Newsletter #7: Starting new countries with Web3
How the blockchain technology, cryptocurrencies and the metaverse can be leveraged to start a new country
A few months ago, on the 4th of July to be precise, Balaji Srinivasan, released his new book “The Network State”. In this book, he talks about starting a new country! I know it sounds ridiculous at first, but if you go through the steps that he proposes, it doesn’t seem too far-fetched. I went through his book and in this post, I will attempt to condense the main ideas in the book as per my understanding. And yes, the release date was not a coincidence!
The current models of countries are what is described as the Nation States in the book. This term is not a new one, in fact, it is said to have arisen from the Westphalian system referring to the treaty of Westphilia in 1648.
Let’s look at what it means:
What is a Nation-State?
Although you can pursue a Ph.D. in the subject, Balaji does provide a good framework to think about the concept of a Nation-State. It can be broken down into the following components:
Land: A demarcated boundary on the map which shows the area owned and controlled by the nation-state. Even though we term it as land, we also include the seas and oceans, and, in modern times, airspace.
Control over the land: The control is almost exclusively enforced through force. The army controls the land, the navy, the sea, and, the airforce, the air.
People: In today’s world, the citizens, or in general, the land's inhabitants. They use the resources of the land to produce something useful for the land. A subset of these people also participates in controlling the land.
A governing people: The subset of the people who are responsible for deciding when, how, and where to use force so that control over the land is maintained by defeating both internal and external threats.
The people of the land and the land itself can be thought of as the Nation and the governing body and the tools of governance (Force, laws, courts, etc) can be thought of as the State.
In addition to this, the book also quotes Oxford’s definition of a Nation, which is:
“A large body of people, united by a common history, culture or language inhabiting a particular territory or country”
Why is this important?
First, it mentions “united people”, and second, more than one factor of why they might be united. So in essence, to have a united set of people, you don’t necessarily have to come from the same background, or physical location or speak the same language, you can, in theory, have any arbitrary common thread, strong enough to form a collective that can create the 4 components mentioned earlier.
What is a Network State?
I do recommend going through the first few pages of the book, where Balaji has described the Network State in 1 sentence, 1000 words, and an essay. My goal here is to take the one-sentence definition and explain the main components as concisely as possible.
“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.”
Okay, so that’s a lot to take in, but it is predictable that something deep enough and complex enough to be a book, is going to be hard to summarise in a sentence.
The crux of a network state is to start with something like a startup company, only here it is a country, and slowly build up the different components using cryptocurrency, VR/AR, and blockchain technology to ultimately gain diplomatic recognition from the current Nation States. So yes if this works, you can be a citizen of a country called Javascript Rules with a valid JR passport!
As with the Nation States, let’s break down the Network State into its components:
A moral innovation:
The thread that binds people together. Eg: Sugar is Bad (An example cited by Balaji in the book and a few podcasts) or JavaScript Rules (Although not a moral innovation, my personal favorite ;) ) The chapter One Commandment goes in depth about why a moral innovation is necessary.
A Social Network:
With the internet and web3, the people forming the nation albeit necessary can be dispersed geographically. Hence the name Network State. Unlike a Nation-State, the people who will form the Network State are not bound by physical boundaries.
A sense of national consciousness, capacity for collective action, and a recognized founder:
Since you can choose which network state to join, a network state must encourage membership such that each person feels like a part of the state. Once this is true, the group can act together on a single goal, kind of like how a company CEO wants everyone to recognize, be aligned with, and work towards realizing the company’s vision. The sense of ownership and belonging go hand to hand with collective action. There is no collective action without unity. A recognized founder will serve the purpose of having a leader at the beginning and a common thread for people down the road.
In-person level civility:
To build trust in a society that operates mostly online, meeting your fellow Networker men and women becomes a crucial part. This can be somewhere in physical space or virtually via VR.
An integrated cryptocurrency and a social contract to enable and limit governance:
The economy of the Network state is carried out via the cryptocurrency of the Network State, this is very similar to currencies of Nation States, only with additional properties of crypto such as anonymity, non-repudiation, difficult to hack yet simple to verify, etc. In addition to this, the governance can be carried out via any mechanisms present today, but what the Network state envisions are easy entry and easy exit. Anyone who signs a social smart contract of a country is accepting the rules of governance, additionally, the conditions for exit can be carried out automatically via the design of the contract. Unlike nation states, you choose when and which network state to enter, as well as when and if to exit.
An archipelago of crowdfunded physical territories and virtual capital:
You need physical space because no matter how good Web3 turns out to be, humans are limited by physics. At least, as of 2022, we cannot go completely digital. What is different in a network state, however, is that these territories are spread out across the world. So how do we know which physical space is owned by the network state One way described in the book, is minting a flag NFT and making it visible via VR Glasses. Virtual capital refers to a VR space that networkizans can access once they verify their membership. For example, a VR library space of online books maintained by a particular network state can be accessed by anyone who can verify their signature on the social contract for that state. The vision is to seamlessly integrate virtual and physical worlds through VR.
An on-chain census that proves a large enough population, income, real estate footprint, and Diplomatic recognition:
This is the final part of the puzzle before the final goal of attaining diplomatic relations. Even though the data on-chain is almost tamper-proof, the technical problem here is to convert physical data to digital data in a reliable way. But once this is achieved, the data of a large enough population with a vibrant enough economy can be used as proof to gain diplomatic recognition.
There you have it. Now you have a basic understanding of what a Network state is, its basic components, and how it differs from the current nation-states.
The idea of starting a new country is a moonshot idea. In addition to this, it is very nascent and hence will require many iterations to be successful. One question I had was, if an easy exit is an option, and everyone just exits at the first sign of trouble, how will we get a stable state? Turns out, Vitalik Buterin (Founder of Ethereum), also points out the same thing in his post about this book. (Yes it was encouraging for me to know I could point out something that he thought of as well :) ) He also points out some other positives as well as negatives, so I would recommend going through that post as well.
I feel ideas like this should be encouraged as well as tried out seriously. Technology helps us to change human lives drastically and we need moonshot ideas to open new frontiers of innovation and progress.
“The people who are crazy enough to think they can change the world, are the ones who do.”
Some fun resources
Here is an interesting tweet, Digital Nomads is a community that has some properties of a network state:
A dashboard of the network states that are live now!
You can read Network State for free here.
That’s it for this issue. I hope you found this article interesting. Until next time!
An article I found interesting: How do QR codes work?
A podcast I found interesting: Tim Ferris Show - Balaji Srinivasan on Network States