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Book Review: "The Network State" and How it Redefines Statehood

In this article, I review a quite thought-provoking book authored by Balaji Srinivasan, the former CTO of Coinbase. This book, as proposes - is named as “The Network State”. Interested people can purchase or read the book for free.

Now, I must say that the book is a propositional masterpiece, since it elucidates a wave of futurist thinking in pursuing international technology law, and the idea of sovereignty under this proposed construct of what Balaji calls a Network State. Let us decipher it by defining some ground rules.

  • I will be deconstructing the basic, and not all advanced ideas, propositions and concepts of this book (I might do analyse those ideas in articles written later in time).

  • I have used the method of testing the potential of the arguments and ideas discussed in the book, in the realms of law, international affairs and governance.

  • This book review is a constructive cum imaginative take on the idea of what a Network State seems to be.

I would like to express my hearty gratitude to Balaji’s revering of the Ramanujan Number. This excerpt from the first chapter, the Preamble, is rather powerful in its tone, and serene in its sensibilities:

Why 1729? That’s the publisher of this work. It’s named after the Ramanujan number, which symbolizes for us the dark talent: all those people from the middle of nowhere, passed over by the establishment, with crazy-but-correct ideas, who could do great things if only given the opportunity. These are exactly the kinds of people who we expect will found startup societies and network states.

The Idea: From a Nation-State to a Network State

Now, anyone who has read pure international law or even jurisprudence could be aware of the idea of sovereignty. The word nation generally, in politics and law, refers to the idea of nationality, attributable to a human population. That national identity generally spans differently across places. In certain states, any one identity defines the nation, while in certain states, composite cultures and the conglomeration of various human identities shape the concept of a nation. Sometimes, a national identity is beyond all identities assumed or inherited by an individual/community. Even the concept of self-determination in international law, was produced considering the trends in the so-called rules-based international order as we know. Now, Balaji explains what is a nation-state, which anyone would be referring to the common and obvious features of a nation-state. If we remember the idea of a social contract, we know that a nation state is comprised of - (a) people; (b) territory; (c) government; and (d) sovereignty (or sovereign will). A country may state that it has all the first 3 components, and yet, in practical terms if it cannot exercise its so-called sovereignty, even under the Purposes and Principles of the Charter of the United Nations (assuming they aim a UN state membership) - perhaps it is not sovereign (in an ideal scenario). Although scholars and professionals of international law are aware that sovereignty has to be agreed upon by a set of countries. In some cases, maybe a single country’s recognition could have some value, if not absolute merit in the international legal system. This quite explains how we look at the international rules-based system.

Now, Balaji explains the idea of a Network State by two definitions - one being simple, and the other being more descriptive, rather cryptic a little.

Let us address both of the definitions.

#1: The Simple Definition

A network state is a highly aligned online community with a capacity for collective action that crowdfunds territory around the world and eventually gains diplomatic recognition from pre-existing states.

#2: The Complicated Definition

A network state is a social network with a moral innovation, a sense of national consciousness, a recognized 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.

The first definition (#1) is a simple explanation that an online community which mobilises for collective efforts, crowdfunding the territorial dispositions attached to the online community - across the world - is a network state. If we however look at the second definition (#2) - we get a larger and interesting picture of the idea, where Balaji tries to propose that this “online community” becomes a network having 2 important characteristics - a sense of moral innovation (which reminds me of the theological and epistemological roots of liberalism) and assuming some sort of consciousness, which is national (as we know, nation=people in obvious ways). The idea of in-person civility, from a management perspective, fascinates me a lot, because it could be related to the ethics that drives a network state. Now, if I try to relate this with my ideas on Soft Law, I can say that the idea of self-regulation and introspecting into the ethics and values which shape a Network State, has been given enough focus in the definition.

Start-up Societies as Network States

We are aware of the generic, neoliberal understanding of the moral and ethical basics behind the genesis of the culture of entrepreneurship. In fact, as the book suggests, a network state is a startup society, with a sense of moral innovation, national consciousness and in-person civility, driving a consensual government, which automatically, does not get the diplomatic recognition of a Network State. Balaji also introduces readers with the idea of network unions and archipelagos. He proposes that like startups take time, to become unicorns and then public companies, even startup societies will take time become a network state.

On trust, national consciousness and in-person civility, this statement by Balaji is worth noticing:

High trust in turn comes from alignment towards a collective purpose and a sense of national consciousness.

In the next sections, I analyse the book’s basic ideas, esp. from Chapter 5 - from law, international affairs and governance perspectives.

On International Law: Return of Terra Nullius and Terra Incognita

This is an excerpt from the Chapter 5 of the book explaining how terra incognita and terra nullius return. Balaji gives a simple proposition that a Network State System assumes many things present on the internet, will eventually become invisible to other subnetworks. It means that the any subordinate component or thing, within the network itself, becomes invisible, eventually. That may be an ordinary tendency to see things, so it does makes real sense why terra incognita could return. The return of terra nullius is nevertheless, more interesting to look forward. Like in public international law, we assume unclaimed physical territories as terra nullius, in the case of even a network state, we can assume that there are so many unclaimed assets, items, identities and indicators, which he covers under the term called the “unclaimed digital territory”.

My view is that terra incognita will only increase as more sophisticated technology infrastructure is built with time, which is not just protectionist, but also interventionist. In both of these strands of technology design thinking, if the idea of a Network State becomes a reality, it could be possible that this could go further deeper, in a spiral. As far as terra nullius is concerned, I have some doubts as to why should it work, because what assets become important, may or may not dilute as the internet and the cyberspace transforms with me. Discoveries and innovation has emerged from mere telecommunication devices to the unusual emergence of the internet of bodies (derived from the internet of things), for example. In both the cases, we will see how things are considered horizontal and vertical, subordinately, or insubordinately.

The book covers some interesting aspects of economy, governance and control. For example, Balaji rightly points out how real-time national governments can sometimes act as digital governments. Examples range from censorship to geoblocking and access controls of applications like Google, Twitter and others as well, in some cases.

As we anticipate the discussion of digital territories, let us ponder upon how the process of diplomatic recognition in a postulated fashion has been covered by the author, which fascinates me.

Balaji explains what happens if a Network State in proposition does not have any diplomatic recognition. Here is excerpt from Chapter 5:

Another excerpt however must be taken into context, from the same chapter, which is provided as follows:

It is understandable that Balaji has taken a reasonable example of cryptography to justify and make his case for diplomatic recognition and other forms of crystallisation to a Network State. This seems to expand the potential of distributed ledger by according private keys to users having exclusive access to their private keys.

The Network State in a Multipolar World Order

Interestingly, the work even if could be assumed to be utopian to be futurist, has some roots in pragmatism and optimism. Balaji has covered interesting examples of global and Western history, and the present conditions. For example, here is an excerpt from the beginning of Chapter 3 where he explains three billion-people led capitals, which are assumed to be quite significant in power and influence:

As the excerpt is self-explanatory, this kind of a characterisation, is a quite normal premise for any proponent to make per se. The one central aspect to all of these three groups or centres of power is that capitalism retains itself as the dominant economic ideology, in the matters of governance and human life. The author’s illustration of all the three examples, make genuine sense. The explanation, interestingly is available within the same chapter with 3 reasons stated, in this excerpt:

The third reason is a quite generic one meaning that uncertainty always eclipses over realities of the present. The second reason, from a policy aspect, is eventful, based on the assumption that the US is on a decline, and thus, is event-centric, which might be a case to revisit how Network States can be achieved. And yet, the author comes up with a better reason - the first one - in which he relates to the statements given by India’s External Affairs Minister, Dr S Jaishankar. Balaji thus relates to the assumptions that Eurocentrism, the primal force of modernity and technological revolutions in these centuries, would not remain the same - and that those same forces of technology, are not under any state or empire’s monopoly, which is practically true.

The author is trying to explain that while big powers, like China and the United States (earlier it was the Soviet Union and the US), aim to create the situation of bipolarity/unipolarity in the realpolitik, thereby affecting the system of international law and the rules-based order, multi-polarity is what countries, individuals and groups demand for, because they too, like the supporters of Pax Bitcoinica reasonably wish for. It helps various actors to assume their own volition to steer their world, in specifics and general, wherever they go, howsoever flawed it might be.

I have also covered Balaji’s proposition of a non-aligned India-Israel partnership, which is cryptocurrency-centric, based on a Twitter thread from his account in the final section of this review.

From a perspective of structural and liberal thinking, it seems that Balaji’s understanding of a Network State, is way refined that the ideals of the Westphalian era, and even of the times, when the United Nations was formed. As international law becomes digital, the perspective this book offers, is a treat to read, for law students & professionals and even the scholars of public policy.

Here is an excerpt on the multipolar nature of the global order, explained by Dr S Jaishankar from his recent book, The India Way: Strategies for an Uncertain World (2021), Chapter 3:

Final Comments and Some Ideas

My final comments begin with analysing a Twitter Thread in which Balaji proposes a non-aligned way integrating BTC/Web3. This is the opening tweet for reference.

Although, the non-aligned movement has largely shaped India’s international legal perspectives, we can see that Balaji explains why should India lead a decentralised approach to technology autonomy and sovereignty. Here is an excerpt from the thread to refer: