The Network State: How To Start a New Country - by Balaji Srinivasan

A network state is a highly aligned online community with a capacity for collective action that crowdfunds territory around the world and eventually gains diplomatic recognition from pre-existing states.

A network state is a social network with a moral innovation, a sense of national consciousness, a recognized founder, a capacity for collective action, an in-person level of civility, an integrated cryptocurrency, a consensual government limited by a social smart contract, an archipelago of crowdfunded physical territories, a virtual capital, and an on-chain census that proves a large enough population, income, and real-estate footprint to attain a measure of diplomatic recognition

The Network State in One Thousand Words

Technology has allowed us to start new companies, new communities, and new currencies. But can we use it to create new cities, or even new countries? A key concept is to go cloud frst, land last — but not land never — by starting with an online community and then materializing it into the physical world. We get there in seven steps:

  1. Found a startup society. This is simply an online community with aspirations of something greater. Anyone can found one, just like anyone can found a company or cryptocurrency. And the founder’s legitimacy comes from whether people opt to follow them.

  2. Organize it into a group capable of collective action. Given a sufficiently dedicated online community, the next step is to organize it into a network union. Unlike a social network, a network union has a purpose: it coordinates its members for their mutual beneft. And unlike a traditional union, a network union is not set up solely in opposition to a particular corporation, so it can take a variety of diferent collective actions. Unionization is a key step because it turns an otherwise inefective online community into a group of people working together for a common cause.

  3. Build trust offline and a cryptoeconomy online. Begin holding in-person meetups in the physical world, of increasing scale and duration, while simultaneously building an internal economy using cryptocurrency

  4. Crowdfund physical nodes. Once sufcient trust has been built and funds have been accumulated, start crowdfunding apartments, houses, and even towns to bring digital citizens into the physical world within real co-living communities.

  5. Digitally connect physical communities. Link these physical nodes together into a network archipelago, a set of digitally connected physical territories distributed around the world. Nodes of the network archipelago range from one-person apartments to in-person communities of arbitrary size. Physical access is granted by holding a web3 cryptopassport, and mixed reality is used to seamlessly link the online and ofine worlds.

  6. Conduct an on-chain census. As the society scales, run a cryptographically auditable census to demonstrate the growing size of your population, income, and real-estate footprint. This is how a startup society proves traction in the face of skepticism.

  7. Gain diplomatic recognition. A startup society with sufficient scale should eventually be able to negotiate for diplomatic recognition from at least one pre-existing government, and from there gradually increased sovereignty, slowly becoming a true network state. The key idea is to populate the land from the cloud, and do so all over the earth. Unlike an ideologically disaligned and geographically centralized legacy state, which packs millions of disputants in one place, a network state is ideologically aligned but geographically decentralized. The people are spread around the world in clusters of varying size, but their hearts are in one place.

If a startup begins by identifying an economic problem in today’s market and presenting a technologically-informed solution to that problem in the form of a new company, a startup society begins by identifying a moral issue in today’s culture and presenting a historically-informed solution to that issue in the form of a new society.

Cryptohistory is Cryptographically Verifable Macrohistory

The expansion of blockspace is on track to give us a cryptographically verifable macrohistory, or cryptohistory for short. This is the log of everything that billions of people choose to make public: every decentralized tweet, every public donation, every birth and death certifcate, every marriage and citizenship record, every crypto domain registration, every merger and acquisition of an on-chain entity, every fnancial statement, every public record — all digitally signed, timestamped, and hashed in freely available public ledgers

In theory you could eventually download the public blockchain of a network state to replay the entire cryptographically verifed history of a community. That’s the future of public records, a concept that is to the paper-based system of the legacy state what paper records were to oral records. It’s also a vision for what macrohistory will become. Not a scattered letter from an Abelard here and a stone tablet from an Egyptian there. But a full log, a cryptohistory. The unifcation of microhistory and macrohistory in one giant cryptographically verifable dataset. We call this indelible, computable, digital, authenticatable history the ledger of record. This concept is foundational to the network state. And it can be used for good or ill. In decentralized form, the ledger of record allows an individual to resist the Stalinist rewriting of the past. It is the ultimate expression of the bottom-up view of history as what’s written to the ledger. But you can also imagine a bastardized form, where the cryptographic checks are removed, the read/write access is centralized, and the idea of a total digital history is used by a state to create an NSA/China-like system of inescapable, lifelong surveillance.

The Realignment

People have talked about zombie Reaganism, but in this scenario a new coalition would be finally popping into view. And it’s a totally diferent carving of the political spectrum than the Reagan era. Rather than nationalists and capitalists (the right) against internationalists and socialists (the left), it’s internationalists and capitalists (left- and right-libertarians) against socialists and nationalists (left- and right-authoritarians). That Realignment would be the Network against the State. The authoritarians would outnumber the libertarians domestically, and have the institutions on their side. But the libertarians would have stronger individual talent, as they’d draw the iconoclasts, and they’d also draw support from the rest of the world. In the language of the political compass, the Reagan era was right-vs-left, whereas the Network-vs-State era would be top vs bottom.

The collision of Leviathans has knocked something loose. Access to all that information from the Network has changed our perception of the present, and with it the perception of the past. The historical inevitability and (even more importantly) the desirability of the US establishment’s victory over all opponents is now very much in question. Both outside and inside the US, there’s the sense that the US-dominated postwar order is either on its last legs or already over, and that the ancient legislators and endless remakes refect a fading culture trying to hang on by its fingernails to prevent what comes next. Though people are gearing up as if on autopilot for a Second Cold War, it’s not obvious that the US will make it out of the frst round given its internal Cold Civil War. The decline in state capacity, in internal alignment, in budgetary resources, in wherewithal, and in political will is tangible. It’s true that the most dedicated establishmentarians do still operate as if the empire will always be there. But the question of what America’s role in the world should be next remains unanswered, because the question of what America represents at home remains unanswered. Within the US, groups on both right and left are now asking themselves in diferent ways: are we the baddies? The left asks whether the US is institutionally racist, the right asks whether the US is irredeemably leftist, and more factions on each side want a national divorce. As we can see from the graphs, America is not really a single “nation state” anymore; it’s at least binational, with two warring groups. There’s been a collapse in institutional trust, and in each other. And the questions now arising are fundamental.

  • Is the US establishment a force for good in the world?

  • Is the US establishment a force for good at home?

  • Would others copy today’s America of their own free will?

  • Would the US establishment tell you the truth?

  • Was it ever a force for good at home or abroad?

My perhaps idiosyncratic answers to these questions are: no, no, no, no, and yes. No, I don’t think the US establishment is nowadays on balance a force for good abroad or at home, or that the US model would be cloned today by someone setting up a new state, or that the US establishment can be trusted to tell the truth. I do, however, think the Cold War America of 1945-1991 was on balance better for its citizens and allies than its Soviet opponents. But while I can justify these answers, my responses aren’t as important as why these questions are arising in the frst place. The reason is that the US establishment has lost control over the narrative. The distortion of the present, and the past, has caught up to them.

To summarize, (a) the period of European greatness corresponded to the open frontier from 1492-1890, (b) the period of total war corresponded to the closing frontier from 1890-1991 which ushered in a necessarily zero-sum world, (c) the peaceful reopening of the digital frontier could lead us again to a time of greatness, (d) the American and Chinese establishments are trying to close that frontier and trap us into the same steel cage match of the 20th century, (e) but with sufficiently good technology we might be able to escape these political roadblocks and (f) reopen not just a digital frontier, but a physical one: on remote pieces of land, on the sea, and eventually in space. This is what we refer to as the generalized Frontier thesis.

One model is that technology favored centralization in the West and especially the US from arguably 1754-1947 (Join, or Die in the French and Indian War, unifed national government post-Civil War, railroads, telegraph, radio, television, movies, mass media in general, and mass production). And technology is now favoring decentralization from roughly 1947 to the present day (transistor, personal computer, internet, remote work, smartphone, cryptocurrency). So, in the West, the grip of the centralized state has begun to slacken. The East is a diferent matter; after a century of communism, socialism, civil war, and Partition, China and India are more internally unifed than they’ve been in a long time. This model would explain why we’re seeing an inversion: there was an upward arc that favored the centralized State, but now we’re in the middle of a downward arc that favors the decentralized Network. So various historical events are recurring with the opposite results, like the fuid fowing in reverse. And that’s the thesis on how our Future is Our Past. In the West, at least. The East is a diferent matter! It’s a whole essay in its own right, but the future may be a Centralized East and a Decentralized West.

Marx’s concept of a class struggle has been so influential that people don’t realize that sometimes those revolutionary classes won, and became ruling classes. And then in turn fought the subsequent revolutionary classes. In fact, they often did. Understanding this is important if you want to build a startup society. Unless you are signifcantly diferentiated from the establishment — unless you have a “10X value proposition”, as a venture capitalist would put it — you’re not going to attract citizens. Social diferentiation means being revolutionary in some sense. Not necessarily in the sense of the Paris Commune. But morally revolutionary in the sense of inverting some premise that society at large thinks is good, yet that you can show — through your meticulous study of history — is actually bad. That moral inversion is the moral innovation that’s the basis for a startup society, and it leads us ineluctably to left-vs-right.

Moral Progress is Moral Innovation is Moral Inversion. If you want to produce moral and not just technological progress, you’re going to have to introduce new moral premises that invert what people previously believed. So one man’s moral innovation is another man’s moral inversion.

Left and Right as Temporary Tactics, Not Constant Classes

The names for the two tactics that arise in these battles may hail from the French Revolution — the left and the right — but they’re almost like magnetic north and south, like yin and yang, seemingly encoded into our nature. The left tactic is to delegitimize the existing order, argue it is unjust, and angle for redistributing the scarce resource (power, money, status, land), while the right tactic is to argue that the current order is fair, that the left is causing chaos, and that the ensuing confict will destroy the scarce resource and not simply redistribute it. You can think of circumstances where the right was correct, and those where the left was. A key concept is that on a historical timescale, right and left are temporary tactics as opposed to defning characteristics of tribes.

What’s the guideline for when a tribe will use left or right tactics? The tribe that’s defending (the ruling class) uses right tactics, and the tribe that’s attacking (the revolutionary class) uses left tactics. Because institutional defenders tend to win, each individual member of a revolutionary class feels like they’re losing. But because institutional defenders have to constantly fght swarms of revolutionaries to hold onto their position, the ruling class also feels like it’s on the back foot. While there are big victories where the tribe using right or left tactics manages to sweeps the feld of their enemies for a brief interval, a new tribe usually arises that is to their respective left or right, and the battle begins anew. Can we ever escape this cycle of confict over scarce resources?

The key word there is scarce. Everything changes when the frontier opens up, when there is a new realm of unoccupied space, where resources are suddenly less scarce. There’s less obligate wrangling, because an aggrieved faction can choose fght or fight, voice or exit. The would-be revolutionary doesn’t necessarily have to use left tactics to overthrow the ruling class anymore, resulting in a right crackdown in response. They can instead leave for the frontier if they don’t like the current order, to show that their way is better, or alternatively fail as many startups do. The frontier means the revolutionary is simultaneously less practically obstructed in their path to reform (because the ruling class can’t stop them from leaving for the frontier and taking unhappy citizens with them), but also more ethically constrained (because the revolutionary can’t simply impose their desired reforms by fat, and must instead gain express consent by having people opt into their jurisdiction). These are, however, reasonable tradeofs. So while the frontier is not a panacea, it is at least a pressure valve. That’s why reopening the frontier may be the most important meta-political thing we can do to reduce political confict.

Putting it all together, we propose that (a) left and right are quantifable phenomena we can see via the spatial theory of voting, (b) the left/right axis is real but rotates with time, (c) they’re ancient and ineradicable concepts, arguably on par with yin/yang or magnetic north/south, (d) they’re complementary tactics to gain access to scarce resources, (e) if one group uses a left tactic, the other is almost forced to adopt a right tactic in response, and vice versa, (f) the frontier reduces political left/right issues because it reduces confict over scarce resources, (g) we can think of left as revolutionary tactics and right as ruling class tactics and (h) the tactics constantly swap hosts over historical timeframes.

A unifed theory of cycles:

  • The left cycle starts with a group of revolutionary leftists that then become institutional rightists.

  • The right cycle starts with a group of determined rightists that then become decadent leftists.

  • The libertarian cycle starts with a group of ideological libertarians that end up building a bureaucratic state.

If you put them together, you get revolutionary, determined, ideologues (a left/right/libertarian fusion) whose glorious victory ends in institutional, bureaucratic, decadence (a diferent kind of left/right/libertarian fusion!

The point is that in any holy war, the left is the word, and the right is the sword. It’s the priest and the warrior; you need both. The left programs the minds. The priests and journalists, the academia and media, they imbue the warriors with a sense of righteous purpose. They also justify the confict to the many bystanders, convincing them to either not get involved — or to get involved on the warriors’ side. In this concept of left, the priests transmit a revolutionary zeal that justifes the war against the opposing order, blesses it, consecrates it, says it is necessary and virtuous, motivates the warriors, boosts their morale, and turns them into missionaries that can defeat any mercenary. The right furnishes the resources. They bring the warriors themselves, the farmers and the miners, the engineers and the locomotives, the rugged physicality, the requisite hierarchy, the necessary frugality, the proft and the loss, the determination and the organization, the hard truths to keep a movement going that complement the moral premises that get a movement started, the point of the spear that prosecutes that holy war.

A group using right tactics often has a defcit of zealous meaning, and is hanging onto a ruling class position while forgetting why they need to justify it from scratch to skeptical onlookers. Conversely, a group using left tactics often has a lack of hardnosed practicality, attacking the ruling class without a concrete plan for what to put in its place come the revolution. Forming a left/right fusion that’s informed by these concepts is quite diferent from what we typically think of as a left/right hybrid, namely passive centrism.

The One Commandment

Every new startup society needs to have a moral premise at its core, one that its founding nation subscribes to, one that is supported by a digital history that a more powerful state can’t delete, one that justifes its existence as a righteous yet peaceful protest against the powers that be. To be clear, it’s a huge endeavor to go and build an entire moral edifice on par with a religion, and work out all the practical details. We’re not advising you come up with your own Ten Commandments! But we do think you can come up with one commandment. One new moral premise. Just one specifc issue where the history and science has convinced you that the establishment is wanting. And where you feel confdent making your case in articles, videos, books, and presentations. These presentations are similar to startup pitch decks. But as the founder of a startup society, you aren’t a technology entrepreneur telling investors why this new innovation is better, faster, and cheaper. You are a moral entrepreneur telling potential future citizens about a better way of life, about a single thing that the broader world has gotten wrong that your community is setting right. By focusing on just one issue, you can set up a parallel society with manageable complexity, as you are changing only one civilizational rule. Unlike a political party, you’re not offering a package deal on many issues that people only shallowly care about. With the one commandment you are instead offering a single issue community, and attracting not single-issue voters but single-issue movers.

Now we see why a focused moral critique is so important. It combines (a) the moral fervor of a political movement with (b) the laser-focus of a startup company into (c) a one-commandment based startup society. Such a society is not a total revolution. We aren’t starting completely de novo. Each startup society is single taking a broken aspect of today’s world, often a State-caused or at least State-neglected calamity, writing the history of that state failure, and then building an opt-in community to solve the problem. It’s a tightly focused parallel society making one impactful change.

The Tripolar Moment: NYT, CCP, BTC

Today’s world is becoming tripolar. It is NYT vs CCP vs BTC. That’s the American Establishment vs the Communist Party of China vs the Global Internet.

Decentralization, Recentralization

The internet increases variance. Digitization allows situations to be taken to their logical conclusion, instantly, even when that digital logic doesn’t quite work in physical reality. This means things can fip from zero to one, without warning. An overnight success, ten seconds in the making. The only certainty is rising volatility.

Why is this happening? Because the internet connects people peer-to-peer. It disintermediates. In doing this it removes the middleman, the mediator, the moerator, and the mediocrity. Of course, each of those words has a diferent connotation. People are happy to see the middleman and mediocrity go, but they don’t necessarily want to see the moderator and mediator disappear. Nevertheless, at least at first, when the internet enters an arena, once the Network Leviathan rears its head, this is what happens. Nodes that had never met before, could never have met before, now connect peer-to-peer. They can form something terrible like a Twitter mob, or they can form something amazing like ETH Research. You get extreme downside and extreme upside.

It used to be that the physical world was primary, and the internet was the mirror. Now that has fipped. The digital world is primary and the physical world is just the mirror. We’re still physical beings, of course. But important events happen on the internet frst and then materialize in the physical world later, if ever.

What does natively digital news look like? There are at least two concepts of interest here: morning dashboards replacing the morning newspaper, and cryptographically verifable event feeds replacing tweets of unverifable content.

Foreseeable Futures

  • AR Glasses Bridge Physical and Digital Worlds

  • Experimental Macroeconomics. Cryptoeconomics is transforming macroeconomics into an experimental subject. Why? Because you can actually issue a currency, set a monetary policy, get opt-in participants, and test your theories in practice. The proof is in the pudding. And, if successful, the pudding is worth many billions of dollars.

American Anarchy, Chinese Control, International Intermediate

Here we give a bit more detail on a sci-fi scenario in which the US descends into a chaotic Second American Civil War, the CCP responds with the opposite extreme of a total surveillance state that traps wealth in its digital yuan network, and the rest of the world - if we’re lucky - builds a stable alternative of opt-in startup societies that peacefully rejects these extremes.

Instead of choosing either anarchic decentralization or coercive centralization, we choose volitional recentralization. The whole point is that the new boss is not the same as the old boss, anymore than Apple was the same as BlackBerry, Amazon was the same as Barnes and Noble, or America was the same as Britain. Recentralization means new leaders, fresh blood. Just as companies and technologies keep leapfrogging each other, so too can new societies with One Commandments combine moral and technological innovation to genuinely progress beyond our status quo. Recentralization is not about going full circle and making zero progress. It’s the helical theory of history. Recentralization, done right, is a cycle back to centralization from one vantage point but a step forward from another.

From Nation States to Network States

Understanding the term “nation state” requires us to distinguish the nation (a group of people with common descent, history, culture, or language) from the state (their government). They are not the same. Even though “nation” is often confated with “state,” the term “nation state” has two words for a reason. The frst word (nation) has the same etymological root as “natality“. It once denoted a group of people with shared ancestry. The second word (state) refers to the entity that governs these people, that commands the police and the military, and that holds the monopoly of violence over the geographic area that the nation inhabits. In a sense, the nation and the state are as diferent as labor and management in a factory. The former are the masses and the latter are the elite. The textbook nation state is something like Japan, in which a single group with shared ancestry and culture (the Japanese) occupies a clearly delineated territory (the islands of Japan) and is ruled by a clear sovereign (the Japanese government) which is representative of the people in some sense (originally via the divine, contemporaneously via the Diet).

There are at least two waypoints between startup society and network state worth noting: the network union and the network archipelago. Turning a startup society into a network union makes it a digital community capable of collective action. Turning that network union into a network archipelago manifests that collective action in the real world, as the community crowdfunds physical properties around the world and connects them via the internet. Finally, an impressive enough network archipelago can achieve diplomatic recognition from an existing government, thereby becoming a true network state.

On Network States

Here’s that one sentence definition again: A network state is a social network with a moral innovation, a sense of national consciousness, a recognized founder, a capacity for collective action, an in-person level of civility, an integrated cryptocurrency, a consensual government limited by a social smart contract, an archipelago of crowdfunded physical territories, a virtual capital, and an on-chain census that proves a large enough population, income, and real estate footprint to attain a measure of diplomatic recognition

when we say that a network state has “consensual government limited by a social smart contract”, we mean that it exercises authority over a digital (and, eventually, physical) sphere constituted solely of those people who’ve opted in to its governance by signing a social smart contract with their ENS names, in much the same way they might “opt in” to the governance of a centralized exchange by depositing coins there.

What is the Network State System

  • Assumption: Digital Primary, Physical Secondary

  • Assumption: The State Becomes An Admin Dashboard

  • Assumption: Divide Networks Rather than Land. Just as post-Westphalian nation states were limited in control to people within their territory, post-Satoshian network states will be limited in control to people who’ve opted into their network. It is a division of the world by network rather than by land.

  • Assumption: Consent and Cryptography Constrain

What does a Network State look like on a Map

The frst thing is to specify which map we mean: a map of the physical world, or of the digital world?

In physical space, a network state looks like an archipelago of interconnected enclaves. So, a network state is a physically distributed state, a bit like Indonesia, but with its pieces of land separated by internet rather than ocean.

In digital space, a network state looks like a densely connected subgraph of a large social network. In our terminology, it’s a 1-network, not an N-network. To gain some intuition for digital space, realize that it is very diferent from physical space:

  • Dimensionality. You don’t have just the two dimensions of latitude and longitude, in a complex social network, you might need N dimensions to properly represent the graph structure.

  • Plasticity. Imagine one day, South Africa suddenly appeared near NYC, with a footbridge to connect the two. That’s like Spotify doing a deal with Uber; suddenly, two huge networks get bridged and people can start walking across. This will become much more obvious as metaverse subnetworks are connected and disconnected by management on the basis of diplomatic relations between network states.

  • Speed. Take a look at the full global footprint of the British Empire at its zenith, and now realize that Facebook achieved greater global penetration than that in just a few years.

  • Elasticity. It’s hard to create more land (Dubai has done some work in the area, and cruise ships arguably count), but it’s easy to create more digital land, albeit hard to make it valuable. The value of land is based on location, location, location, but for digital real estate it’s connection, connection, connection.

  • Invisibility. We take for granted that we can see the Franco/German border, that we know who is on either side. But no one can really see the Facebook/Twitter border, the set of users that have accounts on both services but use them both for roughly 50% of their time online. Borders between nation states are by default highly visible, borders between networks are by default invisible. This last point is truly deep: we’re going back to terra incognita, to terra nullius, to the time of secret societies, to the time of “Here Be Dragons.” The open web is already dark to all but Google, the social web is already dark to all but Facebook and Twitter et al., and while the third web will have some parts that are globally transparent, much of it will be intentionally private and encrypted. This is not a bad thing; in many ways, what we did over the last few decades was upload the entire world in unencrypted form online. Never before has it been possible for so many to stalk anyone. The re-encryption of the world has started with a tactical retreat from public social networks towards Signal groups, but it will go much further.

Path to the Network State

We can now defne a path to the network state:

  1. Network union. A wholly digital entity, organized in a social tree structure, that engages in collective action on behalf of its members. The collective action is key for building organizational muscle.

  2. Network archipelago. A network union that begins acquiring and networking properties in the physical world. The physical interaction is key for building trust.

  3. Network state. A network archipelago that gains diplomatic recognition from at least one legacy state. The diplomatic recognition is key for attaining sovereignty. Of course, the delineation between these categories is fuzzy. For example, a network archipelago with 100k+ people, billions in annual collective income, and a large physical footprint around the world could be deemed a shadow network state. It would have more organization than most stateless nations, as it would actually have a state and land, just not all in one place. All it would lack is recognition.

Slight fuzziness notwithstanding, this is a realistic path from a single network union founder to something big.

Digital Civil Society

Network unions, network societies, and other forms of digital civil society are valuable endpoints in themselves. For example, a serious open source project could have an associated network union that advances the collective interest of (say) a guild of ReactJS programmers, without any need to buy land. Or a ftness infuencer could turn their online community into a network archipelago, replete with gyms around the world, organizing people to get discounted keto-friendly food. You can probably come up with other kinds of structures. The overall idea is to build digital civil society, all those community organizations that aren’t either the state above or the isolated individual below, the kind of non-political voluntary associations that once built America, according to Tocqueville.