DAO Politics — a podcast series from ForkLog, in which, together with invited experts, we examine how decentralized autonomous organizations are structured, and discuss their conceptual and technological foundations. The guest on the season one finale is Synoptic, an expert in corporate law and enthusiast of the programmable economy. Together with him we examine the key shortcomings of the theory of the Network State and explore what alternative projects for the society of the future exist.
The Network State — a concept of a social-political organization proposed by former Coinbase CTO Balaji Srinivasan in the book of the same name and based on the use of blockchain and related technologies. Creating such formations implies presence not only in virtual, but also in physical dimensions. The latter is achieved by acquiring parcels of land around the world, which are then united into a network archipelago. With ambitions to become a network state, theoretically any like-minded community can do it.
Vulnerabilities of the Network State
Balaji Srinivasan’s ideas about the need to create a network state beyond existing jurisdictions are fairly understandable. The historical process, in one form or another, is leading there. The Network State, in essence, is one of the ways to realise a planetary state with a single world government. All these notions seem evident in current conditions: there is a sense that a large historical cycle is ending and that many concepts must be rethought.
Giving a precise definition of the Network State is not easy, even within the framework of political theory and law. Some of Srinivasan’s ideas can be confusing. For example, one of his theses states: “digital primary, physical secondary” — first the digital, then physical reality.
That is, he proposes acknowledging as a fact that we have a new form of life — the digital one. Now we will enter a metaverse with our Telegram and Discord chats, where we will unite with all people on the planet and produce activity. And this activity will be primary, and your daily life secondary. I am puzzled by this approach. I do not believe in its viability.
In the classical definition of the state there is an element such as territory. If there is no territory, there is no state. Our history, in its classical understanding, is the history of the struggle for territory.
We as people live not in virtual reality, but in a concrete physical space. And every time we wake up and open our eyes, all that we see is the state. We live in a house built by a company operating within economic reality. We pay for the internet, sustained by a vast amount of infrastructure existing within the state. We travel on roads.
Wherever we gravitate, we will, one way or another, interact with some form of either state-owned or public property, or relations that are possible only within this structure. Is it possible to pull a person out of this territory and place him into some digital reality, completely disconnecting him from it? I do not see how to do this while we remain physical beings. A specific state (China) has created a system that allows it to monitor its own population on its territory. Moreover, all governments are following this path. But people do not become digits because of it.
If the Network State remains in the cloud, there is a high likelihood that it will not reach my real self, will not be able to address some pressing issues. If a thief comes into your apartment, where will you turn? The Network State? How could the Network State reclaim what was stolen from you?
Talk with people and launch business processes? That is possible in the Network State. Regulate some social processes? Certainly. The ability to unite has always existed for people, and it has always been an effective tool for solving some problems. Which problems this Network State will solve is not stated in the book yet. Therefore I believe the Network State cannot replace the traditional state, but perhaps will find some form of parallel coexistence with it.
The ideal model is possible only when there are ideal people. And there are none. Any Network State will be created by people, and with them there will come conflicts of interest, different worldviews and different strategies.
Luxury Communism
States seek to integrate. If we consult history, we will see that on different territories, first small countries appear. Then they begin to seize each other or form unions, merge. In any case this is always a drive to grow.
The state continually expands, constantly approaches its neighbour and begins to resolve its differences with it. And at some point, when the whole territory has been carved up and wars have become too brutal, states of the next level begin to form. These are either confederations or various federative formations. In any case this is the next form of unification. The European Union, the United States of America — these are unions of states that have merged into a single whole with some form of shared regulation. The USSR was organized on the same principle.
In the realities of the information age we instantly learn about any event on the planet, and we have the ability to respond quickly. I think that in the current conditions it is quite feasible to create a kind of “luxury communism,” based on a programmable economy. Within it one can reproduce both capitalist models of economic activity and planning. And I think the future belongs to multiple models — both globally and locally. The programmable economy opens broad prospects thanks to the very rapid flow of information and the fact that the entire accounting system is simultaneously a global computer. We have everything in one place, and that is very convenient.
The main critique of capitalist economics is that the surplus product created by every person is appropriated by the owners of the means of production. The communist model proposes: factories and machines should be in public ownership. The criterion for distributing goods here is human needs. This is what planning is for.
One of such means of production that would make sense to socialize is artificial intelligence. To produce its output, AI relies on the information generated by a huge number of people over several generations. And the profits that will be generated by each specific artificial intelligence would be fairly distributed not among the company’s shareholders, but among the people who created the raw material feeding the neural networks. That, probably, will be luxury communism.
Barriers to a Programmable Economy
The first obstacle is the world of open information. On the one hand, we want to live there. It gives us Open Source, the Ethereum Virtual Machine, transparency of processes. On the other hand, there is the example of China, where information is open, but only for certain sections of people. So how will it be used? Most likely there will be zones of influence that for one reason or another will not want to disclose part of the information relating, for example, to the state budget. This contradicts the principles of full openness, declared by Web3.
Second barrier — intellectual complexity. The harder it is to explain the model, the harder it is to integrate it into our lives. This is a problem for regulators and for conservative thinking, for which, in principle, the state is responsible. It has no mandate to rush ahead and seek the new.
Third obstacle — problems of hacking. We face a new form of malevolence. The protocol itself can be written perfectly, it will function reliably, but it can be broken entirely. From it money can be siphoned. In other words, this is a new form of criminal activity that needs addressing. And no matter what quantum computer we eventually invent that could outpace any encryption—then we would lose this unique element that allows the crypto-economy to exist at all.