A powerful concept that may shape the future is taking form - a notion that society and governance can benefit from new ideas about decentralised organization. What if like-minded people around the world choose to freely form new societies and create governments using Web3 technology to ensure a transparent, auditable, shareable participatory authority? They could create a new kind of decentralised alternative to the modern nation-state.

In his new book, The Network State, Balaji Srinivasan has offered a term and a precise definition as a starting place. His own “The Network State in One Thousand Words” also lays out a seven-step plan to create a “network state”. But for now, let’s look at his definition and the eleven essential properties that he describes in chapters 1 and 5 of his book. 

Balaji defines “Network State” 

“A network state is a social network with a moral innovation, a sense of national consciousness, a recognised 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.”

Balaji Srinivasan

Components of the Balaji Network State Concept

Let’s look at the eleven elements of the Balaji network state concept and consider why they are important for a new form of government to succeed. 

1. Social Network

The network state can only arise if people choose to support it. To create a network state, you need a group of people who are connected by a network that allows them to cooperate to create the network state. This network could be consensually and explicitly bound by a smart contract version of Rosseau’s “social contract”. At this point, we could call it a startup society, but it is not a network state yet. 

2. A Moral Innovation

You could have a society without much of a central purpose, or just a geographically grouped ethnicity promoting nationalism, but that is the old way. Balaji’s network state is about building something better, something that citizens really choose to care about. Purpose-driven communities flourish while mercenary communities fail. Balaji opines that you don’t have to have an ethos that rises to the complexity of religion, but you must at least have a clear purpose, as he elucidates in the chapter One Commandment.

3. National Consciousness

For citizens to form a successful voluntary nation, they must clearly recognize their choice to associate and cooperate with their fellow citizens to form a decentralized but cohesive nation. They need to feel connected to each other through some shared values, a collective embrace of the moral innovation. 

4. Recognised Founder

For Balaji, a keen observer of the real world, new projects in the decentralization movement require leaders, just like any other start-up project. In the early stages, founders must provide a central source of direction. “A founder is the best kind of leader, because they have the legitimacy associated with building an organization from scratch,” Balaji observes. In contracts to many other forms of authority ( for instance media oligarchy or dictatorship ) a founder’s authority arises from people freely choosing to join what the founder is creating. Later, when the community and project are more mature, the leadership mechanisms can become increasingly decentralized. 

5. Capacity for collective action

The network state will need some way for citizens to cooperate. A clear and simple formal structure on the blockchain can provide decentralized, transparent, and auditable tools for decision-making and collective action. A “network union” can act sort of like a traditional labor union or a trade association to take action and interact with existing governments to benefit its members. 

6. Interpersonal civility

Balaji talks about “voting with your feet”. At the local level, many people are free to move about and choose governments within a nation. When network states begin to flourish, people may prefer to choose societies that are pleasant to be in, where online discourse is friendly and curious rather than aggressive and judgemental. This might seem like an odd requirement - something  desirable rather than mandatory- but perhaps an unpleasant adversarial society cannot succeed. Especially when anyone is free to leave. To build a voluntary, cooperative, high trust society, a norm of interpersonal civility may indeed be necessary.  

7. Integrated cryptocurrency (and blockchain)

Nation states all have official currencies which give them some measure of economic control - or, unfortuantely, some level of out-of-control inflation. Citizens of a network state can benefit from having their own recognized and valuable currency with an auditable supply and transparent policies under citizen control. And you can’t really maintain sovereignity if another sovereign controls your money. But Balaji also points to something beyond currency, a distributed ledger system that is secure, encrypted, globally accessible, uncensorable, and that can serve as an immutable record of all the data we might expect a state to maintain,  the smart contracts, the citizenship, property registries, public national statistics, etc. 

8. Consensual government with powers limited by smart contract 

Citizens opt-in; they actively choose to participate in a network state. And they know exactly what they are getting. The network state’s defined and limited authority over citizens and the mechanism to alter that authority is defined by smart contracts. 

9. Archipelago of crowdfunded territory

Network states will begin as voluntary online societies, but eventually, Balaji believes citizens can and should cooperate and legally purchase physical territory. Because even though he is a visionary technologist, Balaji recognizes how important in-person interaction is, and owning physical territory is almost surely an important precursor to diplomatic recognition by pre-existing nation-states. But the territory doesn’t have to be all in one place. Clusters spread out all around the world can offer physical access to the network state to people in many different countries. 

10. Virtual capital

Balaji envisions a virtual capital as being essential to a network state. Surely people need a recognized place to meet online, regardless of their physical location, and a virtual capital can’t be attacked the way a physical one can. That capital could be as simple as Discord, or it could be a complex and feature-rich virtual reality environment. 

11. On-chain census showing a large enough population to attain diplomatic recognition

Until a group achieves diplomatic recognition from existing nation-states, it is not really a “state”, Balaji asserts. This recognition puts a startup society in a peer relationship with existing states, hence the society truly becomes a state in its own right. Population, territory, and income proven by a rigorous and auditable Web3 system combined with the social smart contract that shows the citizen's consent to be governed give the startup society its full legitimacy as a new type of state - a network state. 

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