Could Blockchain, Crypto Serve as the Foundation for a New Country?

From Cloud to Nation

If it’s possible to put money onto a blockchain and several other use-cases, then why not citizenship for a nation? Former Coinbase CTO turned angel investor, Balaji S. Srinivasan asks the question: how to start a new country? He notes a handful of ways, all of which are interesting and relevant to the modern condition in some way including but not limited to space settlement and seasteading. However the most interesting method mentioned is “the cloud country”.

Srinivasan proposes that a group of individuals start in a different direction than traditional settlement, which involves land and capital acquisition first. He suggests that a community of settlers begin in virtual space, rather than in real space. This would involve social media recruitment and establishment of the state as an open source project. Such an ambitious project would involve planning in VR and remote work to acquire crowdfunded capital for the land.

This acquired land would also not have to be attached by land or sea, as it is connected by a digital network, thus creating a Network State. This land could be acquired as tiny enclaves within currently existing nation-states. It could have 120,000 apartment blocks each in a different city around the world for example. Furthermore, it is not necessary to acquire all of its land at once. It can be accumulated through land acquisitions over time and add physical space to the network as more volunteers are added to the social contract.

Welcome to Prospera

So this is a very bold ambition, but could it ever be done? It certainly sounds well thought out. As it turns out, it already has, but not to the exact specifications. The Honduran government signed an agreement with the private charter city of Prospera back in 2013 to form a sustainable economic development on the island of Roatan. While it is not the exact definition of what Srinivasan calls a “clean slate” to form a country with, it’s certainly a start and a model to work off of.

“The first colonists will be e-residents,” main proprietor, Erick Brimen is quoted with saying.

Brimen further explains that most of them won’t even set foot on the island. Brimen estimates that around two thirds of initial residents are going to be remote workers or acquiring residence to incorporate businesses. Brimen is further quoted as saying that Prospera could be like a “tropical Delaware” for tech businesses around the globe. Not only that, but future Prospera locations could open up around the world, providing the opportunity in Honduras to many more.

In exchange for the favorable economic conditions, Prospera offers locals the chance to work for companies incorporated in the charter city rather than for being stuck with less competitive employment opportunities that may be reducing the quality of life in the area. For a place with a history like Honduras and central America, the private city could prove to be a lucrative boon for the area and provide a more fair model of capitalism than the days of the banana republics.

Network States: The Outer Haven from Authoritarianism

In a scenario where an authoritarian government is threatening to seize your crypto assets, perhaps moving the location of your crypto wallet to a server in Prospero or another Network State might be in your best interest. Ideally you’d want to be a resident of Prospero and probably live there, since most authoritarian regimes don’t usually care about stuff like due process or the rest of the legal system. But if you could even just store your crypto wallet there, that would be very useful for the freedom of people everywhere. You may not even have to be a resident to do that, depending on the service.

Theoretically, all that a Network State should need to exist is a sovereign data center that outside parties cannot tamper with. Microsoft has recently recovered an experimental submersible data center that ran even better than land based ones for two years. If one could be crowdfunded, along with an offshore storage and acquisition method for maintenance and sovereignty, a small crew could easily maintain a Network State.

From here, one could host cryptocurrency wallet services for anybody in the world, ensuring sovereign crypto exchanges for citizens. Profits made from hosting these services could be used to fund expansion onto land or to expand data center services. This would serve as a sort of “Outer Haven” where anybody can keep their money outside of the reach of authoritarian governments and transactions with crypto could be made by anybody anywhere. If crypto is banned or regulated to inconvenience, then it’s not a problem.

Alternatively, this could be done in space or orbit. However, as far as I know, there has yet to be a data center put into orbit, compared to a submersible one.

Hurdles to Cross in Prospera

At this time, Prospera still has a ways to go before it secures enough self determination to become a country and not just a private city under Honduran jurisdiction. The team developing Prospera have to somehow reconcile with the locals, who feel they are overstepping boundaries. In addition, locals feel as though this is just another corporate attempt at controlling the country, as has happened in the past.

Prospera will have to earn recognition on the world stage if it’s going to be a champion for blockchain tech and libertarian values. Prospera cannot protect the assets of currency holders placing their assets there from tyrannical governments if it has no means to project power or settle international disputes. However this should be no problem as larger scale and reputable businesses and investors expand to Prospera, and add to its reputation and capacity for representation. One such business is Pronomos, a venture capital firm backed by Peter Thiel currently investing in the charter city.

Concerns about wealthy landowners establishing systematic dominance early on has also presented itself as a potential concern in the current state of the legal framework. Supposedly, landowners hold more voting power than other residents until the development matures. The counter argument to this being, that during that period almost all residents will be landowners. There are about 100 people at the site in Roatan.

The Experiment in Network Statehood

Regardless of how the Prospera journey goes, it provides us with a few interesting data points in how one might go about establishing a new country in a world where most if not all land is accounted for by some party or another.

1. A city such as Prospera shows us that a voluntary social contract is something people are interested in.
2. Our first data point that a network based country is possible and might even be profitable.
3. How people react to new enclaves moving in nearby.

While charter cities have been attempted before during the cold war era, they were never attempted with the intent to settle them digitally first, in person second. In an age of expanding remote work and social distancing, the concept of network-based communities and settlements may only just be kicking off.