All three poles now exert significant influence in the world, with their differing ideologies, their own currencies (BTC, digital yuan, USD) and sources of truth (the protocol, CCP, NYT).
Against this backdrop, Balaji’s argument is the populous are drawn to these poles or combinations thereof as this is where the real power lies in the 21st century.
Whilst described as BTC Crypto Capital pole, this group is really composed of the proponents and supporters of Web3 and can serve as a base for creating network states.
Network states do not come into being overnight, they begin life as a startup society and must undergo a trajectory not dissimilar to a business startup, focussing initially on addressing a single issue and gathering momentum from this point. After all, nation states even began as a community that evolved into a nation over time.
There are four stages to creating a network state — startup society, network union, network archipelago and finally network state.
In the first phase as a startup society, it’s important that it is focused on a single issue, as people are far more comfortable aligning on a single issue as opposed to having religion-like doctrines that can be challenging to adhere to.
From here as they start to establish a real community — a network union. This is achieved by establishing a leader, a cryptocurrency, collaboration tools for members, and a clear purpose with calls to action for the community.
Once the community starts to connect to the physical world they become a network archipelago. This is where spaces are established for their communities, obtaining property titles or leases to create global hubs for their community.
The final and potentially most challenging part of becoming a true network state is establishing diplomatic recognition by existing nation-states.
If done correctly, network states could influence real-world states with their efficiencies and strength of community. This is not dissimilar to the reach that the media has with respect to impacting politics or business currently.
It’s important finally to point out that the aim of network states is not world domination like empires, but global recognition of their community
There are a number of existing communities which are following elements of the trajectory from startup society to network state but not fully.
- Reddit communities can be considered network unions, but require physical spaces to progress to being an archipelago.
- WeWork is a loose community, however, there is no unequivocal trust between members where they can leave their possessions safely out in the open in any WeWork, or converse openly — there are still plenty of offices in them
- DAO and NFT communities can be if they no longer have the high degree of speculation associated with their cryptocurrencies/NFTs
- Twitter/Facebook/LinkedIn are focussed on any given number of causes dictated by their members, not single uniting causes.
There is no doubt that the communities that have formed around Web3 protocols and projects are incredibly strong, and we’re already seeing many of them on route to becoming their own network states.
However, reaching the ultimate end goal of being an actual network state with diplomatic recognition will take a lot of work and lobbying of existing states. With time we may get there, but equally, it’s possible nation states will adopt similar techniques to produce their own sanctioned Web3 communities, in a similar vein to how central banks are looking to (and in some cases already) use blockchain to create their own digital currencies.
It’s a fascinating subject, and I encourage you to read the book
to come to your own conclusions on this. Balaji is a great thinker and he makes a detailed case for the network state that has far greater depth than what I have articulated here.
There are numerous other themes he highlights, that will likely come up in future articles.