Three Things Vitalik Likes About Network States Plus Four Problems To Fix

Vitalik Buterin recently posted an article titled “What do I think about network states?” in response to Balaji Srinivasan’s recent book “The Network State”. Vitalik sees how ambitious this idea is. “Rather than staying in their own corner of the internet disconnected from the wider world, blockchains could serve as a centrepiece for a new way of organising large chunks of human society.” In our previous post, we looked at five questions Vitalik asked and answered to help us understand Balaji’s vision for the Network State. Now we will dig into the details and discover three things that he likes and four things he dislikes about the Network State as proposed by Balaji. 

Vitalik, self-deprecatingly describing himself as a “baizuo” (foolish white liberal), says he would personally be interested in joining a network state. In particular, at a personal level, a health-focused lifestyle immersion state would appeal to him. But this influential baizuo is interested in the bigger picture beyond just getting reinforcement for healthy living for himself. 

Three Things Vitalik Likes About Balaji’s Version Of Network States

He sees three ways that network states can achieve things that are not possible under existing regulations. One – micro jurisdictions can allow room for minority groups to follow their preference, for instance, a nudist zone. Two – you could take innovative approaches to majority goals. For example, instead of regulating behavior to protect the environment, regulate specific actions less but tax environmental impact, require less permitting and more liability insurance, or use ranked choice voting for public funding decisions. Three – a network state could push against regulatory conservatism in general. People could choose to opt-in to network states that allow higher levels of risk for things like medical trials for instance. 

Connected Small Local Jurisdictions, Big Freedom

The first capability has a strong appeal for Vitalik who observes “We don’t just want to take existing maps of social connections as given and find better ways to come to consensus within them. We also want to reform the webs of social connections themselves, and put people closer to other people that are more compatible with them to better allow different ways of life to maintain their own distinctiveness.”

Innovative Governance For Better Results 

The second capability helps solve a common problem in politics. Startups test practices until they have one that works, then scale. Politics offers solutions that sound good and then commits to them whether they work or not. A more evidence-based and sort of market-based approach to public decision-making could yield better results. 

Risk Tolerant Public Policy for Faster Technological Progress

The third capability is more of a matter of opinion in Vitalik’s reckoning. Is government-induced paralysis the big problem or do we need to fear the Pandora’s Box potential of technology more rather than less? Generally speaking, he’d like to see more freedom to innovate, but with regard to unfriendly AI, he is risk averse. 

Four Aspects of Balaji’s Vision that Vitalik Finds Worrisome

While Vitalik clearly appreciates the idea of network states, he has four major concerns. One, is a recognized founder really essential? Two, what if network states only serve the wealthy? Three, if everyone opts out of nation states, what happens then? Four, how do nation states address externalities? 

Won’t We Get Tired of Founder Leadership? 

Regarding founders, Vitalik agrees it is reasonable to have someone to create and lead the startup society that is a precursor to the network state. But once the startup society grows into a network state, Vitalik is no longer comfortable with founder power. “Small things being centralized is great, extremely large things being centralized is terrifying.” Vitalik asserts that “the problem of how to settle into something other than founder control is important, and Balaji spends too little effort on it. ‘Recognized founder’ is baked into the definition of what a Balajian network state is, but a roadmap toward wider participation in governance is not. It should be.”

How Does This Help People Who Are Not Wealthy? 

Skilled rich people already have a lot of freedom. Nation states offer digital nomad visas. Some people already have a lot of freedom and mobility. Others, like members of the Rohingya minority in Myanmar, mostly do not. Vitalik notes that offering people a better option than living in an oppressive state sounds like a more humane world order than bombing an oppressive state. But does that work in real life? “One point in favor of network states is that they could be based in poor countries, and attract wealthy people from abroad who would then help the local economy. But this does nothing for people in poor countries who want to get out.  Good old-fashioned political action within existing states to liberalize immigration laws seems like the only option.”

What’s Left If You Opt-Out – Nowhere To Run?

Vitalik quotes Noah Smith, who observed “rich crypto guys who moved to countries like Singapore or territories like Puerto Rico still depended crucially on the infrastructure and institutions of highly functional states.” If everyone opts out of nation-states, who will fund the infrastructure they provide? Furthermore, what if the most freedom-friendly nation states collapse because they allow everyone to exit, leaving oppressive expansionist authoritarian states as the only great powers? 

And What About Negative Externalities?

While Vitalik is receptive to the idea that loosening tech regulation could bring benefits, the downside is that less regulation makes it hard to prevent the creation of harmful things. Vitalik asks, to believe in the network state vision, do we have to believe that negative externalities are not a major risk? This would be contrary to the plausible “vulnerable world hypothesis” that says as technology progresses the risk of a single crazy person killing millions increases. Perhaps one can acknowledge these risks but seek to mitigate them with self-defense rather than regulation. For instance, instead of maintaining nation-state control and a ban on gain-of-function research, “we could use network states to help the world along a path to adopting really good HEPA air filtering, far-UVC light, early detection infrastructure and a very rapid vaccine development and deployment pipeline”. On the other hand, one of the most alarming risks for Vitalik, unfriendly AI, cannot be mitigated. Vitalik says that as in the nation-state era, in the network state era, transnational cooperation to ban things like killer robots will be necessary.

Vitalik concludes: 

And so we do want a world where, even if network states have more sovereignty than intentional communities today, their sovereignty is not absolute.”

In our next post, we will examine Vitalik’s ideas for improving the network state concept. 

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