Balaji’s Network State

Table of Contents:

  • Introduction

  • Building a new country

  • But How?

  • CityDAO as a case study

  • Challenges

  • Conclusion

Author(s): estha#4406 & Royalty#3684

Editor(s): FINE#8385

Last updated: 8th Feb 2023

Balaji defines “Network State” :

“A network state is a social network with a moral innovation, a sense of national consciousness, a recognised founder, a capacity for collective action, an in-person level of civility, an integrated cryptocurrency, a consensual government limited by a social smart contract, an archipelago of crowdfunded physical territories, a virtual capital, and an on-chain census that proves a large enough population, income, and real-estate footprint to attain a measure of diplomatic recognition.”


    Right from the stone age when we lived in caves to shelter from the elements and to protect ourselves from wild animals, we had to form groups of people and build communities together to foster their growth and development. Living together and building communities made us form bounds and create our own rules to live by and this worked out. Over time, the internet and the advent of blockchain technology have created new ways and innovations to do things better. We have had people claim ownership of priceless artworks and collectibles through the advent of NFT. The world is moving fast and things are changing every second. Balaji’s network state shows us a future where people from all over the world can build a decentralized community that isn’t physically bounded like any other nation-state or has limits in the landscape but with people that are geographically decentralized and only connected by the internet. A network city is a group of people united by a standard set of values and ideals they would like to see actualized. In a traditional nation, citizens can only have membership by birth or acquisition, but a network city is chosen. By needing to opt in and having skin in the game, membership self-selects those who are passionate and serious about enacting meaningful political change. *Crazy right? Let’s see how that’s possible…. *

“Collective Destroying is easy, Collective Building is tough”

~Balaji Srinivasan

How about the concept of building a new country?

Balaji Srinivasan uses his book “The Network State” to explore what the world would look like if we approached founding a new state in the same way we approach building a startup.

On a Bankless Show podcast, author and tech founder Balaji Srinivasan said that the fundamental concept behind the network state is that there are companies like Google, communities like Facebook, and new currencies like Bitcoin, Ethereum, etc. He posed the question of whether it's possible to use technology to start new cities or countries that are online and align people for a collective good, even if that is a big deal.  

We live in a system where we mostly depend on old values and systems, which is not an issue, but at the same time, we are less bothered by the future we want to live in. 

If we look into the history of civilization, we can always see one thing: there are always changes happening in and around it over time. Often, these changes are carried out by young people. I want to associate this concept with the history of cryptocurrencies. Cryptocurrency started just twelve years ago when Satoshi Nakamoto created bitcoin, which is still "new" looking at the earlier history of long-term revolutions and struggles for change. Can this innovative new crypto economy change the perception of the world around us as we head into the future?

In his bestseller book Network State, Balaji Srinivasan, who is an angel investor, tech founder, and former CTO of Coinbase, elevates our imagination by suggesting that, in the future, nations may be created not by a physical expansion or population growth, but by technology. As cryptocurrency dispels the myths surrounding the currency, people are beginning to understand that currency is just a medium to exchange commodities. With this knowledge, Balaji Srinivasan attempts to explore what the world would look like if we approached founding a new state in the same way we approach building a startup. Thus, just as the myth of currency has faded, the concept of nation is highly subjective.

Social movements are organized groups of people striving towards a common goal. The purpose of a social movement is to create social change. A network state is an online community that is highly aligned and has the ability to come together to fund territory around the world. This community has to eventually gain diplomatic recognition from pre-existing states. It's important to understand that these geeks are people who have deep moral beliefs and at least one common goal that they can all work towards collectively. He said this by saying that a community can be used easily to destroy something, but it is not easy for them to build something that has the potential to change.

A Nation arises out of Crypto-Economy 

He believes that new states are like start-up societies, in that they develop their own internal policies based on smart contracts. He goes on to say that these societies would eventually issue their own cryptocurrencies and establish digital capital. As societies grow in membership and financial strength, they will eventually acquire physical properties across the globe to visit members, conduct research, or formulate policies. Together, they raise funds online to buy land offline and live in different places, all within one network. Eventually, these societies, based both in the physical and digital worlds, would come together to form a "network archipelago." All the citizens of this nation will be together. But in the real world, they’re likely scattered apart. 

With a network state, there is no need to make decisions based on data from a yearly census. Instead, all data will be displayed live on a digital dashboard so everyone can see what's going on in real time. This is a true innovation of the network state.

This new state can be formed. But How?

It was easier to start Bitcoin than to reform the fed. It is easier to start a new city than to reform San Francisco.” - Balaji Srinivasan. The problem with democracy is that it only works to serve the majority but The network state will allow the people to decide what they want and rule over themselves.

1. One commandment

As said before, a network state can be more or less similar to building a start-up. A group of people or an individual discovers that there is room for improvement in society or something else. They start working on a project to fix the problem they've identified. As they work on the project, they grow and attract more people to join their team. The small group eventually becomes a larger society and works together to succeed in its mission. The difference here is that the community or society is morally innovative. They will have a moral innovation that attracts them to a group. It is the core of a society, which can also be known as the "one commandment," where people will be unified together and will be willing to move to a new system and feel a sense of belonging towards what the society aims for. They work together to attain that goal. This will be a kind of national consciousness.

Attaining the constitution and distributing it to people, also works for the better social good and web3, can be said as the "one commandment" of people dao. We as a community might be a nation in the modern world. But also for understanding, it is said that a DAO can't be a network state.

2. Technological aspects        

Balaji put forward the important idea that we should integrate audio and visual communication into our daily activities. In the age of the internet, it's easy to connect with people across geographical boundaries, and there's no need to be physically present when you can do everything virtually. In the Bankless podcast, Balaji said that in the modern world, being physically available will be a premium thing. 

 “Physical is Premium”  - Balaji Srinivasan

Through the innovation of blockchain, this technology can help in attaining a transparent society where every person in the state can know what's happening in their state. This is accompanied by using web3 aspects:

  • Smart contracts to frame societal laws

  • Cryptocurrencies as a reward system

  • Digital and verifiable on-chain documents

  • Private keys to increase security

In modern society, nothing is that transparent. There are a lot of lies and propaganda that come from authorities, and the citizens have few ways to verify them. This new state, on the other hand, is providing ultimate transparency, where every member is allowed access. 

3. The Growth of the community

After the digital foundation of the startup society is established, a group of citizens can come together online to spend time together and then start working on the physical foundations. Although Balaji is a visionary technologist, he recognizes the importance of in-person interaction and believes that owning physical territory is key to being recognized by pre-existing nation-states. The territory doesn't have to be concentrated in one area, though, it can be spread out in clusters around the world so that people from many different countries can have physical access to the network state. This was previously referred to as the "Network Archipelago." You can click on the gif here to see how it might look.

When network states are at their best, people tend to gravitate towards societies that make them happy, where online discourse is more curious and friendly than it is aggressive and judgmental.

4. The network state

When a network state has a stable population, a strong network archipelago, and diplomatic recognition, it is considered a "real nation”. Balaji believes that it should gain diplomatic recognition based on its existing sovereignty. Only then technically they can be called a "network state."

So as an overview, we can say the components of this nation are as follows:

  • Network state 

  • Moral innovation

  • One commandment 

  • A founder or a group of founders

  • Collective community

  • Interpersonal dynamics

  • A crypto economy

  • Smart contract driven laws

  • Crowdfunded territory

  • Virtual treasury

  • Diplomatic recognition

CityDAO as a case study

  • Found a startup society:*
    The aim of CityDAO is to build a Web3 network CIty for the future. In doing so, they have created a community of people reaching out for the same purpose and working hand in hand to accomplish it. *

  • Organize into a group capable of collective action:*
    Balaji suggested forming the “community” into a “Network union” CityDAO has over 5,000 citizens in 100+ locations of the world building one city thereby forming a union. *

  • Build trust offline and a crypto-economy online:*
    Using NFTs, folks can acquire CityDAO citizenship. Online educational conferences have been held in the past and even Citizens of the community have had offline discussions in person on how to acquire lands, especially for project PARCEL 0*

  • Crowdfund physical nodes:*
    Balaji suggests building trust and starts raising crowd funds for acquiring lands and towns to bring digital citizens into the physical world, The acquisition of the PARCEL 0 in CityDAO further explains this. *

  • Digitally connect physical communities:*
    Linking the physical nodes to digital assets. So in the case of holding an NFT or cryptocurrency of some sort, one can gain access to the physical territory. *

  • Conduct an on-chain census:
    Know the population of the community, and check the growing census, income, and real estate footprint. 

  • Gain diplomatic recognition:
    CityDAO is the first DAO that has officially brought land as an LLC in Wyoming. 


One of the most significant challenges I see in the network state is the pre-existing norms in society. We frequently associate a country with the place where we were born. We are rooted in that aspect. 

As society transitions from the nation-state to the network state, there is also a transition in governance and power. Getting diplomatic recognition for such a motif will be a hard task because they have to depend on the current existing bodies, which I personally think won't be that welcoming. 

The management of human resources in a digital country would be very tedious and could end up being challenging.

It will also be difficult to create a new economy that competes with the existing economy, which is possible but difficult.

I would consider the network state to be the integration of social order.

Also in his podcast, Balaji himself states that in a modern race, 'the new form of biology is ideology." People who belong to one ideology might stick together, excluding others. There is a chance that even in a digital country, these differences might arise. Taking on this will be a new challenge.


There is a growing trend among nations like El Salvador, to move away from the traditional model of economy. Also in a nation-state concept, a single entity controls all aspects of the world while in a network-state multiple entities are connected and they share responsibilities for governing the country.

This transition is a possibility to the challenges of globalization, as it allows countries to better adapt to the ever-changing landscape. The network state model can also be seen as a more efficient way of governing, as it allows different entities to specialize in their areas of expertise and work together to solve problems.

In a networked world, traditional hierarchies are being replaced by more fluid, decentralized structures. This shift presents both opportunities and challenges for those in positions of power.

On the one hand, network-state governance can be more participatory and inclusive, giving rise to new forms of democracy. On the other hand, it is mandatory to make sure that the network state can also be used to concentrate power in the hands of a few people, amplifying existing inequalities.

As we navigate this transition, it is crucial that we pay attention to the way power is distributed in networks and work to ensure that everyone has an equal say in how decisions are made.

Still, bullish on the ‘Network-state’ concept. It is time we at least ‘think’ about what our future must look like in the next ten years. 



~Web 3 Series #18

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