What Is the Network State?

Basics

Balaji Srinivasan, former CTO of Coinbase, introduced the concept of the Network State, a socio-political organization leveraging blockchain and related technologies. This model envisions a presence in both virtual and physical realms. The physical aspect is achieved by acquiring parcels of land worldwide, forming a networked archipelago. In theory, any community of like-minded individuals could aspire to become a Network State.

What Is the Network State?

In his book "The Network State," entrepreneur and former Coinbase CTO Balaji Srinivasan outlines a blueprint for creating alternative political entities founded on blockchain and other innovations. Srinivasan argues that social and political changes lag behind technological advancements due to the dominance of nation-states. This dominance restricts reform and experimentation, as political careers require integration into existing power structures.

Unlike politicians, entrepreneurs can initiate ventures without integrating into corporations, with market competition fostering diversity, quality, and progress. The Network State project leverages market dynamism to accelerate social progress, allowing anyone to use modern communication tools and cryptocurrencies to start a community like a business startup. Founders, unburdened by historical legacies, can freely experiment with community parameters, potentially evolving into network states.

Core Principles of the Network State

Balaji Srinivasan defines a Network State as a social network that introduces a moral innovation, possesses collective self-awareness, has a recognized founder, and demonstrates the capacity for coordinated action. It features integrated cryptocurrency, a consensus-based government limited by social smart contracts, a collection of physical territories, virtual capital, and conducts on-chain censuses to prove its population, land, and wealth for potential diplomatic recognition.

Key elements of this definition include:

• Moral Innovation: An ethical idea embraced by all citizens (netizens), succinctly expressed through a "One Commandment" that unites the community.
• Founder: The visionary who proposes the network state concept and retains exclusive decision-making authority over its development.
• Cryptocurrency: Facilitates economic operations, resident identification, voting, and crowdfunding campaigns.
• Land: Physical territories owned by the network state and utilized by its members, distributed globally.
• Diplomatic Recognition: Distinguishes the network state from other community organizations by achieving some level of official recognition.

Srinivasan also categorizes related concepts:

• Startup Society: Founded by a visionary, unified by a single idea, existing online, and engaging in collective actions based on shared values.
• Network Union: A mature startup society with a blockchain-based internal economy and significant membership, capable of advocating its interests to traditional states and large corporations.
• Network Archipelago: A network union with physical assets such as land and property.
• Network State: A network union that has attained diplomatic recognition and political sovereignty.

A startup society need not evolve into a full-fledged network state, similar to how a new business may not aim to become a global corporation.

Defining the "One Commandment"

At the core of a Network State is its moral innovation, encapsulated in the "One Commandment." This principle unites community members, providing them with a shared identity and a collective goal. The "One Commandment" can advocate a lifestyle, such as "Veganism is the most beneficial and ethically acceptable diet for humans," or uphold a value, like "Cancel culture harms society."

Community members act online and offline in unison, guided by this central tenet. For instance, a vegan startup society might promote the benefits of a plant-based diet or open a vegan restaurant, while a community opposed to a cancel culture might support individuals who have lost their jobs due to online harassment.

The Role of Land in a Network State

Following the "cloud first, land next" principle, startup societies should initially organize online before acquiring physical assets. This approach allows them to develop ethical guidelines, a sense of community, and a blockchain-based governance system.

Acquiring land is essential for communal living and business ventures. Srinivasan advises that in the early stages, these societies purchase land in areas outside major cities, where corporations and states show little interest. The territories acquired by the startup society are connected through a network, forming an archipelago.

The Integral Role of Blockchain

Blockchain serves as the core infrastructure of a Network State, enabling participants to verify identities, own and exchange digital assets, make governance decisions, register property rights, engage in legal relations, and even enter into marriages. All interactions recorded on the blockchain provide up-to-date statistical data on the state of the Network State. Consensus-driven smart contracts will function as the laws governing these digital societies.

Srinivasan envisions the possibility of multiple citizenships, where individuals can engage with various Network States through a Web3 login. A crucial concept of the Network State is the on-chain recording of all significant verified events, known as "the ledger of record." This "provable history" prevents manipulation of the past and offers a transparent view of the state's development trajectory.

Network State vs. Past Utopias

Sociologist Pavel Stepantsov notes that Balaji Srinivasan's hypothetical project, the Network State, fits within the framework of contemporary technoutopias, which focus on rethinking social relations through new technologies that organize, observe, and highlight community members.

Unlike the grand 20th-century projects like anarchism and communism, where technology served as a tool for achieving political goals, these technoutopias view technology as a "way of life," with social relationships emerging from innovations. Technology thus shapes new forms of societal interactions.

While often associated with libertarianism, Srinivasan's approach differs significantly. Libertarianism is rooted in utilitarianism, positing that optimal economic conditions will naturally lead to social harmony. In contrast, Srinivasan emphasizes the importance of communication norms and the moral foundations of human communities. His project is more sociological, similar to Norbert Elias's theories, which suggest that supra-individual structures arise from human interactions, perpetuating themselves through the creation of moral norms and values, as explained by Stepantsov.

Criticisms of the Network State

In his article "What I Think About Network States," Ethereum co-founder Vitalik Buterin highlights several concerns:

• Founder-Centric Leadership: While centralization and unilateral decision-making are effective for small startups, they can lead to power asymmetries as the network state scales, potentially stifling its development.
• Accessibility for the Wealthy: This model favors citizens of developed countries who can choose their jurisdictions. Most people in the third world lack the means to fully participate in a network state, being limited in their freedom to move between enclaves.
• Inadequate "Exit Strategy" for Global Issues: The concept of "exit"—opting out of political life or emigrating—fails to address global political problems. Free states might allow their citizens to leave, but authoritarian regimes will likely restrict movement and suppress parallel societies.
• Negative Externalities: The "vulnerable world hypothesis" suggests that scientific progress makes destructive technologies more accessible, necessitating authoritarian measures to mitigate threats. A deregulated world of network states could increase the risk of technological catastrophes.

Conclusion

Balaji Srinivasan's Network State concept combines blockchain technology with socio-political structures to create a fusion of virtual and physical communities. This model prioritizes decentralized governance and community-driven initiatives with land acquisition. Blockchain ensures secure transactions and governance through smart contracts. Despite criticisms related to power centralization and accessibility, the Network State presents a new approach to social organization that could potentially accelerate social progress through technological advancements.