The rise of the blockchain state

Crypto startups like Bitnation and Zulu Republic believe they can replace the state with self-regulating blockchains, some argue they’re biting off more than they can chew.

Speak to enough Blockchain CEOs, and it becomes clear that the true dream of blockchain is obscured from view. Ready to run the world from their bedroom, the political agendas are usually the same: freedom, self-sovereignty, and less government—if any at all.

Blockchain isn’t just a technology that makes businesses more efficient. Protocols are a way for CEOs to redesign the rules of society—block by block—in line with their own fantasies.

These fantasies are quickly becoming a genuine threat to the nation-state as we know it. On January 14, Bitnation—a “decentralised governance” start-up that prepares its users for the ultra-libertarian blockchain utopia—announced it is now trading against BTC on the Worldcore exchange.

But suppose blockchain’s dreams came true. Should blockchain rule us all, and should we be trusting blockchain CEOs with the keys to the world?

Anarchy, State, and Blockchain

In the Journal of the British Blockchain Publication—Europe’s first peer-reviewed blockchain academic journal—Dr. Brendan Markey-Towler, an institutional economist at RMIT University’s Blockchain Innovation Hub, says blockchain technology offers the possibility of finally realising the anarchist dream.

Markey-Towler writes that, because anyone could create a public record on the decentralised ledger, the state no longer holds a monopoly on bureaucratic institutions. Blockchain gets around some of the transaction costs of organising ourselves through government, and it’s increasingly feasible for us to govern ourselves in a decentralised world.

The idea isn’t new—Markey-Towler’s drawing on the work of political science stalwart Albert Hirschman’s Exit, Voice, and Loyalty.  Hirschman described how, if an employee of a company didn’t feel their voice was listened to, another way of voicing dissent would just be to up and leave.

In Markey-Towler’s world, political institutions are no different. Under the blockchain regime, people can leave inefficient political institutions and start blockchain-based governance systems of their own.

But what is  new is that blockchain systems are entirely virtual. Instead of having to move to North Korea to get your fascism fix, you could ‘crypto-secede’ to another governance ‘protocol’. Nor do you have to hire thousands of lackeys to manage the mounting paperwork—blockchain can take care of that, too.

Because it’s easier to leave a blockchain-based institution (Markey-Towler calls these ‘demes’) —competition between different demes will arise and political institutions can evolve naturally. For instance, someone who doesn’t like the Republican Party deme could switch to the Democratic Party deme at the click of a button.

“Any person with a laptop can decide the institutions that exist. They get to write the rules,” Markey-Towler tells Decrypt  in an interview.

He’s not entirely insane: full-blooded libertarians, for instance, can live entirely within the bitcoin infrastructure. In Brooklyn, New York, a grassroots movement allows locals to distribute solar energy from roof panels amongst each other, bypassing the National Grid entirely. And with Bitcoin ATMs, some can live their entire lives outside of the purview of the state.

“Every time someone chooses to interact with a blockchain system and not tell the government about it, the monopoly of the state is weakened,” says Markey-Towler.

The Revolution Will Be Decentralized

Markey-Towler doesn’t think that this can happen just yet—blockchain is just one step closer to the anarchist dream. But Susanne Tarkowski-Tempelhof, founder of Amsterdam-based crypto startup Bitnation, thinks decentralized governance is long overdue.

Living outside of the system is something Tarkowski-Tempelhof knows all too well. Born in Sweden to French and Polish parents, her father struggled to get Swiss citizenship for ten years. Living through her father’s own tortured relationship with statehood was enough to put Tarkowski-Tempelhof off the idea of national identity for life.

But it was the seven years she spent working in war zones as a research contractor to the US military—four of which were in Afghanistan, and another year with rebels in Benghazi—that taught her how life was possible without the nation-state. Tarkowski-Tempelhof saw time and time again how communities—rejected by their own governments–could build small yet successful societies without central governance structures.

“Security, trash collection, healthcare, these things just emerged,” Tarkowski-Tempelhof tells Decrypt  in an interview.

And if—as Tarkowski-Tempelhof says—the main role of governments is to aggregate services in a package and then offer discounted prices for buying them all at once, why not just decentralize the whole thing and do away with governments entirely?

“If you take a nation-state and take away all non-essential systems—like roads, security, and justice—you can’t call yourself a government,” Tarkowski-Tempelhof tells Decrypt .

Tarkowski-Tempelhof witnessed firsthand how different governance styles can co-exist. In one peaceful village in Afghanistan, she says there were three different legal codes in one village. That’s why on Bitnation, citizens can opt-in and opt-out of different governments whenever they want.

Bitnation’s flagship Ethereum-powered app, “Pangea,” holds legal records and supports decentralized “governance structures” that allow users to collaboratively administrate their own micro-societies.

“We don’t offer a specific decision. Choose whatever model you want: if you want democracy or theocracy, it’s your choice.”

Several micro-communities have already taken up Tarkowski-Tempelhof on her Utopian offer. Estonia’s e-residency program, which issues e-residents smart cards they can use to access services and run businesses, uses Bitnation’s technology. The micro-nation Liberland, which occupies a disputed sliver of land between Serbia and Croatia, has tapped Bitnation to work on notarizing its legal system. And the self-proclaimed Apache chief Carlos Mendoza—alias Chief Runningwolf—wants Bitnation’s software to underpin the administrative day-to-day of his resurrected ancient tribe.

Her plan is ambitious, but she doesn’t see a way back. She tells Decrypt  that large, inflexible regimes—like China, Russia, and Saudi-Arabia—will soon crumble under their own weight. Oppression is critical to control an ever-growing populace, which will eventually led to civil war. On the other hand, ‘smart nations’—smaller nations, like Estonia, Switzerland, and Singapore— can be far more responsive to the demands of citizens.

As the E.U. bickered amongst themselves during the refugee crisis of 2015, Tarkowski-Tempelhof and her team started handing out “emergency refugee IDs” to the thousands of refugees sleeping in train stations.

“Nation states…regularly ask to speak to us [to ask us] how we see government evolving. A lot of them are conscious they can’t keep up with the current sort of governance and aren’t sure what to do,” says Tarkowski-Tempelhof.

Currently, Bitnation has around 15,000 ‘citizens’, but Tarkowski-Tempelhof hopes that’ll rise to a million by the end of the year. She acknowledges that the figure sounds a “bit optimistic”.

Gangster’s Paradise

Bitnation isn’t alone in its mission. California-based company Blue Frontiers is floating, quite literally, its own version of a decentralized society. Blue Frontiers—and its non-profit counterpart the Seasteading Institute—hopes to one day mass produce seaborne living platforms, or “seasteads,” each with its own build-it-yourself blockchain-based local government. “Opting out” of a seastead is quite literal: disgruntled seasteaders will simply be able to float away from their neighbours.

Think Scotland thrashing up the North Sea post-Brexit: “If you have four islands and 150 people and you decide you don’t agree,” says Greg Delaune, a Blue Frontiers engineer, “you can split up into two communities of 75 with two islands each. You’re literally detaching and floating.”

The company received a hefty seed fund from billionaire Peter Thiel, and originally secured permission from the French Polynesian government to build a proto-platform on its coast. But the project has stalled: the government revoked its permission after locals branded it an elitist vanity project.

Zulu Republic is another platform that wants to build a global nation on the blockchain, this time to meet the needs of the world’s travellers, from yuppie ‘digital nomads’ to stateless refugees.  

By 2035, Zulu Republic reckons, there’ll be one billion global “nomadic freelancers,” and 258 million displaced refugees, expected to send over $6.5 trillion to their countries of origin. Global freelancers, already a decentralised force, could leapfrog hurdles set in place by real-world infrastructures and set up thriving global businesses.

Reputation in the Zulu Republic is staked on credentials obtained from external, real-world institutions like banks. (Zulu tells Decrypt  it is already working with several, but cannot yet disclose which ones.) The difference is that, on Zulu’s decentralized server, these credentials are held by the users alone. But for some, the blockchain promise all sounds a bit too good to be true, and problems have begun to emerge.

Freedom fighters or terrorists?

The quest to beat back Hobbes’ Leviathan, while nice in theory, does start to run into problems, and blockchain’s immutability can often make things worse. While quick to point out the abuses of governments and state agencies, blockchain startups aren’t quite so sure how to deal with abuses from non-state actors. Subversive powers, claiming their right to freedom, could manipulate emerging technologies to justify their oppressive ideologies. Bitnation already has a Nazi party, says Tarkowski-Tempelhof—herself Jewish–it’s views recorded in an immutable blockchain, making rescinding their views difficult. 

“If people are of the conviction that they only want to be with people what they call Aryan, if they only want to be with that sort of people, they should have the right to,” says Tarkowski-Tempelhof.

But freedom of speech is all well and good until extremist groups act on their vices. The shooter in the attack against a Pittsburgh synagogue in 2018 posted about his intentions on Gab—an 800,000 strong social-media site for the alt-right, neo-Nazis, and white supremacists—ahead of his massacre.

“We trust that people are adult enough,” Bitnation’s Tarkowski-Tempelhof tells Decrypt , but the evidence is starting to turn against her. Franklin Delane, founder of the Zulu Republic admits he can’t prevent villains from spoiling his stateless paradises. “But that’s democracy,” he tells Decrypt .

All of this sounds eerily like Mark Zuckerberg’s widely contested claim that “Facebook isn’t a media company” and as such cannot be held responsible for the views of those that use its platform. Tech companies’ thirst for users, but not the responsibility that comes with them, is a problem that has lead to the rise of fake news and nefarious actors using the laissez-faire policing on social networks as a way to get ahead. 

But Bitnation and the Zulu Republic aren’t the first in the blockchain space to wash their hands of all responsibility, suggesting that perhaps we ought to be less celebratory of those who fight for freedom—but cower when things don’t quite go according to the plan. Wulf Kaal, founder of Semada, a micro-task platform that could control the future micro-task market for millions in the developed world, told Decrypt  that he’s “just an academic.” Bob Reid, creator of Everest—a full-stack digital identity platform that aims to hold the world’s passports on the blockchain, is just an “NGO”. When Mark Beylin—founder of Bounties Network, another micro-task platform—says that his platform doesn’t have any “weird algorithmic reputation calculations” to vet sellers and buyers, he opens up his platform for manipulation. And crypto-evangelist Roger “Bitcoin Jesus” Ver made no qualms about personally administering a life-saving dose of his own cash to the Bitcoin Cash network during November’s bloody “hash war.”

Despite claims of decentralization or objective code, it’s increasingly clear that those who build the protocols also hold all the cards. On the open-source Bitnation platform, power still has the opportunity to concentrate within the parameters defined by the leaders of each micro-jurisdiction. Runningwolf, for instance, already refers to himself as both King and Queen. Zulu Republic’s success hinges on the support of entrenched legal institutions.

In The Relevance of Algorithms,  Tarleton Gillespie warned against thinking of algorithms as impartial or objective. Take a peek behind the curtains, and it’s clear that blockchain’s algorithms constrain more than they liberate. So Blockchain’s Utopia-For-All isn’t about freedom after all. Instead, it’s a subtle shift in power from one ruling elite (governments and states) to another (coders and entrepreneurs). That’s something we should all be worried about. 


Speak to enough Blockchain CEOs, and it becomes clear that the true dream of blockchain is obscured from view. Ready to run the world from their bedroom, the political agendas are usually the same: freedom, self-sovereignty, and less government—if any at all.

Blockchain isn’t just a technology that makes businesses more efficient. Protocols are a way for CEOs to redesign the rules of society—block by block—in line with their own fantasies.

These fantasies are quickly becoming a genuine threat to the nation-state as we know it. On January 14, Bitnation—a “decentralised governance” start-up that prepares its users for the ultra-libertarian blockchain utopia—announced it is now trading against BTC on the Worldcore exchange.

But suppose blockchain’s dreams came true. Should blockchain rule us all, and should we be trusting blockchain CEOs with the keys to the world?

Anarchy, State, and Blockchain

In the Journal of the British Blockchain Publication—Europe’s first peer-reviewed blockchain academic journal—Dr. Brendan Markey-Towler, an institutional economist at RMIT University’s Blockchain Innovation Hub, says blockchain technology offers the possibility of finally realising the anarchist dream.

Markey-Towler writes that, because anyone could create a public record on the decentralised ledger, the state no longer holds a monopoly on bureaucratic institutions. Blockchain gets around some of the transaction costs of organising ourselves through government, and it’s increasingly feasible for us to govern ourselves in a decentralised world.

The idea isn’t new—Markey-Towler’s drawing on the work of political science stalwart Albert Hirschman’s Exit, Voice, and Loyalty.  Hirschman described how, if an employee of a company didn’t feel their voice was listened to, another way of voicing dissent would just be to up and leave.

In Markey-Towler’s world, political institutions are no different. Under the blockchain regime, people can leave inefficient political institutions and start blockchain-based governance systems of their own.

But what is  new is that blockchain systems are entirely virtual. Instead of having to move to North Korea to get your fascism fix, you could ‘crypto-secede’ to another governance ‘protocol’. Nor do you have to hire thousands of lackeys to manage the mounting paperwork—blockchain can take care of that, too.

Because it’s easier to leave a blockchain-based institution (Markey-Towler calls these ‘demes’) —competition between different demes will arise and political institutions can evolve naturally. For instance, someone who doesn’t like the Republican Party deme could switch to the Democratic Party deme at the click of a button.

“Any person with a laptop can decide the institutions that exist. They get to write the rules,” Markey-Towler tells Decrypt  in an interview.

He’s not entirely insane: full-blooded libertarians, for instance, can live entirely within the bitcoin infrastructure. In Brooklyn, New York, a grassroots movement allows locals to distribute solar energy from roof panels amongst each other, bypassing the National Grid entirely. And with Bitcoin ATMs, some can live their entire lives outside of the purview of the state.

“Every time someone chooses to interact with a blockchain system and not tell the government about it, the monopoly of the state is weakened,” says Markey-Towler.

The Revolution Will Be Decentralized

Markey-Towler doesn’t think that this can happen just yet—blockchain is just one step closer to the anarchist dream. But Susanne Tarkowski-Tempelhof, founder of Amsterdam-based crypto startup Bitnation, thinks decentralized governance is long overdue.

Living outside of the system is something Tarkowski-Tempelhof knows all too well. Born in Sweden to French and Polish parents, her father struggled to get Swiss citizenship for ten years. Living through her father’s own tortured relationship with statehood was enough to put Tarkowski-Tempelhof off the idea of national identity for life.

But it was the seven years she spent working in war zones as a research contractor to the US military—four of which were in Afghanistan, and another year with rebels in Benghazi—that taught her how life was possible without the nation-state. Tarkowski-Tempelhof saw time and time again how communities—rejected by their own governments–could build small yet successful societies without central governance structures.

“Security, trash collection, healthcare, these things just emerged,” Tarkowski-Tempelhof tells Decrypt  in an interview.

And if—as Tarkowski-Tempelhof says—the main role of governments is to aggregate services in a package and then offer discounted prices for buying them all at once, why not just decentralize the whole thing and do away with governments entirely?

“If you take a nation-state and take away all non-essential systems—like roads, security, and justice—you can’t call yourself a government,” Tarkowski-Tempelhof tells Decrypt .

Tarkowski-Tempelhof witnessed firsthand how different governance styles can co-exist. In one peaceful village in Afghanistan, she says there were three different legal codes in one village. That’s why on Bitnation, citizens can opt-in and opt-out of different governments whenever they want.

Bitnation’s flagship Ethereum-powered app, “Pangea,” holds legal records and supports decentralized “governance structures” that allow users to collaboratively administrate their own micro-societies.

“We don’t offer a specific decision. Choose whatever model you want: if you want democracy or theocracy, it’s your choice.”

Several micro-communities have already taken up Tarkowski-Tempelhof on her Utopian offer. Estonia’s e-residency program, which issues e-residents smart cards they can use to access services and run businesses, uses Bitnation’s technology. The micro-nation Liberland, which occupies a disputed sliver of land between Serbia and Croatia, has tapped Bitnation to work on notarizing its legal system. And the self-proclaimed Apache chief Carlos Mendoza—alias Chief Runningwolf—wants Bitnation’s software to underpin the administrative day-to-day of his resurrected ancient tribe.

Her plan is ambitious, but she doesn’t see a way back. She tells Decrypt  that large, inflexible regimes—like China, Russia, and Saudi-Arabia—will soon crumble under their own weight. Oppression is critical to control an ever-growing populace, which will eventually led to civil war. On the other hand, ‘smart nations’—smaller nations, like Estonia, Switzerland, and Singapore— can be far more responsive to the demands of citizens.

As the E.U. bickered amongst themselves during the refugee crisis of 2015, Tarkowski-Tempelhof and her team started handing out “emergency refugee IDs” to the thousands of refugees sleeping in train stations.

“Nation states…regularly ask to speak to us [to ask us] how we see government evolving. A lot of them are conscious they can’t keep up with the current sort of governance and aren’t sure what to do,” says Tarkowski-Tempelhof.

Currently, Bitnation has around 15,000 ‘citizens’, but Tarkowski-Tempelhof hopes that’ll rise to a million by the end of the year. She acknowledges that the figure sounds a “bit optimistic”.

Gangster’s Paradise

Bitnation isn’t alone in its mission. California-based company Blue Frontiers is floating, quite literally, its own version of a decentralized society. Blue Frontiers—and its non-profit counterpart the Seasteading Institute—hopes to one day mass produce seaborne living platforms, or “seasteads,” each with its own build-it-yourself blockchain-based local government. “Opting out” of a seastead is quite literal: disgruntled seasteaders will simply be able to float away from their neighbours.

Think Scotland thrashing up the North Sea post-Brexit: “If you have four islands and 150 people and you decide you don’t agree,” says Greg Delaune, a Blue Frontiers engineer, “you can split up into two communities of 75 with two islands each. You’re literally detaching and floating.”

The company received a hefty seed fund from billionaire Peter Thiel, and originally secured permission from the French Polynesian government to build a proto-platform on its coast. But the project has stalled: the government revoked its permission after locals branded it an elitist vanity project.

Zulu Republic is another platform that wants to build a global nation on the blockchain, this time to meet the needs of the world’s travellers, from yuppie ‘digital nomads’ to stateless refugees.  

By 2035, Zulu Republic reckons, there’ll be one billion global “nomadic freelancers,” and 258 million displaced refugees, expected to send over $6.5 trillion to their countries of origin. Global freelancers, already a decentralised force, could leapfrog hurdles set in place by real-world infrastructures and set up thriving global businesses.

Reputation in the Zulu Republic is staked on credentials obtained from external, real-world institutions like banks. (Zulu tells Decrypt  it is already working with several, but cannot yet disclose which ones.) The difference is that, on Zulu’s decentralized server, these credentials are held by the users alone. But for some, the blockchain promise all sounds a bit too good to be true, and problems have begun to emerge.

Freedom fighters or terrorists?

The quest to beat back Hobbes’ Leviathan, while nice in theory, does start to run into problems, and blockchain’s immutability can often make things worse. While quick to point out the abuses of governments and state agencies, blockchain startups aren’t quite so sure how to deal with abuses from non-state actors. Subversive powers, claiming their right to freedom, could manipulate emerging technologies to justify their oppressive ideologies. Bitnation already has a Nazi party, says Tarkowski-Tempelhof—herself Jewish–it’s views recorded in an immutable blockchain, making rescinding their views difficult. 

“If people are of the conviction that they only want to be with people what they call Aryan, if they only want to be with that sort of people, they should have the right to,” says Tarkowski-Tempelhof.

But freedom of speech is all well and good until extremist groups act on their vices. The shooter in the attack against a Pittsburgh synagogue in 2018 posted about his intentions on Gab—an 800,000 strong social-media site for the alt-right, neo-Nazis, and white supremacists—ahead of his massacre.

“We trust that people are adult enough,” Bitnation’s Tarkowski-Tempelhof tells Decrypt , but the evidence is starting to turn against her. Franklin Delane, founder of the Zulu Republic admits he can’t prevent villains from spoiling his stateless paradises. “But that’s democracy,” he tells Decrypt .

All of this sounds eerily like Mark Zuckerberg’s widely contested claim that “Facebook isn’t a media company” and as such cannot be held responsible for the views of those that use its platform. Tech companies’ thirst for users, but not the responsibility that comes with them, is a problem that has lead to the rise of fake news and nefarious actors using the laissez-faire policing on social networks as a way to get ahead. 

But Bitnation and the Zulu Republic aren’t the first in the blockchain space to wash their hands of all responsibility, suggesting that perhaps we ought to be less celebratory of those who fight for freedom—but cower when things don’t quite go according to the plan. Wulf Kaal, founder of Semada, a micro-task platform that could control the future micro-task market for millions in the developed world, told Decrypt  that he’s “just an academic.” Bob Reid, creator of Everest—a full-stack digital identity platform that aims to hold the world’s passports on the blockchain, is just an “NGO”. When Mark Beylin—founder of Bounties Network, another micro-task platform—says that his platform doesn’t have any “weird algorithmic reputation calculations” to vet sellers and buyers, he opens up his platform for manipulation. And crypto-evangelist Roger “Bitcoin Jesus” Ver made no qualms about personally administering a life-saving dose of his own cash to the Bitcoin Cash network during November’s bloody “hash war.”

Despite claims of decentralization or objective code, it’s increasingly clear that those who build the protocols also hold all the cards. On the open-source Bitnation platform, power still has the opportunity to concentrate within the parameters defined by the leaders of each micro-jurisdiction. Runningwolf, for instance, already refers to himself as both King and Queen. Zulu Republic’s success hinges on the support of entrenched legal institutions.

In The Relevance of Algorithms,  Tarleton Gillespie warned against thinking of algorithms as impartial or objective. Take a peek behind the curtains, and it’s clear that blockchain’s algorithms constrain more than they liberate. So Blockchain’s Utopia-For-All isn’t about freedom after all. Instead, it’s a subtle shift in power from one ruling elite (governments and states) to another (coders and entrepreneurs). That’s something we should all be worried about. 


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2019 © Decrypt Media, Inc. All Rights Reserved.

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