Network States: What is a Country but a Collection of Minds?

“Network State,” a term coined by Balaji Srinivasan, is a “highly aligned online community with a capacity for collective action that crowdfunds territory around the world and eventually gains diplomatic recognition from existing states.”

Vitalik Buterin, a friend who also happens to be the Co-Founder of Ethereum (ETH), created a social experiment that I had the pleasure to participate in. The experiment was known as Zuzalu, with 200 invited participants from all over the world, hosted in a picturesque enclave of Montenegro by the Adriatic Sea. We exchanged ideas about philosophy, governance, longevity, synthetic biology, AI, and of course blockchain. We lived and dined together, and invited the best thought leaders to facilitate discussions and workshops. Zuzalu residents were technology company founders, biologists, engineers, artists, philosophers, and most memorably, young people who possess intellectual curiosity and an amount of self-belief to be able to achieve anything.

The concept of the network state has the potential to change the ways that all industries work, as the fundamental underlying infrastructure of a “country” is redefined. We begin to scratch the surface of this social experiment in my conversation with Vitalik. The experience itself was much deeper than any article or interview is able to convey.

This transcript has been edited for length and clarity.

Cathy Tie (CT): How did you come across the concept of network states?

Vitalik Buterin (VB): It all started in early 2021 when I wrote a post on CryptoCities, exploring blockchain applications for local governments. I realized that while blockchains alone may not drive adoption, integrating zero-knowledge proofs could enable people to preserve privacy in matters important to them. I have always been interested in economic and technological mechanisms, and this idea resonated with me. Last year, I wrote an 8,000-word review on Balaji Srinivasan's book, "The Network State," which explores the concept of creating intentional communities focused on prioritizing a healthy lifestyle. Balaji used the example of Kosher Keto to illustrate this idea, emphasizing biomarkers, exercise, and a tech-friendly regulatory environment like the crypto space. While the concept seemed theoretical, Zuzalu aims to conduct practical experiments by bringing together diverse communities to foster cultural experimentation. These experiments are on a unique scale, and were successfully executed within four months, leading to meaningful outcomes. The goal is not to conform to a specific network state category but rather to facilitate intersections between the theorem community and other communities.

CT: Moving from theory to practicality, what were the two biggest learnings from the experiment as it played out?

VB: One major lesson was that it's okay not to plan everything ahead of time. In fact, extensive pre-planning can be detrimental. Embracing the concept of spontaneous order and allowing things to naturally unfold impressed me. The second learning was the importance of experimentation. By running these experiments, we gained valuable insights into what works and what doesn't, helping us refine the concept of network states.

CT: When it comes to building new technologies, how do you envision citizens or residents of a network state leveraging infrastructures to be productive together?

VB: There are two aspects to consider: the human, intuitive, and cultural side, and the formal mechanism side. Culturally, people have an innate understanding, and it's important to foster an environment where they feel empowered to participate and contribute to the experience. Positive incentives are often unnecessary; instead, reducing barriers and reminding people of their capabilities is key. On the formal side, Dunbar's number is significant. It suggests that the average person can maintain meaningful connections with around 100-300 individuals, with 150 being the typical value. When the number of connections is below Dunbar's number, formal mechanisms are generally not required.

CT: How has social media affected the quality of personal connections?

VB: Social media allows us to loosely keep track of a larger number of people. As communities expand beyond a certain size, formal mechanisms become necessary. Money and voting are examples of such formalized social systems. They enable the functioning of larger groups. Experimentation is crucial for distinguishing effective systems from ineffective ones. For instance, we experimented with zero-knowledge technology and developed cryptographic proofs that prevent reproofing of data without revealing the entire dataset. Zu Pass is a system that proves an individual's residency in Zuzalu without disclosing their specific identity. Another example is Zu Poll, a zero-knowledge proof-based polling system that allows residents to create and vote on polls, with each resident limited to one vote.

CT: What are the advantages to using a zero-knowledge proof-based polling system versus an anonymized Google survey?

VB: The privacy is stronger. And Zu Pass and Zu Polls are one of the formalized social systems that worked well. And if we start talking about further into the future and more sensitive applications like voting for example, voting in larger scale elections, you don't want Google to be able to see how their employers or customers or whatever have voted on.

Vitalik Buterin and Cathy Tie

CT: You understand governance at a macro level and how to build larger offline communities. I want to focus on the micro level, particularly the initial members of such a community. They shape the social systems that naturally emerge and influence ongoing dynamics. How do you approach selecting the right individuals to join, and what criteria do you prioritize for optimization?

VB: Scaling poses a challenge in the selection process. To address this, creating multilayer structures and empowering knowledgeable individuals to invite and inform potential members about the community's core values is crucial. By emphasizing the connection between co-living, co-working, and privacy in crypto, and designing the community with a focus on these principles rather than abstract notions of network states, many possibilities can unfold.

CT: Atoms-based technologies, like biotech and hardware, involve a different set of regulations and skills compared to software technologies like blockchain. For example, shipping and customs are hurdles for transporting biomaterials, whereas blockchain engineers can easily be digital nomads and start building software in any city. At the same time, I can see that these technologies can really thrive in a network state infrastructure.

VB: I think that's definitely a lot of really good points there. In larger groups, there is an opportunity to negotiate with the government for favorable conditions, unlike smaller teams that often have to comply or find ways to evade regulations. The emergence of network states and collective digital nomadic communities could have significant implications for investors and real estate. Investors may consider partnering with these communities and investing in projects within them, requiring collective bargaining and revenue-sharing arrangements. Real estate markets may experience shifts, with regions affected by unfavorable factors seeing a decline while geographies with natural beauty and logistical advantages will benefit from this trend.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Cathy Tie

Cathy Tie is the founder and CEO of Locke Bio, a digital health platform company that streamlines the launch of fully integrated, branded telehealth services. Cathy is recognized in Silicon Valley as the youngest founder to raise venture capital in biotech, is a Thiel Fellow, and has been recognized by Forbes in their annual 30 under 30 listing.

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