A Brief History of Cloud Countries
Network States and Utopia
[Update: This post has been selected among the best reviews of Balaji’s original article: “The Network Union”]
In a recent series of articles, entrepreneur and investor Balaji Srinivasan explained his preferred method to “start a new country.” His concept: “cloud countries” or “network states:”
“Rather than starting with the physical territory, we start with the digital community. We recruit online for a group of people interested in founding a new virtual social network, a new city, and eventually a new country.”
The idea of moving where you’re treated best isn’t new. Over the past 30 years, concepts such as Sovereign Individual, Digital nomad, Hypernomad, and Bitcoin Citadel, and movements like the Free State Project have also emerged:
“When the time is ripe for certain things, these things appear in different places in the manner of violets coming to light in early spring.”—Farkas Bolyai
This “Cloud first, Land last” strategy offers a new perspective on an old problem. It gives the practical steps to make the Bitcoin Citadel metaphor a reality, i.e., to build a tribe. In Balaji’s words, it’s a “reverse diaspora:” “a community that forms first on the internet, builds a culture online, and only then comes together in person to build dwellings and structures.”
So, could online communities lead to physical nations? It may seem crazy, but several historical examples suggest this model could work.
For instance, the Sovereign Military Order of Malta (SMOM), even though it possesses no territory today, is a “sovereign subject of international law” and the “smallest sovereign state in the world.” It owns buildings—some enjoying extraterritoriality—and embassies worldwide, issues its own (not yet crypto-) currency and (not yet digital) passports, and has thousands of members. The Order of Malta claims continuity with the Knights Hospitaller, a chivalric order founded in 1099. Organized by language, the Hospitallers had possessions and citadels all over Europe and even in the Americas! They eventually ruled over Malta from 1530 to 1798. Likewise, cloud countries will scale communities, starting with outposts in different geographies, until they find a piece of (is)land. However, this process can be reversed: in 1798, Napoleon invaded Malta and expelled the Order, which became dispersed throughout Europe. A cloud country can quickly move back to the cloud in case of a threat. Tomasz Kamusella reminded me that Estonia already practices this as a contingency should a foreign country attack and occupy the State. In such a situation, Estonia would continue as a “cloud state,” thanks to its data embassy in Luxembourg. Anyway, the Order of Malta was probably the first cloud country.
The Knights Templar was another powerful chivalric order. Founded in 1119, they established financial networks across Christendom and developed banking. They were the world’s first multinational corporation; I consider them the network states’ ancestors.
The Jewish diaspora also created a state after centuries of diasporic existence. Israel’s history is long and complex, but part of its success was the WZO’s early strategy to create a homeland through persistent small-scale immigration. In particular, the Jewish National Fund (JNF) raised funds—with thousands of “Blue boxes” among the diaspora—to acquire land in Ottoman and Mandatory Palestine. By 1948, the JNF owned 54% of the land held by Jews in the region. The JNF also issued commemorative stamps featuring renowned figures, landscapes of Israel, and JNF projects to raise funds. Today, a charity or a community could similarly auction NFTs or create a token and launch an ICO. Israel was later nicknamed the “Start-up Nation” due to its economic success. But even before the creation of the modern State of Israel, Jewish communities were able to create large wealthy settlements at different points in history. In the 12th-century town of Kalisz, Poland, Jews even minted coins for the Polish prince, with names in Hebrew letters. Maybe in the same way that Network Unions will issue tokens. Contrary to Balaji’s cloud countries, one may oppose that ethnoreligious groups like Jews are not communities built from scratch that can grow quickly in membership. However, even though today Jews are all genetically connected, many groups and tribes converted en masse to Judaism in the past. Similarly, cloud countries will grow by convincing people from all around the world to join them. There must be an upside for newcomers to join the network.
Mormons—officially, “Latter-day Saints”—provide a more recent example. Mormonism was founded in New York in the 1820s, but the church had to move from one place to another to escape persecution. Ohio, Missouri, and then Illinois, where they built Nauvoo, a startup city bought by Mormons to escape conflict with the state government in Missouri! Unfortunately, tensions with their neighbors continued, so in 1847, 70,000 Mormons migrated from Illinois to the Salt Lake Valley. They colonized the desert and tried to set up the massive State of Deseret—with its distinct Deseret alphabet. The US government didn’t recognize Deseret, but Utah became a state in 1896. Today, Utah is still 61% Mormon. Like a cloud country, Mormons started as a simple community. But today, some consider them as a nation: “One cannot even be sure, whether [Mormonism] is a sect, a mystery cult, a new religion, a church, a people, a nation, or an American subculture; indeed, at different times and places it is all of these.” (historian Sydney Ahlstrom)
Armenians are another successful ethnic diaspora. When the Armenian State in the historical Armenian highlands disappeared in 1045, Armenians fled to the Mediterranean coast. They created the Armenian Kingdom of Cilicia, called “Little Armenia” or “New Armenia,” as a sort of government in exile. Then this kingdom fell in 1375, and for centuries, Armenians lived scattered across the region without their own State. The short-lived First Republic of Armenia (1918–1920) was the first modern Armenian State since the loss of Armenian statehood in the Middle Ages, and Armenia had to wait until the fall of the Soviet Union in 1991 to fully regain its independence.
These precedents tell us that founding a cloud country may not be a peaceful process. Jews, Mormons, and Armenians all faced discrimination or even genocide. Persecution was often the very reason for building a country of their own.
Several other nations have independence movements: Catalans, Kurds, Sikhs, etc. Some even control territories. Tamil poet Kannadasan’s quote about the Tamils as a stateless nation could apply tomorrow to a cloud country and its reverse diaspora before moving to a land: “There is no state without a Tamil, there is no state for the Tamils.” (try replacing “Tamils” with “Bitcoiners” in this sentence…) Actually, the Liberation Tigers of Tamil Eelam, the Tamil militant organization (designated as a terrorist organization by 32 countries, including the EU, the US, and India), had de facto control of Tamil Eelam for most of the 1990s–2000s, until their military defeat in 2009. It was the only rebel group in history with a navy and an airborne unit. Will cloud countries need well-developed military wings?
On the other hand, some groups, such as Romani, have always claimed nationhood without statehood: “non-territorial nations.” Nizaris also have a mighty prince, the Aga Khan IV, without a land! Per Wikipedia: “He is unique among the richest royals in that he does not preside over a geographic territory.” (Besides, the Aga Khan’s power, inherited from his grandfather, relies on social backlinks from his followers to him. This social tree structure and its institutions are enshrined in the Isma’ili “World Constitution,” which provides ideological alignment to the group.) These stateless groups sometimes describe themselves as part of the “Fourth World,” but could we build that Fourth World in cyberspace?
Besides ethnic and religious groups, cloud countries could be founded on other centers of interest. I see Freemasonry as the kind of community that would be built in the cloud today. Born in authoritarian Europe, the movement also thrived in the US: from Paul Revere to George Washington, many—although far from all—of those who shaped the US in its early history were freemasons. As Todd Creason wrote: “they all had a dream to bring ideals they learned within Craft to an entire nation of people.” For George Washington, the US was “the second Land of promise.” It was a “cultural fork” of Old Europe.
Then, as Balaji explained in another article, the US culture itself—born in the East of the country—forked again:
“These people [tech founders and investors] had the intellectual horsepower to compete with the best of the East. Yet they chose to found something rather than inherit it. And that's how tech became a cultural fork of the East Coast. It's the same root but different branches, like the United States and the United Kingdom.”
The Esperanto movement has also long tried to build an Esperanto‑speaking state and almost succeeded in the small condominium of “Neutral Moresnet.” Many in the movement criticized this goal and instead defined the Esperanto community as “a stateless diaspora linguistic minority” based on freedom of association, sharing humanist values, and not only a constructed language. Today, Esperanto is thriving online and is the 53rd most popular language on Wikipedia (more popular than official languages with millions of speakers, e.g., Swahili or Urdu). Thanks to the internet, Esperantists may eventually create their State, but they need new tools to do so.
Indeed, the movements I previously mentioned were the offline versions of “network unions”: “Large groups of people organized online to advance their collective interests via a series of tactics, culminating in coordinated exit as customers or residents if an accord cannot be found.” Many ethnic diasporas are well organized and defend their members and “their interests as a sovereign collective” at all costs. They tend to live in ethnic enclaves with solid kinship networks, which offer solidarity and trust. However, none had the current technology to structure themselves and scale. In particular, they didn’t have access to blockchains. And, to quote Balaji again: “blockchains change social technology.” The internet, Wikipedia, and Duolingo resuscitated Esperanto, which was slowly dying. Similarly, crypto revolutionizes communities if they organize around a token. With encryption, members can communicate and sign documents without interference from the State. With crowdfunding, they can easily shape their common future: they can commit to buying plots of land in the future; instead of just pledging to move somewhere with no skin in the game, such as in the Free State Project. They can set up a decentralized mutual aid society, a form of mutual insurance for group members. They can use a common token to trade inside the group and give incentives to early adopters. Indeed, tokens can represent shares in a real estate investment trust (REIT). This REIT could own the properties occupied by all members worldwide or own the land of their new city. This will be the legal and technical way to unite the disjoint enclaves of this non-contiguous country. Moreover, governance protocols help communities organize themselves; it gives them the backbone and the administrative infrastructure of the modern State in open-source software. These super online communities will then gradually become full-fledged countries. I can’t wait to see which ethnic minority, religious movement, or interest group will be the first to issue its token. (Or maybe cryptocurrencies are already religions?)
Enlightened Europeans exited to the US. Entrepreneurial minds from the East Coast exited to the West Coast. The next step would be for Silicon Valley, its original culture, values, and ideals, to move to the cloud. And then to live a diasporic life, joined by entrepreneurs from everywhere who share these values, until they can finally settle in a territory and build the third “Land of promise.” Will it be an online Hanseatic League? A digital merchant republic? No one knows because cloud countries and network states are a utopia, and that’s why they’re great.
“Utopia lies at the horizon. When I draw nearer by two steps, it retreats two steps. If I proceed ten steps forward, it swiftly slips ten steps ahead. No matter how far I go, I can never reach it. What, then, is the purpose of utopia? It is to cause us to advance.”—Eduardo Galeano