Network states are internet-based communities building toward real-world governance and recognition.
A network state is a community that establishes a degree of post-Westphalian autonomy or sovereignty, which is then used to develop a self-governing society with its own culture, economy, rules, legal frameworks, and formal institutions. These communities typically form over the internet, establishing a collective identity based on extended kinship ties around a topic, shared values, or ideology.
However, the key defining feature of network states is how this post-Westphalian sovereignty is formed and, due to their nature, how they provide value. Unlike traditional nation states, which ultimately make sovereignty claims based on territorial boundaries, network states typically establish an order within a territory defined in cyberspace and, therefore, are a virtualised or internet-first construct. More generally, the order can be over any domain and communication medium while maintaining its autonomy against adversarial entities, where the territorial focus is on the peers and their relationships within the network.
The network state idea is not science fiction and has historical precedent – an example being the Jewish diaspora establishing 'state-like' organisations, such as Qahals or Kehillas, without associating them with a physical territory. Arguably, the United States established the largest network state through the Patriot Act, extending its sovereignty claims to all data stored by US companies globally, regardless of which jurisdiction the data actually resided in.
Public blockchains, such as Bitcoin, can also be viewed as prototypical network states. Bitcoin has successfully proven itself capable of securing a monetary policy, maintaining its order and autonomy against state-like adversaries, and having a developed economy that has crossed the digital divide; its consensus mechanism can even be viewed as a form of parliamentary sovereignty – the basis of legitimacy in many democratic nation states today.
This notion of consensus in distributed systems as a form of parliamentary sovereignty was first recognised by Leslie Lamport in his 1989 paper describing the Paxos Protocol, "The Part-time Parliament". In the paper, he describes a fictional story of the island of Paxos, where legislators worked part-time, coming and going as they pleased. Despite their irregular attendance, they needed a reliable system to pass laws and maintain consistency in their legislative records. The Paxons developed a protocol describing a parliamentary procedure that ensured decrees were consistently recorded and agreed upon, even when legislators were absent or unreliable.
The modern nation-state model, established by the Peace of Westphalia in 1648, is increasingly seen as outdated and ineffective. Nation states suffer from inefficiencies stemming from corruption, economic failures, and ideological conflicts. Borders imposed by colonialism have led to ethnic conflicts, fiat currencies are prone to mismanagement, and globalisation has weakened state sovereignty. As our lives and interactions become increasingly digital, network states are emerging as an alternative order around which to coordinate – one that resists many of the flaws inherent to our previous centralised governance structures.
The need for laws in online virtual communities was recognised in the early 1990s with LambdaMOO, a text-based virtual reality environment. Initially governed by a "wizardocracy" where programmers held absolute power, LambdaMOO transitioned to self-governance when its head wizard, Pavel Curtis, announced that the wizards would step back from social decision making. This experiment in digital democracy was tested when a user named Mr. Bungle used a "voodoo doll" program to force other characters into non-consensual virtual sexual acts. The community's response led to the development of petition systems, ballot initiatives, and formal dispute resolution mechanisms – essentially creating a nascent legal system.
As Edward Castronova recognised in "Virtual Worlds: A First-Hand Account of Market and Society on the Cyberian Frontier", some virtual communities, such as those forming within MMORPGs like Ultima Online and Everquest, had economies rivaling smaller nation states' GDPs. While strictly digital in nature, such virtual communities not only had comparable economies but user bases exceeding the populations of many recognised nation states, making them prime candidates for digitally mediated governance solutions.
The idea of network states – although not under that name – developed throughout the 1990s and 2000s. Influential publications like Jerry Everard's Virtual States, the collection of works edited by Peter Ludlow contained in Crypto Anarchy, Cyberstates, and Pirate Utopias, John Perry Barlow’s "Declaration of the Independence of Cyberspace", Timothy C. May's "Crypto Anarchy and Virtual Communities" and "Libertaria in Cyberspace", as well as Hakim Bey's The Temporary Autonomous Zone and later publications, such as The Stack by Benjamin H. Bratton or Second Realm by Smuggler and XYZ, further elaborated the need for and potential functioning of such cyberspace governance systems.
Network states can potentially address many of the problems plaguing modern governance. Centralised governing institutions claiming sovereignty over specific territories are ill-equipped to tackle many of the modern age’s issues, which are global in nature. Furthermore, central control of public resources presents seemingly irresistible opportunities for corruption, with those controlling the levers of power disincentivised to pursue reforms that may jeopardise their privileged position. Network states offer an alternative better suited to the challenges of our increasingly digital lives.
Throughout the 1990s and 2000s, extropians, cypherpunks, crypto anarchists, and agorists saw that they could use cryptography and peer-to-peer anonymising networks to carve out territories in cyberspace – networks that could be 'sovereign' or free from adversarial manipulation.
Similarly, the United States military has formally recognised cyberspace as a fifth domain of conflict alongside land, sea, air, and space. According to the US military, cyberspace consists of three distinct layers:
Physical network layer: The tangible infrastructure, including computers, servers, cables, and physical network components that form the medium where data travels
Logical network layer: The abstract relationships between network elements, independent of specific physical paths or nodes
Cyber-persona layer: Digital representations of individuals or entities, which may relate to real people or be artificial, with the possibility of multiple personas per individual
A key realisation is that if a virtual online community could stake a claim within these layers and develop an economy, it would represent a new sovereign power – a network state that would be capable of interfacing with nation states.
While capable of engaging with nation states, the nature of network states is radically different from their territorially based incumbents. By being virtual or internet-native, they often have no physical presence. Participation in network states is voluntary, meaning they have substantially cheaper exit costs than emigrating from a physical territory controlled by a nation state. This means that a network state has to provide value in order to have value and attract new citizens. In short, network states will be forced to be value-driven and competitive in provisioning services and institutions.
The permissionless infrastructure on which they operate encourages network state architects to experiment with governance and legal systems and cater to a specific community of users. Combined with their low exit costs and voluntary nature, network states are platforms for "competitive governance" and "autocentric law" – the most successful governance experiments will thrive as they attract new citizens, while systems failing to optimise around their users’ values will struggle to retain citizens, forcing them to innovate or become obsolete.
Moreover, network states that base their order on blockchain technologies can develop their legitimacy through "express consent", requiring users to sign transactions for services rendered by the network. In this way, network states can reasonably argue a stronger expression of "consent of the governed" – the basis of legitimacy in many liberal democratic governments. In contrast to nation states, network states are created for the people, by the people.
Despite their potential, network states face several challenges. Firstly, they remain largely theoretical and must gain broader acceptance and recognition. The concept of a digital nation challenges traditional notions of sovereignty and governance, making it difficult to establish diplomatic recognition.
Additionally, network states must navigate legal conflicts with existing national and international laws. Blockchain-based governance models, such as smart contracts and DAOs, must be secure from cyber threats while ensuring fair and democratic decision making. Since DAOs are still an emerging governance model, reaching consensus within a decentralised system can be complex and slow.
As financial corruption and inefficiencies continue to plague centralised institutions, the rise of blockchain-based network states and cyberstates provides a viable alternative. By decentralising governance, enhancing financial transparency, and enabling self-organised communities, network states present a compelling vision for the future of governance.
As network states develop their online economies, they will begin to cross the digital divide to secure the interests of their citizens, whether it will be through their economy, markets for enforcement, on-chain entities owning real estate and engaging in property development, or even public administration of special economic zones.
The emergence of new technologies coinciding with a period in history in which nation states are ceding sovereignty to non-state entities presents an opportune moment for such governance experimentation. As our social interactions and economic activities continue to digitalise, our governing institutions will need to follow suit if they are to adapt to the unique challenges of an increasingly connected global population.
In addition to those resources mentioned, there is a wealth of literature exploring the ideas underlying the network state movement, including Tom W. Bell's Your Next Government, Han-Adam II's The State in the Third Millennium, Seasteading by Patri Friedman, Anarchy, State, and Utopia by Robert Nozick and Thomas Nagel, "Nations By Consent" by Murray Rothbard, and Farewell to Westphalia by Jarrad Hope and Peter Ludlow.
Jarrad Hope is a blockchain pioneer, entrepreneur, and advocate for digital self-sovereignty. He entered Bitcoin in 2010 through agorism and crypto-anarchy and later contributed to Ethereum to advance institutional libertarianism. Today, Jarrad leads the development of privacy-preserving and censorship-resistant technologies as the co-founder of Logos, which aims to strengthen civil liberties through politically neutral networks. Through the Institute of Free Technology, he drives initiatives such as Logos’ technology stack (Waku, Nomos, Codex) and the p2p messaging application and crypto wallet Status. Jarrad advocates for building a virtual state, cyberstate, or network state powered by blockchain and AI, and continues to develop cutting-edge technologies to lay the foundations of high-trust societies.
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