of contributions, transformations, dependencies, and engagement in economic processes in a way that is semantically rich and computation-friendly.
2. Valueflows: A Shared Vocabulary for Distributed Economic Activity
Valueflows is an open vocabulary that extends REA for networked, post-market economies. It enables:
- Semantic interoperability: Different agents and systems can coordinate using a shared language.
- Contribution accounting: Track who did what, how, and in what context.
- Workflow modeling: Represent plans, intents, offers, and actual events.
Importantly, Sensorica works with a triadic model of value, inspired by Peirce's semiotic triangle. In this view, value is not a property or substance but a relation among:
- A valuable (a material or immaterial reality),
- A token (which can be money or any symbol representing the valuable),
- A valuation, which is partly subjective and partly inter-subjective, mediated by social and cultural processes.
This model supports non-monetary forms of exchange, such as barter, mutual credit, or symbolic recognition, and can also extend to non-human living systems.
3. hREA: Economic Logic Engine
hREA is a modular implementation of Valueflows. It handles:
- Economic event validation
- Consistency of process flows
- Resource tracking and provenance
It enables agents to run autonomous, interoperable, and accountable economic logic locally—without requiring consensus from a global ledger.
4. Holochain: Agent-Centric, Contextual, and Scalable
Unlike blockchain, Holochain:
- Is agent-centric: Each participant maintains their own source chain.
- Supports local validation: Data is validated within shared contexts.
- Avoids global consensus: There's no single state to agree upon.
- Enables fine-grained privacy and contextual governance.
This makes it ideal for heterarchical, fluid, and evolving networks of contributors, such as those found in CBPP or global p2p design networks.
In computational terms, Holochain systems are closer to distributed multi-agent systems with reflexivity, learning, and local memory, akin to high-level adaptive stigmergic environments. This makes them inherently more suited to modeling real-world economic ecosystems.
Sensorica: A Case in Point
Sensorica is a pioneer OVN experimenting with open hardware, contribution accounting, and stigmergic coordination. It:
- Tracks contributions across roles (engineering, documentation, outreach)
- Attributes valuations to contributions through social processes
- Allocates shares of generated income based on these valuations
- Coordinates distributed contributors asynchronously
This kind of accounting and coordination cannot be achieved only using smart contracts or DAOs without major workarounds or reliance on centralized, off-chain infrastructure. But blockchains with smart contract capabilities (ex. Ethereum and Cardano) offer stable and secure transactional functionality. Sensorica is currently transitioning from a Web2 REA-based infrastructure to a native p2p economic network, which uses Valueflows, hREA, and Holochain to build the stigmergic digital economic environment, and smart contract capable blockchain technologies (ex. Ethereum and Cardano) to build the a secure transaction layer (for currency, credencials, certification, etc.). This shift is intended to enable greater scale, autonomy, and context-awareness. See PEP Master venture for example.
Conclusion: Toward a Post-Market, Networked Economy
Blockchain and DAOs were necessary steps in the decentralization of economic infrastructure. But their computational models are too limited to support the full complexity of economic life. As we transition from a market-based economy to a networked, peer-driven economy, we need:
- Richer representations of production
- Fluid, role-based coordination
- Context-aware decision-making
- Interoperable semantic infrastructures
Open Value Networks, built on REA + Valueflows + hREA + Holochain and using Blockchain for transactions offer a realistic and field-tested path forward. They model economic processes, not just transactions or governance. They reflect the network logic of contemporary collaboration and can sustain resilient, open, and adaptive institutions.
For economists interested in designing the next generation of economic infrastructure, it's time to look beyond the ledger.
References
You can contribute to Sensorica's efforts to build p2p economic infrastructure.
