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Is open access compatible with peer review?

Completely. We seek open access for peer-reviewed literature. The only exception is for preprints, which are put online prior to peer review but which are intended for peer-reviewed journals at a later stage in their evolution. Peer review is medium-independent, as necessary for online journals as for print journals, and no more difficult. Self-publishing to the internet, which bypasses peer review, is not the kind of open access that we seek or endorse.

(From the Budapest Open Access Initiative: Frequently Asked Questions)