11 MIN3 Mar 2024

Why Build a Network State?: An Introduction

Voluntary, non-territorial governance services would lead to greater freedom, accountability, and a more peaceful future



This beginner piece on the potential advantages of network-based governance explores the shortcomings of the nation-state social order and their roots in its coercive, territorial nature. By contrast, voluntary, on-chain governance services could extend freedoms currently unknown to every individual. The ensuing marketplace of public services monopolised by nation states today would encourage competition to attract citizens by providing better social institutions while disincentivising corruption and inefficiencies.

The coercive nature of the nation-state status quo undermines civil liberties and stifles innovation, while its territoriality limits accountability and promotes conflict. Recent technological advances and a gradual shift in public consciousness give rise to an alternative — a system of network or cyber states.

Voluntary by nature and not bound to specific geographical locations, a network state system could ensure greater governmental accountability while encouraging experimentation in previously state-monopolised systems. A plurality of voluntary public institutions would take the place of those mandated by the state, leading to greater efficiency, creativity, and a harmonious culture of experimentation and discovery.

These factors make this radical new social order worthy of pursuit and potentially a means by which all humans can enjoy freedom, prosperity, and peace currently reserved for a privileged few.

The Flawed Status Quo

Our world is artificially divided into jurisdictions. Each of these jurisdictions has its own territory, ruled over by a sovereign governance system that determines how those residing within its borders live. The specific piece of land on which we are born shapes many aspects of our lives, including the opportunities with which we are presented. The rules in Sweden are very different from those in Iran, for example. While some governance systems are arguably freer than others, no jurisdiction extends the freedom for all citizens to live as they see fit.

It is easy to see injustice in authoritarian regimes. Election fraud or refusing to entertain democratic processes silences the people’s voice in governance. Yet, even in those systems that appoint their leaders through fair elections, a large portion of the population will not support their elected representatives and the laws they pass. In many cases, votes are decided by tiny margins, and huge numbers of citizens must live under leadership that does not share their values, concerns, or vision for the future. In his 1859 work On Liberty, English philosopher John Stuart Mill described this concept as ‘tyranny of the majority’.

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When groups with starkly divergent agendas compete for power, the result is often wasteful political deadlock and inaction. Meanwhile, the electoral process itself distorts incentives. Politics becomes a game of reelection rather than implementing policies that stand to benefit the most people. If an initiative will not yield results within a leadership term, there is very little incentive for a government to pursue it, particularly if those results might emerge under a different group’s rule and allow the previous leaders to claim credit for it.

Compounding matters is the fact that representatives in a democratic system face little accountability to voters once elected. Only in the most extreme cases of malpractice do politicians face pressure to step down. Simply reneging on electoral promises is insufficient grounds to force a leader from their position, resulting in a term of potentially years of suboptimal governance.

A Questionable Contract

While dictatorships are widely understood to be more coercive in nature than democratic rule, both draw their governing mandate from a questionable source. At birth, we enter into a contract of sorts. In exchange for services the state provides, we forfeit our freedoms. We finance these services through the payment of taxes, and our eligibility to benefit from them depends on us following a specific set of rules.

The sixteenth-century English political philosopher Thomas Hobbes articulated this relationship in his 1651 book, Leviathan, in which he reasoned that the security the state provides the individual gives rise to human progress. Arguing that the absence of such a system forces humans to focus solely on their own self-preservation, he wrote

In the 18th century, Swiss philosopher Jean-Jacques Rousseau referred to the relationship between individuals and the state as a ‘social contract’. However, Rousseau contended that the contract is a voluntary one.

In reality, it is difficult to make this claim because we have no choice in where we are born and from birth, we are beholden to our birth state’s laws. Even later in life, knowing exactly what the state expects from its citizens is extremely difficult. In the United States, for example, a citizen must follow thousands of laws and regulations. How can the contract be truly voluntary if our side of the arrangement is so difficult to comprehend? 

Furthermore, the constitutions underpinning our governance systems were, in many cases, agreed upon tens or even hundreds of years ago, and even if those currently living under them were alive to influence their adoption, it is often the responsibility of a Constitutional Assembly or similar body to adopt or amend a constitution. A popular vote may or may not be part of the process. However, putting a proposal to the public in such a manner hardly compensates for its lack of involvement in the drafting because a simple ‘yes’ or ‘no’ gives no opportunity to raise specific issues.

Limited Options

Our contract with the state is not like signing any other form of contract; we cannot simply choose an alternative system if we do not agree to the terms mandated by our current one. The options are extremely limited in this regard. We can accept our fate and live under rules with which we fundamentally disagree, we can pressure our leaders into changing the laws through reform or revolution, or we can attempt to be accepted into a jurisdiction with rules that more fully align with our principles and values.

None of these options are particularly attractive. The first requires us to abide by laws with which we disagree, and there are penalties for not doing so. You might receive a warning or fine initially; repeat offences will likely result in more severe consequences and, eventually, your imprisonment. Under stricter regimes, you might be immediately incarcerated or, in some parts of the world, face capital punishment. The threat of harm coerces you to abide by the laws.

The second option is often futile. As demonstrated by the government co-opting of the Occupy Wall Street movement, efforts to change a political system through reform do not usually succeed — especially if a majority of the population supports the system. The alternative is some form of revolutionary action, which may involve violent clashes with police or military forces. If the revolution succeeds, the government replacing the one ousted may not live up to your expectations, leaving you back in the position from which you started, as seen in Egypt in the wake of the Arab Spring uprisings. Alternatively, the insurrection might fail, resulting in punishments for attempting to overthrow the government.


The final option is to exit the system entirely. While easily stated, the reality is much more complex and potentially traumatic. Relocating legally involves lengthy bureaucratic processes and great financial expenditure, which do not guarantee acceptance into a new system. Individuals might be rejected for all manner of reasons, including their country of origin

Alternatively, individuals might try to relocate illegally, which comes with its own risks and hardships. Those desperate enough to attempt this option are often financially impoverished, making journeys arduous and potentially dangerous. In both cases, individuals must give up their lives and relationships in their homeland to settle in someplace new. Compounding matters are possible issues relating to cultural differences, language barriers, and hostility from the local population.

Territory and Conflict

The bounding of different governance systems to specific geographical territories presents additional challenges beyond those relating to relocation. Competing nation-state claims over specific territory are often the cause of military conflict, with an estimated 85% of warfare involving a territorial dispute.

At the time of writing, conflicts over land dominate headlines, with territorial disagreements ongoing in Eastern Ukraine and Israel. Regardless of their support or opposition, hundreds of millions of civilians have fallen victim to such conflicts, from which they stand to gain very little, if anything at all.

Beyond the civilian loss of life, wars are extremely expensive financially. The US has spent an estimated $8 trillion on military operations since 9/11. Whether or not taxpayers support 

such actions is irrelevant; the social contract dictates that they must fund them. These are tax dollars that could be spent on more worthwhile causes — such as underfunded education systems.

As former British Prime Minister Neville Chamberlain stated ahead of the start of World War II:

The Network State Alternative

The nation-state system is rooted in its territoriality, and our leaders derive their ruling mandate through coercion. As we have seen, both are problematic. However, there is an alternative, which is becoming increasingly feasible through recent technological advances. Similarly,   events like the Snowden revelationsWikileaks publications, profiteering around COVID-19 confusion, and ever-present efforts to manipulate public thinking via social media have fuelled government distrust. The outcome is the beginning of a consciousness shift needed for the masses to back a move away from current political systems and their underlying social order.

Blockchain technology enables the deployment of voluntary governing services across jurisdictional boundaries. Its first application, cryptocurrencies, demonstrated that we can decouple money from the state. More recently, we have seen blockchain-based governance and more sophisticated financial services emerge in the form of decentralised autonomous organisations (DAOs) and decentralised finance (DeFi), respectively. 


While they are far from perfect in their current iterations, they demonstrate that once highly centralised, often state-provided services can be decentralised and deployed as voluntary competitors to legacy institutions. And their voluntary nature is crucial. Every interaction with a blockchain-based system requires explicit consent — unlike the coerced consent the nation state uses to justify its position — via the signing of a transaction.

Since there is no obligation to participate, there is a strong incentive for on-chain systems to maximise benefits while mitigating disadvantages. If there is an alternative system that more fully protects our freedoms, upholds our values, or just provides a better service, we can withdraw our support from one system and enter another. When a more attractive alternative does not exist, we are completely free to create one ourselves, thanks to the permissionless nature of public blockchain networks.

Such freedom would lead to vast experimentation in governance, financial, and social systems, the beginnings of which are already underway in DAOs, DeFi, and decentralised social applications. When such radical alternatives are allowed to thrive or fail, the result can only be progress. As we see in the private sector, a free market inspires innovation. Although not all innovations turn out to be positive ones, their flaws lead to dwindling support, which eventually renders them obsolete. Meanwhile, those systems that improve the lives of their supporters — like the most successful products — would attract more users, empowering them to innovate further.


Non-state institutions will not just compete with one another but also with those services the state provides. This puts national governments in an interesting position: it would become increasingly difficult to claim they are acting optimally in the public interest while voluntary, network-based alternatives better serve their users. Ultimately, this would incentivise nation states to assimilate the most successful ideas, forcing the improvement of their mandated offerings. While long term, the existence of non-state institutions might lead to the full dismantling of the nation-state system, in the shorter term, we will likely see vast improvements to the state-provided services with which we are familiar today. This concept, known as ‘competitive governance’, is one developed and advanced by the American anarcho-capitalist theorist, Patri Friedman


That said, a full network-based governance system remains a promising vision of what our future societies could look like. It is difficult to imagine a cyber state going to war with another as there would be no territorial ownership over which to fight, and those attempting to spend their citizens’ funds on conflicts would surely lose support as members opted out of funding the violence to join a more peaceful, constructive community. The threat of citizens leaving would incentivise beneficial policies that align with their values while disincentivising wasteful and destructive ones. Only the most effective governance systems would thrive, and individuals would be free to support those network states that best reflect their personal wants, needs, and values.

With maturing P2P systems providing increasingly solid technical foundations, supported by a growing yearning for an alternative to a status quo that encourages corruption, inefficiency, and conflict, the stage appears set to reimagine our existing social order. The transition will not be swift, but if our alternative institutions provide benefits unrealised by the nation-state system, converts to this new way of thinking and organising will gradually opt in in pursuit of a freer, more dynamic, and more peaceful future.

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