Decentralized Nations and the Future of Governments

(Update: This essay has been chosen as one of the winning submissions. 🏆)

I.

John Palmer first published this essay in 2016. Read that first, for context, and then read this essay. In this essay, I want to explore some of the ideas that John laid out in his piece 5 years ago.

I’ll also use history as a crystal ball later in this essay to try to look at what might happen in the future. History doesn’t repeat. But it sure does rhyme. Will that be the case here? Let’s dig deeper.

John compares politics with business, and how the latter has the advantage of disruptive innovation while the former does not. Government innovation is slow. Small businesses, specifically start ups, like to “move fast and break things.” In this world, the best business out-competes all others in the same niche. That doesn’t stop others from trying to compete, and new and better businesses replace existing ones all the time. Whenever a new business succeeds and a previous one fails, it is always because the new business offers more value than what the previous one offered. In politics, when governments change, the outcome is not always similar. More often than not, we get the same thing in a slightly different package.

In this essay, I’ll focus on democratic governments and free nations, since they’re the ones who are best suited to explore ideas of decentralization, not really by virtue of who’s running the government at the time, but by virtue of what the masses want. Authoritarian governments won’t entertain such ideas, and will resist it till they’re on their last dime. To them, power is everything. They’ll choose power and total control over growth and innovation every time. That is why they’ll inevitably remain inferior.

A democracy does not always pick the best leader, or the right government. That is not the purpose of a democracy. The purpose of a democracy is to vote the wrong leader out of power. It is this fact that distinguishes a democracy as the best system of government. It is a system that allows innovation to thrive, where progress isn’t held back and you don’t fear someone taking away everything you’re building by citing draconian laws.

However, as John as mentioned, a democracy is slow. It doesn’t have the advantage that businesses have, and can’t radically change. They’re slow to introduce new things, and even slower when it comes to implementing them. John addresses in his essay that this might just be a feature and not a bug. Change, by virtue of being slow and methodical, might prevent dangerous changes from occurring but it also prevents the disruptive changes that can make everything objectively better.

In a democracy, we don’t know whether a new party elected to replace the old party will actually be better until the end of its term. And even then, propaganda and fear play a major role in deciding the outcome of elections over concrete facts. There are many incentives to leech resources out of the system, instead of contributing your time and effort into reforming the system as a whole. Politicians who are smart, and deficient in moral values and ethics, realize this very quickly. The result is an act, a facade put on to convince the world that they’re the solution we need, when instead, they’re going to do exactly what their predecessors did.

Businesses, when they fail to deliver, perish. Governmental cycles can, and do, last for decades with incompetent people on both sides. There isn’t an economic penalty for them, and when the economic penalty due to bad policies does arise, the ones who suffer the most are the common people.

Under such circumstances, is it safe to say that politics is failing and perhaps a decentralized approach to governments might work? But wait, can we ever decentralize a system like this?

Yes, we can.

But first, let’s look at politics.

II.

Politics. Other than religion, this is the only subject where everyone has an opinion, everyone believes their opinion is the right opinion and everyone defends their opinion like it’s sacred to them. There are very few immediate consequences of being wrong when everything is theoretical. Compared to fields like science, where you require a certain amount of knowledge to debate and being wrong has immediate consequences, politics depends on your beliefs, and these beliefs can be just as delusional as the next person’s. This is why you see people advocating for things that sound good in theory but have been proven to be inefficient in practice. Virtue signalling and pseudo-victims of oppression are rampant, while authentic voices are lost in the noise. Anyone capable of solving problems quickly realizes that the private sector will reward them more than selling an image in public, so that’s what they naturally choose.

Politics doesn’t incentivize those in power to work to the fullest amount of their capacity, bring meaningful change and make people’s lives better. That is left to them as a choice. Sure, some politicians have the moral compass to “do the right thing”, but in every step of the way, if a system forces you to choose between a hard and selfless path, and an easy route that benefits you and your friends but disadvantages the nation, it’s safe to say that statistically, a lot of selfish choices are made. Politicians sell themselves. They sell hope to the masses, with no guarantee of ever following through with their plans. It’s a zero-sum game where if someone wins, someone has to lose. Lying is seen as a virtue. There is endless pandering and endless amounts of time and value are lost in campaigning and celebrations.

The worst part of all this is- we are paying for everything.

How long do you think such a system will work?

The answer might seem like- forever, but it is not. Sooner or later, the masses will realize what very few people have already figured out. Many have figured out the value of Bitcoin over fiat money, and soon that will become a mainstream choice for the masses, a hedge against hyperinflation and economic crashes.

In the same way, people will figure out that governments are inefficient and once they do, once that notion becomes widespread, there’s no looking back from there.

Such a revolutionary change that dispels away the forms of governments that we’re used to might seem impossible to us. It might seem doubly impossible because our generation was born into this system. It is hard to zoom out, but if we zoom out and look back at history, we will see that such revolutions have already taken place when existing inefficient systems of power were replaced by efficient ones.

III.

Before there were governments, churches controlled everything, taxed everything and everyone thought they’d be around forever. The combination of blind belief and faith, authoritarian executions in the name of God and the absence of distributed systems of knowledge- were the keys of their long reign.

Churches were in power for a ridiculously long time, before people started to realize that they’re the ones being handed the short end of the stick. Churches were incompetent and inefficient at what they did. They taxed everything and everyone, stifled economic opportunities, punished free-thinking, but in return, they provided very little value. On the contrary, they went out of their way in making the lives of the people they controlled harder.

The word of God was final. The printing press didn’t exist, and people weren’t exposed to different ideas. The sole benefactors were the people involved with the church, who lavished on the taxes they stole from hardworking people.

The revolution didn’t happen overnight. In fact, the change was slow. But slowly, churches lost the power they once held and became irrelevant. Governments everywhere, are committing the same mistake that churches once committed. They’re taking a lot from us, but giving back very little. Governments thrive when the returns to violence are high, but in the absence of wars and rampant physical violence, what is the need of giving power to lying salesmen?

Sure, you could argue that in their absence, the returns to violence may increase, and that is true. You could also argue that if not governments, then what’s the alternative?

We never had a viable alternative in human history. But now, thanks to technology, we do.

IV.

For the first time in history, we can use digital assets to experiment with new and innovative economic systems. We can experiment with systems of money without the need of anyone in the middle.

In the same way, we can now experiment with governments. Decentralized autonomous organizations are the just the first form of organization that we have thought of, that doesn’t require anyone in charge to work and everyone can work anonymously and remotely. Imagine if we managed to build a government, or a network state this way, what kinds of experiments could we run?

Small startups have the advantage of disrupting fast, that governments do not. But network states on the blockchain can innovate at any pace they want. There is zero possibility of any harm in the beginning(or ever, if the governance is built right). This will allow for disruptive innovation and improvements which are missing from every nation right now.

For the first time in human history, we can create a country. Everyone can, just like we can create a currency. Once software eats through every industry, currency is the first thing it’ll take over. Governments and nation-states are next. Network states and digital nations are just on the horizon.

Of course, no one will take them seriously in the beginning. Then, corporations will come out with their own versions of a “metaverse.” Even they might not be recognized, but the problems of recognition and legal implications can come later. What is important is just getting started, and the way blockchain technology is growing, it won’t be too long till we all have choices between choosing different decentralized network states.

John predicts 2 scenarios in the conclusion of his essay-

  1. Most people will use bitcoin and currencies tied to geographical states will become just a formality for government procedures.
  2. Dependence on currencies will become granular, and states, cities and even neighborhoods will have their own currencies and conduct their business through them.

I think the former scenario is most likely to happen. However, we don’t know the “brand new world” that CBDCs will bring. It is hard to figure out what CBDCs will be competing against. Will they be against banks, and make them unnecessary? Will they be competing against other digital currencies of other nations? Or, in the hope of making these inflationary digital currencies popular, will governments try to hopelessly fight against the decentralized giants?

I do not know the answer to these questions. But I do know that if history teaches us anything, it teaches us that nothing inefficient is permanent.

So, when in doubt, zoom out.


If you liked this and want to read my essays in your inbox, sign up here-

Leave a Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s