Networked Nations
Hi friends 👋,
Something must be in the air, because this article’s topic was incredibly well timed with Web3’s latest fascination.
This past Thursday, ConstitutionDAO went viral as it offered to organize a collective bid on one of 11 surviving copies of the United States constitution. Like any good heist, our team of internet patriots must race against the clock. They need to raise $20M for the auction which is 3 days away!!! I joined the Discord early on and saw the rapid assembly of a decentralized team of developers, designers, and legal experts. It was electric, inspiring, and smelled faintly of the future.
Over on Twitter, ConstitutionDAO has transcended meme-hood, achieving a cultural symbolism at the intersection of Web3’s self-sovereignty and American libertarianism. Just take a look at some of the messages people are attaching to their funding deposits (credit to Packy for sourcing these, he always beats me to the punch).
This one stopped me in my tracks.
Chills. ConstitutionDAO has inspired the internet to consider more meaningful, identity-fulfilling avenues for collective action. It also acted as a proof of concept for how DAOs can interface with the physical world. ConstitutionDAO has managed to contact museum’s like the Smithsonian to handle storage and logistics of the constitution.
So how does this article fit into the picture? Well this article is really about three things:
Web3’s aptitude for big contrarian ideas
Why institutions fail over time, and our best method for replacing them
How Web3 is building a ‘nationhood stack’, that start on-chain but slowly manifests in the real world
Though any sane person would have told me to break this up into three articles… here we are.
Let’s get to it 🚀
P.S. if anyone knows how to get in touch with Nicholas Cage, please reach out ASAP.
Networked Nations
Key to understanding Web3 is the idea of WAGMI, the belief that we’re all going to make it. WAGMI embodies the collectivist, positive-sum mentality of Web3’s core contributors. It is the spiritual force that keeps people’s chips on the table, the pep talk inspiring them to ape into the latest token or group-bid in the name of the the people. But WAGMI is also about awareness, achieving an enlightened state in recognition of Web3’s ‘meta-game’: that we’re all just having fun experimenting on new platforms, making internet friends, and taking our shot at financial security.
WAGMI culture inherits some of its values from the seed of the Web3 community; the HODL tribe of early cryptocurrencies. WAGMI is a natural extension to HODL, because if you were early to Bitcoin and Ethereum, and held on to your coins, you’ve likely made it. WAGMI is the HODL dream manifested.
A common wisdom in investing is that to achieve outsized returns on your bet, it’s not enough to simply be right. You need to be contrarian and right. The holders of BTC and ETH bought their coins in 2012 or 2016, at a time when talking about decentralized money networks and an internet ‘owned by the people’ would bring concerned glances over the dinner table (warning: still does). But with 20/20 hindsight and 2021 prices, it’s all too easy to paint over the deep level of commitment required to be a part of this devout, contrarian community.
While betting on Bitcoin and Ethereum today might still be right, it’s no longer contrarian. Web3’s most lucrative opportunities have shifted, and now people speculate on the potential of decentralized talent collectives (DAOs) and the impact of digitized culture (NFTs). The juiciest returns forever remain on the periphery of accepted ideas. Contrarianism highlights another essential aspect of Web3’s culture: a longing for intellectual discussion and disruptive ideology.
As I’ve met more of Web3’s major contributors, I’ve only become more impressed by their affinity for big ideas. This probably holds true amongst any community of builders and founders, but I think especially so for Web3. This is well explained by a quote from Balaji:
“Decentralization is not the absence of leadership, decentralization is the abundance of leadership”
A self-organizing community like Web3 is more likely to contain self-driven members. The force pushing them down the rabbit hole is a maniacal pursuit of curiosity, a gnawing hunger for knowledge, and a willingness to destroy and recreate the very fabric of society. When I first started grappling with Web3, I had to read about concepts ranging from game theory to monetary policy, from cryptography to collective psychology. Everyone thinking about Web3 shares this “Proof of Work”, and is the reason we can correlate being a Web3 early adopter with having a ravenous appetite for ideology.
A recent project, Verses, perfectly embodies this trait with the launching of a Declaration of the Interdependence of Cyberspace. The text is a ‘fork’ of an original copy of John Barlow’s 1996 declaration, written as an indictment of the institutions that threatened to slow the progression of the early internet.
Web3’s own declaration now lives permanently on the Arweave blockchain, where you can add your cryptographic signature or fork it for revision. I really encourage you to check out the Verses’ Twitter to see the thoughtful comments from community members - its a true display of Web3’s love for ideology.
For those new to Web3, the content of Barlow’s and Verses’ declaration can appear as gratuitous criticism. After all, any discussion that knocks the government and scorns ‘failing institutions’ can sound paranoid and alarmist - but this reflex is a sign that critique of our institutions has fallen outside the Overton Window. This should never be the case.
An open critique of institutions is what leads to country’s gaining their independence, and is what’s leading the internet to its own independence. A proper lens for Web3 is as a modern anti-establishment movement using technology rather than policy to build a new future. True anti-establishment behaviour isn’t performed as an act of destruction, but rather in the name of reincarnation. So welcome, to Future Proof’s biggest collection of ideas yet:
Institutional Anti-Patterns
Starting an Institution Revolution
Government: A Platform of Platforms
A Tech Stack for Nationhood
Rise of the Network State
Institutional Anti-Patterns
Before we begin, it’s worth defining exactly what we mean when we talk about institutions. There are two sides to the institutional coin; institutions can be either structural or procedural.
You’re likely already familiar with the idea of structural institutions; these are major societal functions embodied by organizations: the education system has universities and colleges, and the media system has cable TV and newspapers. Procedural institutions are more nuanced, they are customs or established ways of doing things: like the institution of marriage and the nuclear family. I really like this definition of institutions by academic Samuel P. Huntington:
“Institutions are stable, valued, recurring patterns of behavior”
Whether embodied or cultural, institutions create patterns that govern the progression of society. This leads us to one of the most important questions we can ask: are our institutions creating the right societal patterns?
In software development, there’s a useful concept known as an anti-pattern. Anti-patterns are ways of solving a problem that generate more bad outcomes than good. Anti-patterns still count as solutions, just not the best ones. Like a bad coding habit that adds unnecessary complexity or runtime to your program.
In North America, our major institutions have been around for so long that we forget the value of institutional disruption. A changing of the guard is a healthy rebalance for the ecosystem, cleansing our institutions of their anti-patterns. Instead our institutional archetypes for the government, mass media, and higher education remain relatively unchanged since their inception. As a result, society’s patterns are defined by entities that are hundreds of years old, like the GOP (167 years), the New York Times (170 years), Yale and Harvard (320, 386 years).
This isn’t inherently a bad thing. Institutional paradigms are meant to have a pretty long shelf life. There’s no rule on when they need to be replaced. Instead, it’s more like a gut check. We just have to ask ourselves: are our institutions creating the right societal patterns?
My 2 Cents
If I was forced to decide, I’d say our structural institutions are contributing to a lot of societal anti-patterns. In particular, there seems to be a deep disconnect between the intended and actual outcomes generated by government, media, and the education system. And most of these problems aren’t even hidden away, they’re staring us right in the face!
Students are graduating into ever-increasing levels of debt. The media inspires more outrage and intellectual division than it does informedness and moderacy. There’s a general angst amongst young people that they won’t be able to afford the lives of their parents. All in all, it seems like many of our social contracts offer quite a “bad deal”. Now, I’m not saying these are easy problems to solve, but I think it’s important to talk about why these anti-patterns exist.
I’d start with the fact that old institutions are relics from a pre-internet age. We haven’t refreshed the roster since humanity’s greatest transformation yet: the information revolution. I love this quote from Revolt of the Public, a book reflecting on the impact of the internet on our political landscape:
“As the amount of information available to the public increases, the authoritativeness of any one source decreases... The more information becomes available, the less of a monopoly any one source has.”
Our institutions are a byproduct of the era they were conceived in, that being a pre-information, pre-internet age. Now, the cloud has burst open, and there are no authorities, just opinions - millions of daily anecdotes and opinions. Thousands of blogs and newsletters all pointing in different directions. And have our institutions kept up? I don’t know. There is a gap, and this dissonance is best characterized by the New York Time’s ad campaign where it equates itself to the Truth:
Being pre-internet in a post-internet world is itself an anti-pattern.
Starting an Institution Revolution
Like cells in a body, faulty institutions need to be identified, dismantled, and refactored into modern parts of society. But as it turns out, institutions have a profound interest in their continued existing. All rebellions face improbable odds and it proves remarkably difficult to usher in new paradigms. Doing so requires that the upstart institution win in the arena of markets and consumer choice. They must win in society’s endless election: the daily redistribution money and attention.
Institutions are revolutionized by this reallocation. Legacy media is degraded not because we stop subscribing, but because the best journalists choose to start a Substack. Oil and gas phases out of use because consumer values change and we become happy to pay the green premium. Compared to money and attention, our actual democratic votes are infrequent and low-signal. The most powerful election is embedded into the fabric of everyday life, the endless distribution of human and financial capital.
All good rebels know that the Empire has a habit of striking back. Institutions stay in power by flexing on legacy distribution, established influence, and creating protective regulation. This disrupts the natural handoff of power, leaving us with anti-patterns, poorly suited for the age they exist in. But innovation finds a way. Creator-led courses and MOOCs rose to the challenge, offering cheaper education and training in a digital format. In 2009, Bitcoin seeded the idea of having a monetary network that transcends borders and institutions. Did you know that Bitcion’s genesis block references bailouts of the banking system? Where there is yin there is yang.
“Chancellor on brink of second bailout for banks” - embedded within the Bitcoin genesis block
Government: A Platform of Platforms
We tend not to like it when companies or platforms overstay their welcome or get too big. In Part 1 of Web3 Explained, we showed that platforms at end of their life cycle exhibit extractive behavior. They switch from providing value to demanding it from their users. Well, institutions themselves are platforms for their social functions. And there are signs we are properly in the extract phase.
To limit scope, we’ll focus the rest of this article on the mother of all institutions: government. Governments are THE platform for all other platforms. Anyone who wants to access a government’s users (citizens) needs to play by their rules (laws). Governments tend to be our oldest institutions, which means their structural ‘DNA’ is the least adapted for the modern age. While governments can ideologically change (i.e. a new party comes to power), governments as a process rarely change.
Governments can be seen as an incredibly ‘sticky’ platform, but not for good reasons. It’s really a combination of high switching costs and lack of competition that keep governments the way they are. The only competition for governments are… well, other governments. And switching to a new ‘platform’ requires you to cast the ultimate attention/monetary vote: changing your country of residence.
What’s interesting is that these problems are remarkably similar to the problems caused by extractive platform companies (from Web3 Explained Part 2). Mapped to the government platform, these problems become:
Distribution Dependence: We rely on governments to uphold the ‘nation experience’, exposing us to rent-seeking behaviour and platform mismanagement.
Locked Value Chains: Governments centralize resources, preventing fair competition across the ‘governance stack’.
Digital Islands: Citizens and their valuables are difficult to transfer between governments.
It seems silly to call out these problems because we don’t consider ourselves to have any ‘government alternatives’… that is until now.
A Tech Stack for Nationhood
The following sentence will require a leap of faith: Open state networks are the first viable alternative to governments as a platform. Before you ask me to take off my tin foil hat, let me provide a few reasons why this makes sense.
In Web3 Explained, we showed that blockchain and tokens enable the existence of open state networks. An open state network is like an internet that stores shared data that every user and application can access. But it’s what the data in the network represents that’s so important. In Meta vs. the World we said:
“Protocols alter data in a way that reflects a new allocation of resources within a network. These resources often have implicit or explicit value in the real world, and so this change of data is reflective of a new state of value distribution.”
It’s data on a bank’s server that determines your net worth. It’s data on a government server that determines your citizenship. So an open network using cryptographically secure tokens - also known as a cryptonetwork - is really like a secure open database that we can use to keep track of… well, anything.
You’re probably thinking: governments do more than just protect your data. And you’re right. Being a citizen of a government is a two way contract: as long as you pay the necessary platform fees, the government will protect and uphold your rights. Common rights include the right to own property, to speak freely, and the right to due legal process in the case of disputes.
What I want to convince you of is that cryptonetworks can fulfill the same promises made by governments.
Digital Liberties and Crypto Rights
We already know how cryptonetworks enable ownership through tokens. The other rights are less obvious. In the case of a dispute, instead of a right to a trial by jury your trial will be overseen by a consensus algorithm. Your freedom of speech is characterized by an ability to post any content you want on censorship resistant platforms like Mirror. Cryptonetworks promise all this and more, so long as you continue to pay your gas fees!
In Tascha Che’s How to Value L1 Blockchains, an argument is made that the proper valuation method for cryptonetworks shouldn’t be discounted cash flows, but something more akin to GDP. This makes sense when you realize that Ethereum’s reshuffling of data is really documenting the digital footprint of an entire economy.
There’s a reason this is so non-obvious: Cryptonetworks start in their most abstract form and build OUT towards the real world. At first it's just an open state database, but then we attach a narrative to the data and decide it represents something culturally valuable, like digital gold or your favorite JPEGs. Before you know it, the shuffling of that data represents something more consequential like a collective bid on a copy of the US constitution!
Now, for my most tin-foil-hat-worthy claim yet: there’s an angle where the trendline of Web3 development can be seen as the creation of a tech stack for decentralized nationhood. Think about it.
At a baseline, a nation’s feature set includes: identity management (digital wallets), property ownership (tokens), monetary network (cryptocurrencies), maintenance of laws and regulations (smart contracts, protocols), communication (Discord, Telegram) and governance (DAOs). Today Web3 offers the primitive forms of each of these features, but improvements are underway. Wallet addresses will be consumed into query-able social graphs and inter-wallet messaging will add a communication layer that is native to Web3. These protocols are already being worked on by teams like CyberConnect and XMTP.
These advancements will realize one of Web3’s wildest ideas yet, something known as the Network State.
Rise of The Network State
The idea behind a network state is to offer a digital solution that replicates the functionality of a nation state. Though a grand idea, we’ve seen that the early building blocks are already here.
Balaji Srinivasan offers the following definition for a network state: a social network with an integrated cryptocurrency, and a sense of national consciousness that eventually crowd funds territory.
He imagines a future where communities form digital-first, percolating their presence into the physical world. This makes surprising sense in a world where we are more connected to people on our Twitter feed than neighbours in our apartment building. In fact, there is already a DAO with this bold vision, aptly named CityDAO. CityDAO owns 40 acres of land in Wyoming. This is crazy but it’s just the beginning. Remember what we said earlier:
Cryptonetworks start in their most abstract form and build OUT towards the real world.
There’s already quite a lot of activity in building this digital-first world. Creator Cabins offers a shelter-as-a-service subscription model for DAO contributors and digitally native communities. Wyoming created a legal on-ramp to recognize DAOs as a legal entity. Much like NFT NYC shocked the world with the scale and presence of the NFT community, we’ll have to get used to the idea of intangible digital communities that form and reform, gather and disband in the real world.
While community conception is a strength of Web3, the real test will be managing community retention. What will make someone want to belong to a DAO or network state for years on end? Is it continued financial yield? Is it the culture? Perhaps it’s the friends we make along the way? That’s what makes Friends with Benefits such an interesting social experiment.
One of the most exciting parts about Web3 is that it accelerates the rate of ideas spreading and gives a clear path for communities to form around them. After all, ConstitutionDAO formed an entire developer, legal, and marketing team in a matter of days!
Amongst all this wild speculation, I know one thing for: any technology that can make our communities richer and more meaningful to be a part of, well that’s just a wonderful thing.
What a beautiful and exciting world to live in.
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With gratitude, ✌️
Cooper