What is a Network State?

Main

• The Network State is a concept of socio-political organization proposed by the former CTO of the Coinbase crypto exchange Balaji Srinivasan and based on the use of blockchain and related technologies.
• The creation of such formations implies the presence not only in the virtual, but also in the physical dimension.
• The latter is achieved through the acquisition of land around the world, which are then combined into a networked archipelago.
• If you have ambitions, any community of like-minded people can theoretically become a network state.

Why create new states?

The idea of ​​Network State is outlined in the book of the same name by the entrepreneur, investor and former CTO of the Coinbase cryptocurrency exchange Balaji Srinivasan. In this work, the businessman proposes an algorithm for creating network states – alternative political formations based on blockchain technologies and other innovations.

According to Srinivasan, social and political change is slower than technological change. This, in his opinion, is due to the global dominance of nation-states. In such a situation, reforms and experiments with new ways of social organization are limited: a political career is inaccessible to the majority and is associated with the need to integrate into existing institutions of power.

Unlike bureaucrats, entrepreneurs are not required to join corporations in order to organize their business; market competition increases the variety and quality of goods, generating the common good and driving progress. As Srinivasan puts it, “getting on the Forbes list is much easier than getting on the list of US presidents.”

The Network State project proposes to use the dynamism of the market to accelerate social progress – anyone who wishes, using modern means of communication and cryptocurrencies, can establish their own startup society, just like a founder opens a new business.

The founder is not bound by the legacy of the past and is free to experiment with the parameters of the community, which can later become a network state.

What are the fundamental principles of the network state?

Srinivasan defines a Network State as “a social network that offers moral innovation, has a sense of collective self-awareness, has a recognized founder, the capacity for collective action, a certain level of correctness in interpersonal interaction, an integrated cryptocurrency, a government based on consensus and limited by social smart contracts, having at its disposal an archipelago of physical territories, virtual capital, conducting an on-chain census that shows that the network state has enough people, land and wealth to achieve a certain diplomatic recognition.

Under the key points of this definition, the author means the following:

• moral innovation is an ethical idea shared by all citizens (netizens) of the network state. It must be succinctly expressed with the help of “One Commandment” – a formula shared by all participants;
• the founder offers a vision of the network state and has the exclusive right to make decisions regarding the development of the project;
• cryptocurrency provides economic functioning, allows you to keep records and identify residents, conduct voting and participate in crowdfunding campaigns;
• land is the property of the network state in the physical world, which is in the use of its members. It can be distributed all over the world;
• diplomatic recognition distinguishes the network state from other possible types of community organization.

Srinivasan also distinguishes between the concepts of “startup society”, “network union”, “network archipelago” and “network state”.

• a startup society is a society founded by a founder and united by one idea, existing in a network and taking collective action based on its values;
• the network union is a startup society that has already reached maturity, has an internal economy based on the blockchain, with a large number of members. Network alliances are able to defend their interests in front of traditional states and large corporations;
• network archipelago – a network union that has physical assets: land, property, etc.;
• a network state is a network alliance that has achieved some degree of diplomatic recognition and political sovereignty.

A startup society does not need to evolve into a full-fledged network state, just as a new business may not have the ambition to become a global corporation.

What could be the “One Commandment”?

Moral innovation is the base point around which all the above associations are built. It brings the members of the community together, gives them a common identity and a purpose for collective action. The “One Commandment” can be about lifestyle choices, such as “Veganism is the healthiest and most ethical diet for humans,” or values, “Cancellation culture hurts society.”

Community members act in a coordinated way both online and offline based on the One Commandment. For example, members of a vegan start-up society can distribute materials about the benefits of avoiding animal products or open their own restaurant, and members of a society against cancellation culture can look for work for people fired as a result of online bullying.

Why does the network state need land?

Cloud first, land next (but not land never) — the principle that startup societies, before acquiring land and other non-digital assets, must organize themselves online. From network communications and collective practice, they will be able to develop ethical rules and self-awareness of belonging to the community, as well as develop a blockchain architecture for self-government and decision-making.

The acquisition of land is necessary for cohabitation and opening businesses. At the first stage, Srinivasan recommends buying plots outside major cities in places that corporations and states are not interested in.

The territories acquired by the start-up society are united into an archipelago through a network.

What is the role of blockchain here?

Blockchain is the main infrastructure of the network state, allowing participants to verify their identity, own and exchange digital assets, make management decisions, register property rights, enter into legal relations with other citizens, enter into marriages, and so on.

All interactions of netizens recorded in the blockchain will always make it possible to have up-to-date statistical data on the state of the state. The role of laws in the Network State will be played by consensually accepted smart contracts.

Srinivasan allows the emergence of the institution of multiple citizenship: using a Web3 login, a person will be able to participate in the life of several network states at once.

One of the most important ideas of the Network State is the on-chain recording of all significant verified events (the ledger of record), a “provable history”, which will allow you to avoid manipulation of the past, as well as to see the trajectory of the development of the state.

How is Network State different from previous utopias?

According to the sociologist Pavel Stepantsov, Balaji Srinivasan’s hypothetical project can be put in the line of modern techno-utopias – a way of problematizing social relations that arises from attention to new technologies for organizing, observing and making visible members of the community.

Unlike the big projects of the 20th century – anarchism and communism, in which technology plays the role of a tool to achieve a political goal, in these utopias, technology is understood as a “form of life.” Social relations for them are derived from innovations. Technique forms new forms of social interactions.

“Srinivasan is often considered a follower of libertarianism, but this is not entirely true. Libertarianism is based on the philosophy of utilitarianism: if we reach an optimal economic state, then the social component will follow it. The Srinivasan project emphasizes the importance of the norms of communication and the moral underpinnings of human communities. It is more sociological and resembles the theorizing of the sociologist Norbert Elias, who suggested that supra-individual structures are formed from the interaction of people and reproduce themselves through the creation of moral norms and values,” the expert explains.

Why is Network State being criticized?

Ethereum co-founder Vitalik Buterin in his article “What I think about the network state” highlighted several points “with which he has problems”:

• leadership role of the founder. Centralization and sole decision-making work well for small startups, but power asymmetries can be an issue when scaling, and founder decisions can hinder the development of digital states;
• inaccessibility for people without much income. This concept is well suited for citizens of developed countries who can choose their own jurisdiction for life, but most third world citizens will not be able to fully participate in the network state – they are limited in their freedom to choose jurisdictions and cannot move between enclaves;
• the insufficiency of the “exit strategy” for solving global political problems. “Exit” – non-participation in political life, including through emigration. Free states will allow their citizens to leave their jurisdictions, while authoritarian states will close their borders and prevent the formation of parallel societies within their borders;
• the problem of negative externalities. The “Vulnerable World Hypothesis” suggests that scientific progress increases access to disruptive technologies for all. Therefore, to prevent threats, authoritarian measures are needed. The deregulated world of network states increases the chances of a man-made disaster.