Why Build a Network State?
Upgrading governance would unlock trillions in value and protect the rights of billions underserved by the incumbent nation-state system
Logos
In “What is a Network State?”, we defined the concept and introduced its philosophical foundations, historical forefathers, and contemporary efforts to create network states. If you’re new to network states and haven’t read this introduction, we recommend starting there.
Assuming you already have a basic understanding of the concept of a network state, this Logos Learn article will make the case for them from various angles, including from an economic, humanitarian, and societal point of view.
Declining trust, corruption, and entrenched inefficiency
Around the world, there is growing distrust in our governments. A study beginning in 1958 by the Pew Research Center shows that the US population’s trust in the Federal government declined from a high of 77% in 1964 to just 22% in 2024. A 2024 NatCen survey shows similar declining faith in the British system, with 79% of respondents saying it could be improved “quite a lot” or a “great deal”.
Writing in Farewell to Westphalia, and citing figures from IPSOS, Jarrad Hope and Peter Ludlow make the case that “Public confidence in governmental institutions has been in decline for decades, and it is happening everywhere”, providing figures from both France and the UK as examples. The authors go on to highlight the disparity between public trust in government scores and private-sector customer satisfaction (CSAT) scores, observing that “CSAT benchmarks are often found to exceed 70%, essentially the inverse of the poor scores people assign to their national governments”.
It’s hardly surprising that trust in our governing institutions is in decline. After all, corruption is rampant across our financial system. Transparency International’s “Corruption Perceptions Index 2023” shows that two-thirds of the 180 countries sampled had “serious corruption problems”, with 23 countries falling to their lowest scores since the index began in 1995.
From elected government representatives and homeowners’ association board members embezzling community resources, to multinational banks paying hundreds of millions to settle fraud charges, those at the top of our centralised institutions are regularly the beneficiaries of this corruption. Given their privileged position and the fact that reform must come from within, they are reluctant to implement changes that may jeopardise their elevated status.
Furthermore, even supposedly democratic systems lack mechanisms to ensure accountability of elected leaders. History is full of examples, such as George H.W. Bush’s famous “Read my lips: no new taxes” 1988 campaign platform, which was inevitably followed by tax increases later in his presidency. Of course, Bush served the rest of his term in office, leaving those who voted for him no doubt feeling disillusioned with the political process.
Nation states: Antiquated tech?
Perhaps the problem is the system itself, not the establishment which benefits most handsomely from it. For centuries, the chief sovereign governing entities in our world have been the centralised governments of nation states. This became the case following the signing of two European peace treaties, collectively known as the Peace of Westphalia, in 1648. The treaties ended the Thirty Years’ War, which claimed an estimated four to 12 million lives, making it then-Europe’s most violent conflict to date. They also established the idea that each state has authority over the affairs within its territory, also known as the principle of “state sovereignty”.
This idea of nation-state sovereignty was an attempt to solve a very specific problem: to end a continent-wide war resulting from religious differences. Given the slew of European wars throughout the 19th and 20th centuries and the tremendous loss of life accompanying them, it would be difficult to argue that the Peace of Westphalia succeeded in its main goal. However, this did not stop the foundational principle of state sovereignty from becoming an international norm even outside of Europe.
Today, we face all kinds of transnational threats and global issues that the Peace of Westphalia’s signatories couldn’t possibly have foreseen. Examples include climate change, pandemics, global financial crises, international terrorism, drug trafficking and organised crime, cyberattacks, global supply chain management, and mass migration. Addressing such concerns demands global cooperation, which has increased the perceived need for supranational organisations at a layer above the nation state, such as the European Union, the United Nations, NATO, and many others. Nation states have voluntarily ceded some sovereignty to these and similar entities in an effort to tackle such issues. The fact that some of these organisations were created expressly to prevent conflict between states further undermines the idea that the sovereignty of nation states can ensure peace.
Similarly, nation states cede sovereignty to layers below the national level. Each of the more than 5,000 special economic zones around the world has negotiated agreements with nation states to enable alternative governance structures and regulatory frameworks, often with the goal of stimulating foreign investment – again, an issue that was far less pressing to those signing the peace treaties back in the 17th century.
A network-state upgrade
With the concept of state sovereignty already unravelling under pressures caused by these global problems that the geographically encumbered nation state is poorly equipped to tackle, perhaps it is time to upgrade our governance processes.
Beyond the sphere of human coordination, new technologies replace older ones, regardless of how ubiquitous the old tech once seemed, unlocking new benefits as they arrive. Think about how many technologies your smartphone has replaced: landline telephones, paper maps, and film cameras, to name just a few.
We believe that innovations enabled by networking and blockchain technologies lay the groundwork for a major upheaval in the way we organise as human beings. Essentially, they enable us to administer governance digitally, with indifference to traditional nation-state boundaries. Network states, as some have labelled these next-generation political formations, offer several compelling advantages over our current system.
As we’ll discover in the following few sections, they incentivise efficiency, disincentivise corruption, extend civil liberties protections to billions underserved by our current institutions,, and can address local problems to which existing governments may be unwilling or unable to dedicate resources.
Network states as economic powerhouses
A 2006 World Bank publication titled Where is the Wealth of Nations? claims that “human capital and the value of institutions (as measured by rule of law) constitute the largest share of wealth in virtually all countries”, making it more valuable than all of the Earth’s natural resources. Indeed, a paper titled “Institutional Development, Transaction Costs and Economic Growth” highlights that a 0.1% reduction in institutional transaction costs results in a 3- to 4-fold increase in a nation’s overall prosperity. Given that the size of the global economy is now over $100 trillion, we are talking about hundreds of trillions in capital wasted on institutional inefficiencies. Those funds could mean the difference between being a developing and a developed country.
As we mentioned earlier, corruption is also a major blight on our financial system, siphoning an estimated 5% of global GDP (+$5 trillion) annually away from applications that could benefit society’s underserved, rather than those at the top of our financial, business, and governance institutions. Such corruption is made possible by the opaqueness of our legacy financial system, coupled with the misuse of power by those heading our centralised institutions. Furthermore, those attempting to police activities are susceptible to bribery themselves and efforts that do purport to address the issue of illicit financial flows, like onerous AML and KYC policies, are arguably complete failures. In 2009, for example, the UN reported that 99.8% of illicit financial flows are completely unaffected by such policies.
Finally, there is the matter of centralised monetary policy. Fractional reserve banking, which is responsible for the creation of new money in economies, effectively finances the ballooning deficits of nation states around the world by devaluing the savings of everyday citizens. These debt-based economies are themselves the result of institutional inefficiencies as governments borrow to afford to pay for the public services expected of them, effectively taxing their citizens through inflation and pushing the debt onto them.
Since the 1913 Federal Reserve Act granted the US central bank the ability to control the monetary supply, the US dollar’s purchasing power has plunged. In 1933, for example, $1 could be exchanged for 10 bottles of beer. Today, that $1 will struggle to buy a single coffee. The economist known as Peruvian Bull highlights this rampant inflation in his book The Dollar Endgame, writing that more than 77% of national currencies issued over the last 500 years have failed, mostly due to inflationary pressures.
We believe that network states are well-positioned to address, or at least alleviate, each of these issues due to their unique properties, predominantly stemming from their deployment on blockchain and related technologies.
Optimising governance
Regarding institutional inefficiencies, network states provide governance services digitally, meaning they can serve their citizens regardless of where they are located globally. Furthermore, citizens can access a much wider array of alternative approaches to governance without needing to engage in the costly, both economically and socially, process of relocation that exiting a nation state entails.
By reducing the cost of exiting political systems, governing entities would have a strong incentive to provide real value to citizens because if they do not, citizens will withdraw support. This competition in governing services encourages network states to strive for maximum efficiency, as wasteful practices fail to attract and retain citizens. Best practices will stick and be forked and deployed in other network states, eventually leading to the discovery of the most optimal processes. As mentioned, just a 0.1% optimisation of society’s institutions' efficiency would be worth tens of trillions of dollars to the global economy. However, we are inclined to believe that the efficiency gains from directly incentivising such an optimisation would be far greater.
Furthermore, blockchain enables governing processes that were not previously feasible. Network states bring citizens much closer to governance systems by enabling them, for example, to vote on more than simply who will run the government for the next four or five years. Examples include the allocation of public funds or whether to increase mandatory contributions to the community to raise more funds. We see an early version of this kind of activity already in the decentralised decision-making processes DAOs use to allocate funding.
Blockchain’s permissionless nature also enables literally anyone to contribute to the very governance apparatus itself. A 10-year-old citizen could write a smart contract that completely reinvents some aspect of the network state’s operation, and if it yields sufficient improvements over the previous process, it will certainly be implemented. Research papers published by the World Bank, Frontiers in Political Science, and the Journal of Public Economics show that citizen productivity increases when they are more engaged in the political process. When citizens can engage at the granular level that network states enable, we believe such gains can lead to unprecedented human productivity, ushering in a new era of prosperity for humanity.
Tackling corruption
Blockchain technology enables financial institutions to be built on transparent infrastructure, making the kind of corruption and money laundering that takes place behind the closed doors of international banks like HSBC and JP Morgan Chase much more difficult to conceal. Citizens of a network state running its governance processes on transparent blockchain infrastructure could follow their financial contributions to their community and check that they are not being spent in ways they did not consent to.
Relatedly, programmable public blockchains enable smart contracts and programmable money. If the network state empowers citizens to choose exactly how their contributions are spent, a transparent, publicly auditable smart contract could automatically forward community contributions to the initiatives their contributors support. This radical transparency and mitigation of corruption would further incentivise citizens to participate in the political process.
Corruption is not just a drain that diverts resources away from more productive means; it is detrimental to a society’s trust and enthusiasm for the entire political system. Evidence suggests that perceived corruption leads to dwindling political participation – why bother engaging if the fruits of your efforts will only get siphoned away? Therefore, in mitigating corruption, blockchain-based political formations will encourage participation, which (as we saw earlier) encourages greater economic productivity.
Sound monetary policy
Network states enable financial systems that provide an exit from the fiat currencies of nation states. As we established earlier, centralised management of national currencies has been a spectacular failure – the US’s $36 trillion debt providing a stark illustration. Blockchain technology’s first application, Bitcoin, introduced a parallel monetary system outside the legacy financial system that continues to successfully resist efforts to corrupt it from the world’s most powerful actors. Bitcoin has a fixed and transparently auditable monetary supply, which enters circulation at decreasing frequency over time. This fixed supply offers an alternative store of value to the inflationary currencies of nation states to anyone with internet access.
.jpg){kind=link}
Ethereum takes a different approach in an attempt to address concerns about rewards for infrastructure operators drying up as currencies like BTC reach their capped supply. Ethereum continues to issue ETH, but a portion of each transaction fee is destroyed, or “burned”. Consequently, ETH has a dynamic monetary supply that responds to network usage, creating another incentive feedback loop. Those invested in the success of the network are encouraged to build applications that users find real value in, such that transaction volume will increase and the amount of ETH burned will outweigh the amount issued. Consequently, the value of their own holdings will increase as the overall ciruclating supply decreases.
These are just some of the monetary policy possibilities that innovators at the forefront of blockchain technology have conceived so far. Thanks to the market dynamics introduced by competition among network states to attract citizens, there is a strong incentive to improve on these ideas, and blockchain’s permissionless nature means there is nothing to stop individuals from proposing new ones. Those monetary policies that people find most attractive will thrive while less favourable ones will fail, encouraging continued optimisation.
Network states protecting civil liberties
Because network-state governance is digitally provisioned via blockchain technology, it enables groups of people possessing kinship ties and a desire for self-determination to administer their own affairs, regardless of whether they are formally recognised as a nation state by entities like the United Nations. There are many examples of such people around the world, including the Catalans, Basques, Scots, Tibetans, Uyghurs, Chechens, Kurds, and Rohingya.
Authorities opposed to the self-rule of such groups have historically used a variety of tactics to undermine self-determination movements, but more often than not, they involve the exploitation of their own control of centralised institutions. For example, the Spanish government under General Franco banned the teaching of the Catalan language in schools. Meanwhile, history is full of examples of the murder of the leaders of such peoples, including Aslan Maskhadov, President of the self-declared Chechen Republic of Ichkeria, who was killed by Russian special forces in 2005.
Owing to its operational infrastructure’s wide geographic distribution and its indifference to nation-state borders, the institutions provisioned by a network state are naturally resistant to traditional attacks against physical infrastructure. This enables them to exist in parallel with existing state institutions without requiring people to relocate – an option that may not be available at all, depending on how despotic their local government is.
To draw on an example from our previous Learn article, onchain educational programmes could provide banned cultural learning resources, stored on a durable archiving platform like Codex and distributed over a privacy-preserving network like Waku, with funding organised and distributed via a blockchain engineered for such applications, like Nomos. Leveraging such a basket of technologies would enable these programmes to continue to enrich their users’ lives while protecting both them and those providing it from persecution by any entity hostile to the initiative.
Network states to revive civil society
Around the world, people are losing their sense of kinship and connection to local communities, prompting the erosion of civic engagement. Driving this trend are several converging forces. Urbanisation and geographic mobility have weakened extended family networks and neighbourhood ties; for instance, in the United States, the average person moves house more than 11 times in their lifetime, disrupting continuity of social bonds. Meanwhile, the rise of digital communication has shifted much of our interaction online, where relationships tend to be more fragmented, polarised, or transactional.
In the absence of strong local ties, differences between people become chasms and require management by the state when they boil over into conflicts. This in turn invites greater security measures, including surveillance and censorship, further restricting the public’s freedoms and contributing to division within and breakdown of civil society. Countries like China have institutionalised mass surveillance through tools like its social credit system, while even in liberal democracies, governments have used terrorism, crime, and pandemic management as pretexts to expand data collection and restrict freedoms. Edward Snowden’s revelations about NSA programmes in the US revealed the extent to which ordinary citizens, not just criminals or foreign actors, had become targets of mass surveillance.
History shows us many examples where an engaged and active civil society, organising in parallel to the nation state, was able to achieve monumental things to improve their lives. By providing spaces for independent thought and political education, Charta 77 in Czechoslovakia, which united dissidents through networks of mutual accountability, was able to lay the groundwork for peaceful regime change in the nation.
Nations with strong civil societies develop closer kinship ties and are more cohesive. Rebuilding civil society around the world is among the first goals of the Logos network state, and Logos Circles are an early effort to achieve it. Circles are the local chapters of the network state, hosted by the Logos community in different cities around the world.
Circles identify local problems and come together to solve them, while also providing a space for education and dissemination of information relating to parallel organising. As people begin to engage with these alternative structures – ones that meet real needs and reflect local values – they begin to bring legitimacy to them. Over time, this legitimacy becomes a form of power. And in the long run, that power can evolve into a new form of governance rooted in community, participation, and trust.
Network states for prosperity and feeedom
At a time when legacy governance systems are faltering under the weight of corruption, inefficiency, and mistrust, network states offer a compelling alternative grounded in consent, transparency, and community. Their sovereign digital infrastructure allows for governance that is both radically local and globally accessible, empowering individuals and groups previously underserved or actively suppressed by traditional political structures.
By enabling citizens to participate more directly in governance and resource allocation, network states dramatically reduce the friction of political engagement. This, in turn, fosters both civic participation and economic productivity. As the data suggests, even marginal gains in institutional efficiency can yield exponential increases in prosperity. If widely adopted, network states could reclaim trillions in squandered value and redirect it toward communities who need it most.
Network states also provide a framework to defend and extend human rights. Stateless peoples, disenfranchised minorities, and transnational communities can coordinate, educate, and govern without asking permission from regimes that deny them basic recognition. As communities organising around blockchain technology begin solving real local problems through grassroots initiatives, they rebuild the kinship and solidarity that underpin a vibrant civil society.
Now that you understand the extent to which we all stand to benefit from building a network state, you’re probably wondering how to do it. “How to Build a Network State”, the next Logos article in this introductory series, will show you how to put these ideas into action.
If you believe governance can be more just, more human, and more effective, the time to act is now. Join us in building the future of governance with Logos – where participation is power, prosperity is abundant, and freedom is the foundation.
Logos
Tom W. Bell
Dr. Corey Petty
Logos
Logos
Logos
Logos
Logos
Logos
Logos
Logos
Logos
Logos