Balaji Srinivasan’s recent book about The Network State lays out the foundations for a new structural movement in politics. Vitalik Buterin recognizes the network state movement and its ambitious goal:

“Network states can also be viewed as an attempt to sketch out a possible broader political narrative for the crypto space. 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.”

Vitalik Buterin “What Do I Think About Network States

That sounds good, but is it realistic? Vitalik asks several questions and offers his own answers to help us decide. First, let’s take a look at his first five questions to get the big picture as he sees it. In our next post, we’ll examine his opinions about what is good and what needs improvement. 

1. What is a network state?

As Vitalik implies, it depends on who you ask, and how long you give them to answer. Most people familiar with the term would probably agree with Balaji’s most succinct definition: 

“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.”

Balaji Srinivasan

But Balaji adds several other components, notably the need for a cryptocurrency and a central moral principle. Vitalk is receptive to these notions, but whether these are necessary or not is perhaps a matter of opinion. Vitalik offers the following seemingly supportive summary of Balaji’s position as follows: 

“While we do need political collectives bound not just by economic interest but also by moral force, we don't need to stick with the specific political collectives we have today, which are highly flawed and increasingly unrepresentative of people's values. Rather, we can, and should, create new and better collectives.”

That is something many people might agree with. 

2. So what kinds of network states could we build?

Vitalik astutely classifies the examples into two types. The first category is lifestyle immersion communities, for instance an archipelago of vegan jurisdictions spread out across the world within other countries and allowed to enforce their own food supply rules. The second category is pro-tech regulatory innovation. You could have jurisdictions where crypto acceptance is required, or a region that “legalizes radical experiments in transit and drone delivery, accepting higher risks to personal safety in exchange for the privilege of participating in a technological frontier.”

Vitalik approvingly notes that while you could try to create these regulations in normal jurisdictions, the network states approach of creating smaller opt-in sub-zones offers a “moderate approach”. Here he is recognizing a key feature of the archipelago vision Balaji’ offers - people with similar desires can choose the government they want in physically separate small jurisdictions that are virtually united into a recognizable state-like power. 

3. What is Balaji's megapolitical case for network states?

Balaji offers an analysis of contemporary political forces as a struggle between three movements, the “woke’ US left, the Chinese Communist Party (CCP), and the right wing/BTC Maximalists. Balaji values freedom highly and feels an affinity for the BTC maxis, but Vitalik observes that he also has “a dislike of their hostility toward cooperation and order.” 

Bajali, Vitalki observes, offers a synthesis from this sort of three-way version of the dialectic. 

“Network states, in Balaji's view, are a "de-centralised centre" that could create a better alternative. They combine the love of freedom of team BTC with the moral energy of team NYT and the organization of team CCP, and give us the best benefits of all three (plus a level of international appeal greater than any of the three) and avoid the worst parts. “

4. Do you have to like Balaji's megapolitics to like network states?

Vitalik asserts you can reject Balaji’s ideas about political movements and still appreciate network states, but in order to appreciate the network state concept it is worth taking a closer look at Balaji’s ideas even if you find them disagreeable. 

If the US hegemony is working ok, you don’t need to fix it. If the US liberal political establishment is hypocritical, it is a real threat to freedom. The “authoritarian left” may be a real threat to crypto currency projects and network states. 

But what if you don’t agree with Balaji about wokeness in the US? Your efforts to make the US more equitable only benefit a small percent of the world’s population. Network states could allow you to show your model for governance works and export it around the world. What if the Republicans get a decades-long majority? You don’t have to agree with Balaji about wokeness to be interested in an alternative form of governance. 

Vitalik brings up a separate issue here and points to a potential downside of the network state. What if they are too successful for their own good? If everyone leaves nation-states to become network state citizens, there will be no one left to maintain the nation-states, and Vitalik asserts that network states will still be dependent on the nation-state infrastructure. 

In this section, we find a very clear albeit limited endorsement of the concept. Vitalik says: 

“My own view is friendly to network states, though with a lot of caveats and different ideas about how network states could work.”

5. What does cryptocurrency have to do with network states?

For one thing, Vitalik says, there is a sort of spiritual alignment. 

“Cryptocurrency in 2022 is a key standard-bearer for internationalist liberal. Blockchain communities continue to stand for openness, freedom, censorship resistance, and credible neutrality.”

But it's not just about values, cryptocurrency offers a technological solution to real problems. For instance, the blockchain creates an immutable record, a detailed microhistory. Zero-knowledge technology offers the ability to choose what is public and what is private while maintaining security. Naming systems can connect identity to transactions. NFTs can hold non-financial data like diplomas. 

Vitalik says we need to look deeper than these narrow applications and see that both blockchains and network states are trying to “create a new root” - an alternative to national courts. 

“Blockchains are the only infrastructure system that at least attempts to do ultimate dispute resolution at the non-state level (either through on-chain smart contract logic or through the freedom to fork). This makes them an ideal base infrastructure for network states.“

In this followup article, we find out what Vitalik likes and doesn’t like about Balaji’s version of the Network State concept.