Cryptocurrency: Nation-States Vs Network-States Vs Crypto-Claves

grarpamp grarpamp at
Tue Sep 7 17:03:53 PDT 2021

Nation-States Vs Network-States Vs Crypto-Claves Sovereign Individual, Rees-Mogg and Davidson,_Society_and_Culture  Quantum Jump: A survival guide for the new
Renaissance, Clement

MetaCops Unlimited is the official peacekeeping force of White
Columns, and also of The Mews at Windsor Heights, The Heights at Bear
Run, Cinnamon Grove, and The Farms of Cloverdelle. They also enforce
traffic regulations on all highways and byways operated by Fairlanes,
Inc. A few different FOQNEs ( Franchise-Organized Quasi-National
Entities) also use them: Caymans Plus and The Alps, for example. But
franchise nations prefer to have their own security force. You can bet
that Metazania and New South Africa handle their own security; that’s
the only reason people become citizens, so they can get drafted.
Obviously, Nova Sicilia has its own security, too. Narcolombia doesn’t
need security because people are scared just to drive past the
franchise at less than a hundred miles an hour (Y.T. always snags a
nifty power boost in neighborhoods thick with Narcolombia consulates),
and Mr. Lee’s Greater Hong Kong, the grandaddy of all FOQNEs, handles
it in a typically Hong Kong way, with robots.

    MetaCops’ main competitor, WorldBeat Security, handles all roads
belonging to Cruiseways, plus has worldwide contracts with Dixie
Traditionals, Pickett’s Plantation, Rainbow Heights (check it out—two
apartheid Burbclaves and one for black suits), Meadowvale on the river
and Brickyard Station. WorldBeat is smaller than MetaCops, handles
more upscale contracts, supposedly has a bigger espionage arm—though
if that’s what people want, they just talk to an account rep at the
Central Intelligence Corporation. And then there’s The Enforcers—but
they cost a lot and don’t take well to supervision. It is rumored
that, under their uniforms, they wear T-shirts bearing the unofficial
Enforcer coat of arms: a fist holding a nightstick, emblazoned with
the words SUE ME.

    - Neal Stephenson,  Snow Crash

A phrase which has been coming up more often lately on the podcast
circuit is the ‘Network State’ and the idea that our current default
governance structure, the nation state, is in the process of being
obsoleted by them. In many ways network states will be more oppressive
than nation states. But what is also occurring are variations of the
network state, enclaves built on decentralized crypto-currencies and
principles of individual autonomy. I think of this phenomenon as an
emerging league of crypto-sovereignties or “crypto-claves”.

In this piece I talk about how these three governance structures
emerge, how they contrast with one another and how they will all
compete for the future of governance.

The idea of a network state isn’t an entirely new concept.  There is
the Manuel Castells trilogy  which kicked off with ‘The Rise of
Network Society’ in 1996. A few decades earlier with 1970’s ‘Future
Shock’ by Alvin Toffler realized that the accelerating rate of change
brought about by the microprocessor was sending society into something
post-industrial. He expanded on that later in Third Wave which came
out in 1980. By the time he got to Power Shift  in 1990, the arc he
had traced in three books, across three decades started refining his
insights that the information economy would become the great leveller.
Knowledge would be the ultimate democratizer, individuals would be
able to attain wealth and power previously reserved for monarchs or
nation states. The defining struggle of the future, as Toffler saw it,
wouldn’t be between political factions or rival nations but between
the information cognoscenti and those left behind in the remnants of
industrial society.

But the work which picked up the threads of these undercurrents and I
think most presciently anticipated transformational shift we’re
experiencing today was Lord Rees-Mogg and James Dale Davidson’s ‘The
Sovereign Individual‘ from 1997.  I first read this book shortly after
it came out and have re-read it several times since. I have it on
audiobook and sometimes listen to it on long drives. We used to talk
about this a lot back in the AxisOfEasy Salon days.

What Sovereign Individual did, which makes it a near holy tome among
the Bitcoin and crypto currency space, was anticipate the rise of
non-state digital money. It realized that when it happened it would be
a complete game-changer.  Digital money was going to ‘take away the
punch bowl’ from nation state governments and it would force them to
compete for fealty.

    “Inflation has the same effect as a tax on all who hold the
currency… inflation as a revenue option will be largely foreclosed by
the emergence of cybermoney. New technologies will allow the holders
of of wealth to bypass the national monopolies that have issued and
regulated money in the modern period.”

We still don’t know who Satoshi Nakamoto was, and probably never will.
But I can guarantee you this: Satoshi read The Sovereign Individual.

What all of these works converged on was how the megatrends set in
motion by the microchip, computers and networks would reshape
industrial society. But what really changed the game not only
industrial society but the governance structure that managed it was
that emergence of decentralization, cryptography and non-state money.

What I think Rees-Mogg and Davidson captured so well in Sovereign
Individual was the recognition of where the levers of power were
throughout recorded history, and how when technology moved those
fulcrums, it reordered society itself. Dark Ages… Feudalism… The
Church…. The Nation State, all arising and giving way to the next as
agriculture, gunpowder, literacy, double-entry accounting created the
power shifts of their day.

As society moved through various stages of development, the prevailing
form of hierarchy and authority evolved. There is a lesser known book
by the Canadian W R Clement called Quantum Jump: A survival guide for
the new Renaissance who ascribed this to increasing levels of
abstraction. Each shift, every level-up in mental abstraction created
a corresponding reordering in the fundamental architecture of society
– from the Middle Age’s agrarian feudalism  through to the industrial
age’s monolith, assembly lines and cubicles,  and then the microchip
leading to computer networks.

In the Age of the Enlightenment the heightened abstraction was the
discovery of perspective (“God’s Space”) and the intellectual leaps
that accompanied it, such as increased literacy and double-entry
accounting. The abstraction component unfolding now is about
cryptography and it’s about decentralization.

Brunelleschi and the re-discovery of Linear Perspective circa 1400’s

It’s this increasing abstraction element that helps us understand why
this shift to a post-industrial age will not simply be digitized

What we have been calling “globalism” is an industrialist fantasy
premised on a linear extrapolation of assembly line society into
post-national super-states, with top down governance by a technocratic
elite (although applied locally through “subsidiarity”). In other
words, it’s industrialist society gone digital.

But the digital age comes with an architecture of its own. Nation
states don’t magically morph into network states after their leaders
convene in Davos and come out of it with a framework and a catch

Nation States get Supplanted by Network States

If the near constant lurching from crisis to crisis over the last
decade or more shows, nation states have become ill equipped to deal
with the complexities of a networked world. The global crisis induced
by the pandemic exposed policy-makers and the experts who inform them
to be more tone deaf and beholden to institutional groupthink than
rational, competent and innovative in their responses.

Taking the obsolete nation state model into the digital age via simple
linear extensions is not what we mean by “network states”, although
that isn’t preventing world leaders (and the industrial era super-rich
who pull their strings) from trying.

Disruption, almost as a rule, originates from outside the wheelhouse
of whatever is being disrupted. So too will network states disrupt the
nation state from outside of the Westphalian context.

Right now the front-runners for becoming the first recognized network
states are Big Tech platforms like Facebook and Google. In Eric
Schmidt and Jared Cohen’s The New Digital Age, they more or less
nominate themselves:

    “We believe that that modern technology platforms such as Google,
Facebook, Amazon and Apple, are even more powerful than most people
realize, and in our future world will be profoundly altered by their
adoption and successfulness in societies everywhere”.

Once a platform like Facebook successfully launches their own digital
currency, then a typical user’s Facebook account will become more
central to their day-to-day existence than their state issued passport
(especially in the coming era of increasing travel restrictions on the

These emergent network states will not simply brush aside nation
states and replace them. In many aspects they will overlap and in some
cases fuse, like if Facebook’s coming Diem stablecoin becomes a de
facto FedCoin.

The power structures of the nation states won’t go gently into the
dustbin of history. They will go down swinging, over a transitional
era that may span decades or longer, similar to the centuries long
tensions between monarchs and the Papacy that shaped the transition
from the Middle Ages into the Renaissance

Left: King Henry II submitting to Pope’s Legate, 1563
Right: The First Zuck, grilled by US Senate committee 2018

Nor will these Network States, built almost entirely upon the fruits
of surveillance capitalism, be a beacon of personal freedom and
individual autonomy in the coming age. In this sense (the repression
of the individual), Network States will be a linear extrapolation and
amplification of current nation state trends.

For a long time when I used to talk about how industrialist ideas like
The Great Reset and Fourth Industrial Revolution would be transitory
and ultimately give way to something else, I had lingering doubts in
my mind. I worried that maybe I’d be wrong about all that and we
really were headed into a system of Fully Automated Top Down
Collectivism. A technologically driven dystopian dark age from which
only a complete system collapse would make it possible to emerge.

However, it was in writing this month’s Crypto Capitalist Letter  that
I finally realized that I hadn’t fully appreciated something very
important about what I knew intellectually:

It was that no amount of trying to force a linear extrapolation of the
outgoing systems were going to work because the advent of
decentralized cryptography and non-state money had already changed the
architecture of power and the incentive structures around wealth

Until even recently I was still thinking about this in probabilities,
as something that appeared almost certain to happen, but not
necessarily a lock. What I realized when I was writing the following,
was that it’s now already occurred. For one thing, in my coverage of
the US Infrastructure Bill and the months long battle to amend the
crypto currency clause which was tucked-in to it, I wrote:

    the bill passed and the tax reporting clause on crypto was
included without any of the amendments the crypto community was
looking for (it was blocked by a single congressman, who is in his
final term and was holding out for a $50B military pork allocation to
his state, and he didn’t get it).

    But all that said, everybody with proximity to it understands that
the provision as written is overly broad and unworkable, but the
larger picture is this: This bill took the idea that “The US
government will eventually ban crypto” off of the table.

    It’s over. The US will never ban crypto, it’s officially part of
the system now.

Further, in my monthly coverage of the development of Central Bank
Digital Currencies (CBDC’s or ‘EvilCoin’), and this is the part where
it really kicked in for me, I wrote:

    “established policy makers are operating on the premise of a
linear extension from their previous experience. Central Bank Digital
Currencies are the purest expression of this assumption. Take central
bank issued fiat currency, digitize it, add the ability to overlay
ideological policy imperatives onto money (like social credit), and
then everything just continues on as before.

    But the underlying architecture of the global power structure is
phase shifting into something else entirely and the reason why is
because decentralized, non-state, cryptographically secured money is
already here. The smart money realizes that this is a superior form of
money to preserve wealth and autonomy. Everything else is secondary.”

Existing pools of capital are simply not going to select CBDCs to
safeguard their wealth because CBDCs will be explicitly constructed to
preclude capital formation: expiry dates on cash, negative interest
rates, and policy overrides on how you can spend it? Versus
unrestricted capital mobility, ultra-sound monetary policy and
crypto-graphically secured self-custody?

Nobody in a position to would choose the former and there’s enough
wealth in the world to drive the latter that it made me realize the
genie well and truly is out of the bottle.
Crypto-claves become the bastions of individual freedom

The emergence of what comes next, something I differentiate from
network states by calling them “crypto-claves” isn’t something that
will probably happen, it is  happening. The monetary architecture that
would drive something like that is already here and the proof is in it
being the fastest growing monetary asset in world history.

Where network states won’t be decentralized or very participatory
(mostly subject to “take it or leave it” EULAs), and may grow to more
closely resemble China-style social credit systems, crypto-claves will
be decentralized, participatory enclaves of self-sovereignty.

Crypto-claves are a type of network state that is decentralized and
holds participant sovereignty paramount (I say ‘participant’ instead
of ‘individual’ because the participants may be a person, or perhaps
they may be a smart contract or other autonomous agent).

The defining difference between network states and crypto-claves is
the platforms vs protocols distinction we’ve been making for some

A platform is a black box, top down walled garden. The rules may be
spelled out in enormous EULAs that nobody ever reads but everybody is
forced to accept before entering the space. The rules are applied
capriciously and it’s clear to all participants that some are more
equal than others and certain ideological mindsets are preferred and

Facebook and Twitter are platforms. Email and DNS are protocols.
Anybody can stand up an email server and as long as they conform to
the protocol laid out in places like RFC 2822, be able to send and
receive email. Savvy marketers have been saying for years that in this
era of cancel culture and deplatform attacks, the single most
important communications channels with one’s community is email.

While many are quick to point out that DNS is an inverted tree
hierarchy under the purview of ICANN, the internet root is observed
purely via consensus and convention. There are no technical barriers
from anybody adding their own extensions onto the root or using a
different one, other than somehow gaining market adaption.

As an aside: before Bitcoin came along I was habitually declaring that
a true P2P DNS was impossible. Then came the blockchain and I was
proved wrong (it is worth observing that I’m considered a DNS expert,
so what we saw happen there was an expert in the field was proven dead
wrong by non-credentialed outsiders. There’s that disruption again,
incessantly intruding from the outside).

While it’s still in the early innings, with experiments like Namecoin,
Handshake and Ethereum Name Service, it’s just a matter of time before
the ICANN sponsored legacy root is seriously challenged or disrupted
by a blockchain based root layer that extends the capabilities of DNS.
But I digress.

Platform-based network states will, in some ways simply be linear
extrapolations of nation states, implemented in the digital realm.

But in crypto-claves that are truly decentralized, protocol based
systems, the rules will always be open source code that can be
downloaded by anybody. They will apply across the board to all
participants because they are baked into the protocol itself. That
doesn’t mean equal outcomes abound or that participants can’t erect
layer 2 filters and mechanisms that incentivize some actions over
others. Just that the rules are clear, every participant’s rights
under the protocol are inalienable because they are crypto-graphically
guaranteed and that the rules are applied uniformly and require
consensus to change.

Finally, and perhaps most importantly, participation in decentralized
protocol systems will be voluntary. Crypto sovereignties will be able
to be exited or forked. If the recent past is any guideline, platforms
tend to coalesce into quasi-monopolies much like their nation state
antecedents, while protocol based claves will likely form more of a
mesh network effect. Charles Hugh Smith once likened it to a modern
age Hanseatic League of Crypto States.

This is already happening with the emergence of Decentralized
Autonomous Organizations (DAOs). Almost every single Decentralized
Exchange (DEX) is a DAO and run by owners of that DAO’s governance
token. And these are not just piddling little experiments. Aave has a
$3 billion dollar treasury. That’s more cash than most publicly traded

Would you like to be a direct participant in the allocation of that
treasury? Simply swap some of your ETH into AAVE and bingo! You’re a
citizen of the DAO.

More importantly, if some DAO I’m a member of decides to enact some
policy I’m not entirely on board with, I can simply swap out.

Where tech platforms like Google and Facebook insist and enforce true
identity verification, crypto-claves will incentivize and cultivate
pseudonymity. Participants in the latter will have membership in
(citizenship?) in multiple DAOs, and guilds that suit their purposes
at multiple times and from multiple places.

Similar to how network states will not supplant nation states
entirely, crypto claves will gather a momentum of their own and elbow
out their own space amongst the network states.

The future will be a chaotic interplay between these three organizing
principles, a creative tension between overlapping nation states,
breakaway states, local fiefdoms, network states and crypto

21st Century governance structure quick-reference

Because basic human rights are hard coded into decentralized, open
source crypto-graphically secured protocols, they will gather
increasing gravitas over time. Once people figure out (as many have
over the last two years) that when their inalienable rights, such as
the ones recognized by the UN Charter of Human Rights or the US
Constitution, are subject to interpretation and suspension by a thin
layer of overlords and technocrats, the incentive structure will impel
them toward systems and structures that mathematically guarantees
those rights.

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