The Network State with Balaji Srinivasan | #𝗦𝗔𝗟𝗧𝗡𝗬

Here to talk to you today about something I'm calling the network State. Some of you may have already seen the book, but the basic premise is actually very simple, which is we've started new currencies. Could we start new countries? How do we actually go about that? Well, as I mentioned, there's a long form version you can go to thentworksate.com, it's free online, you can read on your phone anywhere. But let me see if I can give the 10 minute, the short form version. So the fundamental premise is that starting new countries is possible, preferable and profitable. And let's focus on the first part because that seems like the most difficult part, actually doing this. So how could we prove that starting new countries is possible? Well, just as sort of a motivating way of thinking about it, like we know that we've started new companies up there is, you know, top right is Google. Okay, We've started new communities like, you know, Facebook and Twitter. We've started new currencies like Bitcoin and Ethereum. These are all from very humble beginnings. You know, Google in a garage and Facebook in a dorm room and Bitcoin from a white paper posted on a message board. And these things are now trillion dollar 100 billion entities that are shaping the world. And so the question is, is that where the Internet stops is the end of the Internet just new currencies and we don't do anything beyond that point? Or might we be able to not just do companies and communities and currencies, but cities and even new countries? And that's the concept of the network state. And that little graphic at the bottom, if you only remember one graphic, this is the thing to remember. This is a dashboard that shows what a network state would actually look like. And so it's like a social network, except it has a sense of national consciousness and can crowdfund territory around the world and network it together. And in so doing, all of those pieces of property on the left hand side, just like all of Google's offices around the world, pieces of commercial real estate are all essentially pieces of Google. And you swipe your badge and you see the Google logo on the wall and you're part of the Google intranet and everybody there is a Googler. In the same way, if you generalize that from commercial real estate to residential real estate to arbitrary real estate, nothing stops the community in the cloud from buying territory in the land and networking it and connecting it together, basically, just like you've got Hawaii and the United States, they're 2,000 miles away, the continental US and Hawaii, but they're separated by ocean. And in the same way you could have different pieces of territory that are separated by Internet, but that think of themselves as part of the same group, the same nation. And this, what I'm showing here on screen is a scaled network state that actually has 1,729,314 people. But it's also got an income and a real estate footprint that's quite large and frankly comparable to a traditional neighborhood nation state, except it's just distributed, spread out, it's decentralized, just like bitcoin, it's all over the world, yet it sums up to something that's quite comparable to a legacy fiat country. And how would you actually go about building something like this? So I've given the final form here. Here's kind of the zero to one version. So you start with just one person, let's say in Tokyo, just like Zuck started in his dorm room or Larry and Sergey Volody started with two people in their garage. And you go from one and then you have 10 and then 101,000 and you see the buildings get more and more sophisticated. On the right hand side you go from two people in a group house to 50 people buying a bunch of houses in a cul de sac. Okay? And eventually you go to whole small towns and even big chunks of cities. Just like you have a Chinatown. In many cities around the world you would have a network state town for this network state that's portion of the neighborhood where members of that network state live. Okay? And this actually nothing I'm showing on screen is impossible. You know, we, we have the technology for social networks and for mobile phones. The cryptocurrency that you can issue for the network state and the governance, you know, things like snapshot.org, you can do on chain voting all the pieces of both capitalism and democracy. You can put them in the cloud and you can actually have self governance of those people that think of themselves as a people. And so this is actually a new way of thinking about a nation and a state. You build it cloud first, land last, but not land never first. You build a community of the cloud, you establish just the esprit de corps, you hold meetups and then eventually you start crowdfunding territory offline and networking together. And you have your flag and you have your logos on the wall and you have your T shirts and you have your clothes and you have your food and, and you build larger and larger pockets in the physical world, where you can effectively enforce private law, for example, you could require everybody to wear formal wear, or you could have a sugar free society, or you could shut off the Internet at night so that people would focus. I give various examples like this, you can think of many others. And then eventually, as I'll get to, you might even be able to achieve diplomatic recognition. So, so how would we get that? So one concept, I'll introduce three concepts. One concept is most countries are actually small countries, that is to say, in the UN. The 193 odd countries in the UN, more than 50% of them, are actually less than 10 million people in size. And that's kind of counterintuitive because most people live in big countries, but most countries are small countries. And there's actually 12 countries that are less than 100,000 people in, which is actually quite small. And these are of the scale of social networks that people here have probably invested in or funded. Online services that people invested or funded, we've built services that are larger than this. So scale is actually not really the constraint as much as people think. It's more affinity. You start with eyeballs in the 90s and you go to daily active users in the 2000s, then you go to holders in the 2010s who are holding a big chunk of their net worth in a cryptocurrency. And I think in this decade we get to the netizen who holds a digital passport to complement their digital currency. The digital currency is their cryptocurrency. The digital passport is of their crypto country. And so these kinds of things, you're not talking about something where the scale is out of reach relative to traditional states, but the affinity, the strength. Right, so the first observation is most countries are small countries. Then actually the UN membership has been growing over time. Okay, if you plot from the foundation of the un, it has been growing. It seems to have kind of plateaued out or whatever since the early 90s. But sometimes curves like this can surprise you. The number of currencies, if we plotted it would potentially look similar, at least in the 20th century. But now it's recently just suddenly exploded. Towards the end, the graph just goes totally vertical somewhere around 2017. And the third concept is that you may have seen coinmarketcap.com this is a fun site called fiatmarketcap.com, which ranks Bitcoin versus the fiat currencies of the world. And you can see it's right there between Turkey and Chile. I think it's like number 26, number 27. Okay, it's kind of funny, but this cryptocurrency, this cloud currency is ranking with the traditional land and offline and fiat currencies. And so in much the same way, if you take the populations of the world of all of these different countries, okay, perhaps somewhere at number 151, nestled in between Latvia and Bahrain, a country that had 1,729,314 people. Provably. I can get into the concept of how you'd prove that with an on chain census and so on. That's a more technical topic. But let's assume you could prove that you actually had that many people who are part of your digital state that would nestle in right there between two very legitimate sovereigns. It would probably have comparable, it has comparable population, but probably have comparable or even larger gdp, per capita savings, real estate footprint. It has all the qualities of being a state, except it's a digital archipelago. However, if you go and take a look at a country like let's say Indonesia, you know, that's a bunch of islands that are separated by ocean and we still think of it as a, as a country that has a seat in the un. If a bunch of islands that are separated by Internet that thinks of itself as a country, perhaps eventually it could gain diplomatic recognition when it's got the numbers and the oomph to match, just like this table shows. And this is how the things are connected. That dashboard I showed earlier, that number over there is their ranking. Just like the coin's market cap ranks with fiat currencies, the country's verified population ranks with existing fiat countries. And so the concept here. Why do I think this is possible? Well, sufficient traction already means diplomatic recognition. For example, Tuvalu has done a deal with GoDaddy for the TV domain. And you've seen other kinds of deals like Nevada with Tesla has done the gigafactory deal you've seen El Salvador has adopted Bitcoin as a sovereign currency. There's more examples. Wyoming and its dao law, working with Ethereum. Columbia has done the co domain. Amazon HQ2 has worked with New York and Virginia. More and more of these deals between companies and currencies, cloud entities on the one hand, and cities, states and countries, land entities on the other hand, between cloud entities and land entities, between the new players and the old sovereigns. Those are already happening. And if you have enough economic clout, you can make this happen. The TV domain, that's only like a few million dollars a year, like $10 million a year or something like that. It's not billions. And some of these cloud entities may have billions. So with billions, you might actually be able to get much, much farther than you think, especially with some of the smaller countries for whom that's real money. And so this is the concept. Sufficient traction in the cloud could get you diplomatic recognition on the land. And so that's kind of the first part of the argument that it's possible. I will just quickly go through why I consider it preferable and also profitable. So why would starting new countries be preferable? Well, there's really both a push and a pull. Okay, the push is that in many countries around the world, those are riots in Sri Lanka, in Venezuela, in Panama. On the top, there's a lot of bad things that are happening. There's unstable governments. There's food or energy shortages, there's civil unrest. The powerless will want to have a way out of failed states. That's not revolution. Cryptocurrency gives them part of that. In Venezuela, they can have at least a store of value, Bitcoin that can't be inflated by the government. But it's not all of it. That's the push, and then the pull is for the ambitious. I mean, humans expanded out of Africa and went to every continent around the world. There's the explosion mentality that gets you to Ellis island and eventually lets you put a flag on the moon. That pioneering spirit that allows you to reopen the frontier. So both out of necessity and possibility, Much like cryptocurrency itself, which helps both the marginalized who just want a bank account and the power user who wants to push the limits of what can be done with the bank account. The concept of the startup state appeals to those kinds of groups, those who need it and those who can build it. Okay, so that's why it's preferable. Then why is it profitable? So this one is perhaps the easiest one. If you go and make a little graph of nation states, social networks, and network states. And on the X axis, there is population, it's a log scale, and the Y axis is arpu. And I'm basically saying that the annual revenue per user for a social network is the traditional arpu, but the annual revenue per user for a nation state is the tax revenue. Okay, so in the upper right corner, you can see the US And China have immense scale on the X axis as well as immense monetization on the Y axis. And in the bottom, you can see the large social networks meta all the way out on the right hand side they have enormous scale, but they only get sub$100 per user. I know it says only, but it's like less than a nation state gets. And so an interesting question is, can you do something that's right around here that doesn't have the scale of an international social network but has the affinity of a nation state? Okay, that's like one of these smaller countries. I think that's very possible. I think that's an open spot on the map. I think that's going vertical as opposed to going horizontal. And if in the 2000s the goal was to get everybody online in the 2000s, I think the goal is to get everybody aligned. And how do you align them within these communities where people share their values and then they can kind of hopefully peaceably trade with others. So that's the concept of why starting new countries is possible, preferable and profitable. And there's as I mentioned, a book linked version@theneworkstate.com and that's it. So thank you.