The Network State - How Crypto and Tech Can Help Us Start New Countries
Our networks facilitate the creation of new countries in forms we haven’t seen before.
I just finished reading The Network State, a book written by entrepreneur, investor, and early cryptocurrency adopter Balaji Srinivasan.
The book explains how technology enables us to start not just new communities or movements, but entirely new countries (though in a different form than what you’re thinking).
If you believe in the power of the internet to bring people together around common causes, this is an enjoyable read.
While the entire book is thought-provoking, one chapter titled God, State, Network jumped out at me. This chapter provides a macro view of how humans have evolved in who we follow and align ourselves with over time, and how the advent of the “network” changes this dramatically.
Let’s learn more about what a network state is and this chapter was all about.
What is a Network State?
In Balaji’s words, the short, concise definition of a network state is:
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.
More fleshed out, a network state is the next iteration of a nation state (i.e. country) where its citizens:
Come together via shared morals, goals, and interests, not just geographical proximity.
Are primarily connected virtually, not necessarily physically.
Use a decentralized cryptocurrency (not centralized, state-controlled money) for its economy.
Eventually obtain recognition from its traditional nation state peers.
There’s a lot more to the network state, and the book does a deep dive into the history, politics, and societal and technological changes that brought us to where we are today.
God, State, Network
The God, State, Network chapter is absolutely crucial to understanding what the network state is and how it compares to the beliefs and standards that we’re so familiar with today.
Balaji defines a “Leviathan” as a powerful force that hovers above all and has control, either directly or indirectly, over people’s behaviors. Essentially, a Leviathan is the most powerful force in the world at that given time.
In the 1800s and prior, God was the Leviathan. Whether you were Catholic, Islamic, or Buddhist, your God guided your beliefs and behaviors. If you didn’t comply, God would punish you, and you had to confess your sins. People feared God and behaved accordingly.
Starting in the 1900s, the State (central governments) became the Leviathan. Governments control the social, financial, and environmental rules and regulations that impact our lives everyday, for better or worse. If you don’t comply, the State would fine you, throw you in prison, or even execute you.
Balaji argues that God is dying, and so is the State.
The next Leviathan is the Network, your community of peers on messaging apps, social networks, and more recently, crypto networks. These are people who will not unilaterally rule with an iron fist like God and some States, but will keep each other in check through agreed-upon societal norms and community action.
The Role of Encryption in the Network
At the core of the Network is encryption.
Encryption is a method of scrambling data so that only authorized parties can understand the information.
When you buy goods on Amazon, your credit card information is encrypted so that no one can access the numbers while you’re being charged. If you enter any personal information on a healthcare site, that data is encrypted so others can’t see your private health data. WhatsApp messages are supposedly encrypted so that only you and the recipient can see the messages, and Zuck can’t send you extremely targeted ads that follow you around the internet.
In crypto networks, encryption allows you to have full control over your funds and data with your private key. And no one, including the State, can access your data and assets without your permission or without solving a near-impossible math problem.
Encryption facilitates many of the critical characteristics of network states. Below we outline some of these characteristics and how they’re different from and better than our State-centric world today.
Key Characteristics of a Network State
Encryption Impedes the State from Eavesdropping
When there is strong encryption that a government can’t break, people can communicate freely without the fear of being surveilled.
Governments don’t like this.
The China Communist Party is notorious for surveillance and censorship of their people. Recently, Chinese citizens had to get creative in organizing protests against oppressive COVID-19 restrictions. With strong encryption, citizens can gather around common causes much more easily.
In 2021, the U.S. Congress introduced a law to force Apple to build a backdoor so the government can access user data on iPhones and iCloud. This law would have prevented Apple and other tech companies from using strong encryption for their devices and cloud storage products. The law did not even reach the voting stage, and rightfully so.
Encryption stops the State from being able to eavesdrop. And when governments can’t eavesdrop, they can’t control their citizens.
Cryptocurrency > Fiat Currency
Many governments are threatened by cryptocurrency because it is money they cannot easily ban, seize, nor print.
The State maintains immense control over its citizens by having full power over monetary supply, and we’re clearly seeing the effects of the Federal Reserve’s money printing during Covid. The price of food has inflated by 11.3% since last January. And recently, Silicon Valley Bank collapsed primarily as a result of rapid interest hikes by the Fed in reaction to this inflation.
With encryption and cryptocurrency, governments have much less control over citizens’ finances. The State can’t print money as they please anymore; cryptocurrencies’ monetary supply is either immutable via code, or changes need to be agreed upon by the community.
Cryptocurrencies, which are built on top of encryption technology, allow citizens to break free from the monetary control of centralized governments.
Mobile > Geographical Constraints
The idea of national borders and geographical boundaries is going by the wayside. Our phones and other mobile technologies, and the communities that they facilitate, play a huge role in this.
Many of us can now live and work anywhere in the world we desire. This means that we are no longer bound to an office location, and thus a home location. Therefore we now have the power to select which local, state, and federal laws that apply to us.
With the improvements in virtual and augmented reality technology, we can even leave the physical surroundings of the real world and enter virtual worlds with completely different characters, environments, and regulations.
As we are more mobile, our online social networks become more important than our local communities as a source of connectedness and belonging. As such, the laws and norms that govern these social networks may become more important than those that govern our physical localities.
And if these modes of communication facilitated by mobile technology are encrypted, we are truly free from any State eavesdropping or tampering.
Peer-to-Peer Media > State Media
We’re already seeing more news being reported and consumed in real-time on social networks like Twitter. We no longer have to trust and wait for articles published by The New York Times, The Washington Post, or our local news publications. Our online neighbors are beating them to the punch with immediate, on-the-ground reporting.
Balaji strongly believes that state media suppresses freedom of speech in different ways, and cites two examples:
Xinhuanet, which is controlled by the State (the Chinese Communist Party) to fight free speech. I believe this.
The New York Times, which Balaji believes controls the State through its reporting (I’m not so sure about this.)
Regardless of what you think, peer-to-peer media is certainly growing in frequency and importance, and threatens the power of governments to control the narrative.
Cryptographic Verification > Human Verification
Most people think that crypto and blockchain is all about money. Actually, this technology is all about decentralized verification and truth without the need for trust.
In crypto networks, facts and history are agreed upon by a large, decentralized group of community members, not just a small number of people in powerful positions. Data is immutably stored on-chain - and not in a centralized, editable database - forever.
These facts can be about the transfer of money, ownership of certain items (NFTs, real estate deeds, and more), and eventually will expand to documentation of entire generational histories.
And this data is verified by the Network, not the State, using encryption.
I Don’t Hate the Government
Based on my agreement with many of Balaji’s stances and support of cryptocurrency, you may think that I am hate the government. I don't!
I’m no anti-government anarchist. I do believe that there are many benefits to having centralized governments that manage public goods such as roads, transportation, and housing.
At the same time I believe that governments manage many aspects of the economy, privacy, and law poorly. And crypto is such an important technological innovation that can help improve upon these aspects that are critical to our everyday lives.
Over to You
What are your thoughts on network states?
Do you think that encryption and cryptocurrencies, and the networks that these technologies facilitate, give us the power to improve upon today’s State-driven environment?
Do you think we have the ability to create new, diplomatically-recognized entities that are not constrained by geographical boundaries?
I’d love to hear your thoughts. Please comment below or on this Twitter thread:
https://twitter.com/mikewchan/status/1645806671011414016?s=20
If you liked this post, I would highly suggest you read the entire book for free at https://thenetworkstate.com/. Thanks for reading!
[yikes-mailchimp form="1"]