What is a Network State?

What if a group of tech entrepreneurs, biologists, philosophers, and engineers gathered and decided to create their own country where everyone has a digital ID, and all transactions are kept on blockchain? This might seem a little (or a lot) dystopian, but it is the concept of a Network State in a nutshell. Currently, it draws in a lot of supporters. 

In this article, we are going to figure out how it could change the world as we know it.   

What is the idea behind the Network State?

The idea of the Network State was first described by Balaji Srinivasan, a prominent entrepreneur, technologist, and thought leader in the field of technology. He wrote a book about this concept and published it on July 4, 2022.

This date was chosen because, in this book, Srinivasan talks about the role of various existing political structures of the modern world and how they suffocate technological innovation. In his view, the traditional state is a thing of the past that has become outdated because of modern technologies.

Thus, Balaji Srinivasan's vision represents a novel approach to social and political organization in the digital era. Basically, he calls upon technology-savvy people to create their own states. They can be focused on various things, such as income distribution, healthy lifestyle, longer life expectancy, and so on.

The author acknowledges that this is not an easy process by any means, and he suggests the “cloud first, land later” approach. These are the steps to this process:

1. A group of people with shared interests establishes an online community with the ambition of achieving something greater, paralleling the creation of companies or cryptocurrencies.
2. These digital communities evolve into network unions, in which members collaborate. Such groups are supposed to be better in organization compared to online communities. Unlike traditional unions, they are not exclusively focused on opposing corporations but strive to create their own Network State.
3. Next, this group has to increase trust in the eyes of other people. This is done by face-to-face meetings, conferences, etc. The bigger such events are, the better.
4. Trust and resources are supposed to help with collectively funding tangible assets (e.g. residences and towns). This will allow digital citizens to transition into physical co-living and co-working in highly technological communities.
5. Then the physical nodes of the digital societies are to be interconnected so that each person has some form of a digital identity.
6. After that, the network’s citizens can create a census to illustrate the expansion in population and income, showcasing the society's growth using blockchain technologies.
7. Once this state reaches a significant scale, a startup society carries out negotiations for recognition from already existing governments. This is necessary for getting greater sovereignty to become a fully-fledged network state.

This concept sees the Network State as more of an ideological alignment of people from different parts of the world, which makes geographical decentralization an important aspect. The global population is dispersed, and organized into clusters of various sizes, all sharing common principles and values.

What is the role of blockchain technologies in the Network State?

In Balaji Srinivasan's concept, blockchain technologies and cryptocurrencies play an important part in both the formation and operation of digital communities. They have several essential functions.

Within the Network State, blockchain and cryptocurrencies serve as the backbone for creating a digital economy. These virtual societies employ cryptocurrencies as their internal currency, enabling seamless transactions, trade, and the accumulation of wealth within their community. This approach promotes economic self-sufficiency and transparency, as all financial activities are securely recorded on the blockchain.

What is more, blockchain technology, particularly the concept of Web3 cryptopassports, plays a role in facilitating physical access to the Network State's co-living communities. This feature empowers citizens to move between physical locations while preserving their digital identity, which is important for geographical decentralization.

The immutable and transparent nature of blockchain technology is also used for governance. Such activities as voting and censuses are supposed to be carried out on the blockchain. 

Additionally, cryptocurrencies, being decentralized digital assets, can empower the Network State to become financially independent. By establishing their own cryptocurrency-based economy, these digital societies can decrease their reliance on traditional financial systems. This aligns with their vision of ideological harmony coupled with geographical decentralization.

A real-world example: the Zuzalu project 

The Zuzalu project was organized by Vitalik Buterin, co-founder of Ethereum in March 2023. The entrepreneur gathered 200 participants from around the world and from various backgrounds (engineers, IT specialists, artists, biologists, philosophers, etc.), who spent two months co-living in Montenegro. It aimed to create an intentional community focused on fostering cultural and intellectual exchange. Basically, this was a real-world experiment exploring the concept of a Network State.

For this experiment, even specialized apps were created that use zero-knowledge proofs: Zu Pass (for identification) and Zu Poll (for voting). They enhanced the privacy and security of residents' identities.

In an interview, Buterin shared his main takeaways from this event. According to him, the project emphasized the value of experimentation in refining the concept of a Network State. Citizens will benefit from infrastructures, but informal mechanisms can be as effective because they reduce barriers and remind people of their capabilities.

At the same time, they ran into some challenges. For instance, selecting the right people who will be allowed to join such a community can be problematic when it comes to scaling the project. Creating multilayer structures and empowering knowledgeable members to invite and inform potential recruits about core values is essential.

Criticism of the Network State concept

While the concept presents radically innovative ideas for redefining governance and community organization in the modern day and age, it faces significant scrutiny and several points have been met with criticism.

First of all, critics often question the practicality of transitioning from traditional nation-states to Network States. They argue that the existing global political order, with its established legal, economic, and social structures, presents formidable obstacles to the creation of these digitally driven societies. Especially when it comes to the final step towards creating a Network State, diplomatic recognition, critics are convinced that no existing country would support a Network State because this would mean losing taxpayers.

Another concern is the potential for anarchy within the Network States. Some people argue that without robust governance structures and legal frameworks, these communities could descend into chaos, posing risks to the safety and security of their residents.

Furthermore, questions are raised about the selection process for Network State residents and how inclusive these communities can be. Critics emphasize the potential for exclusivity or elitism within these societies. Vitalik Buterin, who generally endorses the concept, has voiced a fear. He wrote that if the Network States were to be constructed carelessly, they could potentially only be beneficial to the wealthy people. 

Conclusion

To sum up, the Network State concept represents a bold and visionary reimagining of governance. It makes several interesting points about the present power structures and offers a new way of solving societal problems through a technical lens. However, as it is now, in its rather early and pretty much entirely theoretical stages, it faces a lot of valid criticism. There is a need for careful consideration and practical solutions as this concept continues to evolve.

The Network State concept has the potential to disrupt existing political and economic systems. This could lead to all sorts of consequences, including completely unpredictable ones. This is why it will benefit from further research. Hopefully, there will be more real-world cases of building such communities in the future, so that we can see how viable such concepts are.