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Operational Transformation (OT) is a consistency maintenance technique for collaborative editing systems-a special class of distributed applications for supporting human-computer-human interaction and collaboration over communication networks. The theory of causality has been the foundation of all prior OT systems, but it is inadequate to meet essential OT requirements in functionality and correctness. In this paper, we analyze the limitation of the causality theory, propose a novel theory of operation context as the new foundation for OT systems, and present a new OT algorithm-Context-based OT (COT)-which provides uniform and efficient solutions to both consistency maintenance and undo problems. The COT algorithm has been implemented and used for supporting a range of novel collaborative applications. The context theory and context vectors are potentially applicable to other distributed computing applications.