What Is a Network State?
A new model for governance, enabling decentralised-yet-cooperative organisation for a post-nation-state world
Logos
Nation states, established with the Peace of Westphalia in 1648, maintain sovereignty within their borders and not beyond them. Therefore, despite offering many advantages over the governance systems that predated them, they struggle to tackle modern, global problems, which demand coordination at the transnational level. Meanwhile, they often fail to address issues affecting their own citizens, whether through malicious intent or negligence.
Technologies advance – few people continue to travel by horseback in the 21st century. Yet we continue to govern with technologies that are almost 380 years old. Now is the time to explore new governance systems that are more suited to the digitally connected world we live in today. Since network states and the technologies they’re built on can administer governance digitally and across borders, they represent the next step in human societies.
In this article, we’ll explain what a network state is, consider the concept’s philosophical and historical foundations, and look briefly at the emerging network state landscape.
Defining a network state
A network state is a digitally native, value-aligned community that coordinates its actions around technologies that resist outside interference, enabling it to achieve a degree of sovereignty. Unlike traditional nation states that assert power through territorial control and inherited institutions, network states emerge from decentralised digital communities. These communities typically form around shared goals, belief systems, or missions, using communication and coordination technologies to develop institutions such as legal systems, economies, and governance frameworks.
A key trait of network states is their ability to provision sovereign institutions without reliance on traditional nation states. They achieve this using technologies like blockchain, which allow distributed participants to come to consensus around decision making, even if outside forces want to disrupt the community’s organisational capacity. For example, voting for a particular action will take place via a transparent, immutable onchain mechanism, and network-state economies will often leverage cryptocurrencies that operate in parallel to the legacy financial system.
Since network-state institutions are deployed on permissionless technologies and are provisioned over the Internet rather than exclusively to those born on a specific piece of physical territory, they have a unique ability to provide entirely voluntary governance services. One can easily and affordably opt in or out of these institutions, giving rise to competition in the provisioning of governance services and “polycentric” legal systems.
This ability for citizens to exit unfavourable systems, combined with the transparency of blockchain technology, creates a powerful incentive for network states to strive for efficiency and alignment with their people’s values. Meanwhile, the same market forces disincentivise corruption and other wasteful practices that are commonplace within the current nation-state social order. This is similar to how companies in free-market economies strive to provide the best service or product for the lowest price to attract more customers – only network states attempt to enact policies that will attract and retain high-value citizens.
Ideological origins of network states
Many people who are already familiar with the concept of a network state attribute the idea to technologist Balaji Srinivasan and his 2022 book The Network State: How to Start a New Country. While the text gives the concept its most recent name and defines it concisely, it fails to delve into its ideological origins, largely ignoring an important body of work that long predates the usage of the term “network state”.
The seed of the network state idea can be found in the work of early cypherpunks and crypto-anarchist writers, namely the godfather of crypto-anarchism, Timothy May. He was one of the first to write about the concept in a 1992 article, “Libertaria in Cyberspace”, in which he described the idea as “Crypto Libertaria”, arguing that “An arbitrarily large number of separate 'nations' can simultaneously exist. This allows for rapid experimentation, self-selection, and evolution.”
This early vision foresaw a refuge for individuals to voluntarily exit from the state and coercive actors by protecting their “true names” via privacy-enhancing protocols and strong cryptography. May was not alone in his thinking, and several other texts published during the 1990s documented the need for governance structures within the realm of cyberspace. The American philosopher and co-author of Farewell to Westphalia, Peter Ludlow, anthologised several of these texts in a collection published in 2001 and titled Crypto Anarchy, Cyberstates, and Pirate Utopias.
Around the time that the cypherpunk visionaries were theorising about the possibility of cyberspace governance, online communities were forming, highlighting the need for digitally mediated governance processes. A text-based virtual reality environment from the early 1990s, known as LambdaMOO, introduced a community governance system after a player began subjecting others to unsolicited virtual sexual acts. This digital world’s nascent legal system included petition systems, voting, and mechanisms for dispute resolution. Later examples of purely virtual worlds, such as Ultima Online and Everquest, would support economies and populations exceeding those of recognised nation states, further validating the need for and potential of cyberspace governance.
Although some early online communities began implementing rudimentary versions of the kind of digital-first governance these theorists envisioned, the issue of sovereignty remained. For digitally mediated governance systems to truly coexist with or even rival those of the nation state, they needed to be able to withstand attempts to undermine them. And given that such systems would, by their very nature, undermine nation-state sovereignty in some domains, those attempts would likely originate from very powerful actors. Then came Bitcoin.
Public blockchains as protonetwork states
Bitcoin demonstrated that a decentralised digital system can uphold a functioning monetary policy, sustain economic activity, and resist interference from powerful, state-level actors. Its consensus protocol can be interpreted as a decentralised analogue to parliamentary authority, offering a new model of legitimacy based on explicit consent, rather than the implied consent of today’s liberal democratic governance systems. Later, the Ethereum network incorporated a Turing-complete programming language, enabling anyone to deploy essentially any program while benefiting from the game-theory-backed security of the blockchain.
Such public blockchains can be considered prototypical network states – voluntary, digitally mediated, distributed globally, and, thanks to smart contracts, now able to support more complex applications and institutions. The advent of blockchain technology rekindled interest in the work of the previously mentioned cypherpunk thinkers as the technology caught up with their theories.
Yet, despite demonstrating the technology’s potential, early public blockchains remain vulnerable to external pressures, undermining the sovereignty of the institutions deployed upon them. In particular, a lack of network-level privacy enables authorities to pressure those running the physical infrastructure supporting these networks. The US Office of Foreign Assets Control's 2022 sanctions against the Ethereum-based application Tornado Cash and Ethereum validators’ subsequent censorship of transactions demonstrate this.
Balaji’s network states or cyberstates?
As mentioned, Balaji Srinivasan has been largely credited with defining the concept of a network state. In his book The Network State, Srinivasan offers multiple definitions of a network state of varying lengths. In doing so, he makes assertions about their defining characteristics, some of which are fairly universally acknowledged and others more objectionable.
In his view, once a network state has established itself digitally, it should attempt to crowdfund land and subsequently negotiate agreements to establish political sovereignty with the nation state from which the land is leased. Such an arrangement would be similar to those negotiated by the more than 5,000 special economic zones worldwide and the emerging charter cities movement – themselves efforts to experiment with legal frameworks and regulatory regimes outside the bureaucratic constraints of existing nation states.
Such arrangements can undoubtedly offer advantages, as evidenced by a 10-fold increase in foreign direct investment in less than two decades in the Shenzhen SEZ in China. However, such initiatives remain highly dependent on their host nation, which can be problematic. For example, after charter cities like Próspera started appearing in Honduras following the passing of the ZEDE (Zone for Employment and Economic Development) law, the Honduran Supreme Court eventually declared such formations to be unconstitutional. This dependence on existing sovereign political entities leads some thinkers, including those within Logos, to consider land acquisition as unnecessary for network states.
Similarly, Srinivasan contends that a network state should eventually seek diplomatic recognition from existing nation states. Again, many believe this to be unnecessary as the network state can still provide value to its citizens without existing political entities formally recognising it. As Logos co-founder Jarrad Hope and Peter Ludlow phrase it in their book Farewell to Westphalia:
In rebuking some of the fine details of Srinivasan’s thesis, the two authors make the distinction between a network state and what they call a “cyberstate” – the latter referring to a strictly digital political formation that never attempts to acquire land and does not seek diplomatic recognition.
While the notion of a state without physical territory may seem peculiar to readers, it is perhaps not so far-fetched. Technological breakthroughs, like those pursued by the Institute of Free Technology and adopted by Logos, allow for sovereign digital-first onchain institutions, accessed via the Internet, that do not require any land footprint whatsoever.
Parallel societies: The historical forefathers of the network state
Because of their modularity, adaptability, and the more direct access to the levers of power that they afford, network state or cyberstate institutions are uniquely positioned to coexist with legacy governance structures. Their deployment on blockchain infrastructure allows them to resist external interference and run in “parallel” with the existing political system, responding to local issues where perhaps the local government is unwilling or unable to help.
To illustrate, let’s consider an example: let’s say a network state forms around the issue of women’s education in states like Afghanistan. The network state could use private communication protocols like Waku to distribute educational resources stored on a decentralised archiving platform like Codex. Meanwhile, Nomos, a layer-one blockchain network engineered to support such initiatives, could provide a platform on which to coordinate funding and decision making in a distributed fashion.
Although such a programme would undoubtedly be unpopular with the local ruling class, its distributed, digital nature would mean there would be no single, central location for authorities to attack. Furthermore, opting to deploy on privacy-preserving technologies would protect the individuals benefiting from these educational resources, those making them available, and those running the infrastructure itself, as linking their actions to their identities would be all but impossible. Thanks to these properties of the underlying technologies, the initiative could continue making real-world impact while resisting attempts to subvert it.
This notion of parallel governance has historical precedence and has even led to political regime change. In the late 1960s, as communist rule tightened its grip on Czechoslovakia, dissidents sought ways to resist without direct confrontation. Activists like Václav Benda called for the creation of a “parallel polis” – an independent cultural and social sphere that would provide spaces of autonomy and freedom beyond the reach of the regime.
Much like the cypherpunks and those experimenting with digitally mediated governance today, Benda and his fellow activists envisioned a society that operated outside state dominance, cultivating its own institutions, governance, and culture. Their efforts laid the foundation for a broader resistance movement, ultimately contributing to the collapse of the communist regime in the late 1980s and bringing the dissidents to power.
The emerging network state movement
New tools afforded by blockchain technology have spawned the emergence of several initiatives that fall under the network-state umbrella. Along with Logos are Zuzalu, a project organising temporary or “pop-up” physical spaces for collaboration on technological solutions to local problems around the world, and Praxis Nation, which is attempting to crowdfund a charter city development and boasts an online community of 87,300 globally distributed individuals from which companies valued at more than $920 million have been founded.
Although in their infancy, pop-up community spaces, like those organised by Edge City and Zuzalu, give a glimpse into how network states might look. Often referred to as pop-up cities or pop-up villages, they have parallels with the SEZs and charter cities mentioned earlier, providing spaces to test innovative approaches to problems we face as a society, from longevity research to social coordination and new approaches to governance. However, the network meeting on the ground continues to organise after these temporary events, leveraging blockchain technology to develop financial services, governance mechanisms, and other next-generation societal institutions.
Beyond Westphalia: Upgrading human governance for freedom and prosperity
The rise of network and cyberstates signals the beginning of a profound shift in how human societies organise, coordinate, and govern. A World Bank report previously identified governance as the most valuable asset on Earth – more valuable than all of the planet’s natural resources combined. As the legacy nation-state model, rooted in territoriality and slow-moving, corruptible institutions, struggles to keep up with global problems and individual demands, digitally native systems present a trillion-dollar opportunity to upgrade the very fabric of governance.
These new models offer freedom of choice in governance, empowering individuals to opt into systems that reflect their values instead of being trapped by the geographic lottery of birth. They unlock competition in governance, incentivising efficiency, transparency, and alignment with their citizens’ needs. And critically, they are digitally mediated, allowing access to education, justice, finance, and public services from anywhere on Earth via the Internet.
Bitcoin demonstrated that a new kind of money – one not issued by the state – was possible. The network state extends this and could represent blockchain’s most profound application: the reinvention of the state itself. Far from being fringe experiments, these emerging digital polities are the logical continuation of an already underway shift toward more modular, transparent, and voluntary forms of societal coordination.
In the next instalment of the Learn series, we’ll dive deeper into the advantages of network states over the nation-state system. In “Why Build a Network State?”, we’ll explore how institutional inefficiencies cost our society trillions of dollars in wasted capital and how small increases in efficiency can make huge differences to citizen prosperity. We’ll also touch upon how network states and the infrastructure they run on can better safeguard individual liberties in the digital age.
Logos believes a network-state future is inevitable, and we need coders, creatives, and anyone passionate about alternative governance to help us build and govern it. Join us, contribute code to our GitHub repos or write and design to help us spread our ideas. Drop by our Discord and be early to the next stage of human evolution!
Sterlin Lujan
Jarrad Hope
Peter Ludlow
Jarrad Hope
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