Internet > Nation-state? 12/24

Khanna and Srinivasan make the case

Parag Khanna and Balaji S. Srinivasan (KS) say that with the rise of Web 3.0, the functions of the nation-state will be taken over by networks. I wish that they would tell us what has changed since John Perry Barlow wrote the Declaration of the Independence of Cyberspace, which has not held up well. KS write,

the unit of distance between two people is not the travel time between their positions on the globe but rather the degrees of separation in their social networks.

Frances Cairncross published The Death of Distance back in 1997. It is true that back then less than 10 percent of the world’s population had Web access, and now it is probably more than half. Otherwise, what makes this time different?

Chistopher Mims must be wondering the same thing.

it was supposed to be distributed, user-controlled and, in a word, democratic.

Then came Big Tech and the attendant centralization, windfall profits, culture wars, misinformation campaigns, Congressional hearings, EU rulings, antitrust battles and techno-nationalism that have characterized the past decade.

. . .the torrent of money and interest flowing into Web3 companies and projects, and the mainstreaming of blockchain technologies by Block and its competitors, are a measure of just how dissatisfied even many of those who built the current internet have become with it—not to mention how much they think they can profit from solving the very problems they created.

KS write,

in the age of encryption, it’s not about how many divisions a state has to defend its property. It’s about how much long division it would have to do to seize yours.

I can see this for digital goods, but not for physical goods or for you body. Try telling the government, “You can’t collect taxes from me until you guess the password.”

Perhaps they would respond that people can escape high taxes by moving to a low-tax country. But will you be secure in your property and person? If the “stationary bandits” find that their citizens are leaving, probably some of them will turn into “roving bandits,” redefining “citizen” as “anyone we decide should give us money.” Or they might treat low-tax countries as rogue states and punish them accordingly.

It seems to me that the core of KS’s argument is this:

Crypto protocols, by contrast, allow millions of active participants—both customers and producers—in a market to develop decentralized regulatory mechanisms that avoid both the perils of captured state regulators and corporate self-regulators. It is only a matter of time before cloud-based entities emerge for decentralized regulation of industries beyond cryptocurrencies. Importantly, these bodies will be truly global and boundary-spanning, unlike today’s geographically constrained national regulators.

I don’t think that they talking about direct democracy. If they are, then that was another concept that some Net-heads promoted in the 1990s. It never emerged. I am by no means convinced that its emergence would be a good thing.

Internet-enabled services create opportunities for alternative governance mechanisms. But I am afraid that that they raise many more governance problems than they solve. Think of content moderation on Facebook, for example.

What the solutions to all of these governance problems will look like is hard to predict. I can see governance designed and implemented by individual corporations, by government agencies, or by non-governmental organizations like Underwriters Laboratories or the Internet Engineering Task Forces. I can see governance issues that don’t get resolved well at all—content moderation of Facebook, for example.

What I cannot see is what KS are talking about when they envision challenges of governance being met by “millions of active participants” What does that even mean? Is there a proof-of-concept anywhere?

Stephen Diehl expresses his skepticism very colorfully.

At its core web3 is a vapid marketing campaign that attempts to reframe the public’s negative associations of crypto assets into a false narrative about disruption of legacy tech company hegemony. It is a distraction in the pursuit of selling more coins and continuing the gravy train of evading securities regulation. We see this manifest in the circularity in which the crypto and web3 movement talks about itself. It’s not about solving real consumer problems. The only problem to be solved by web3 is how to post-hoc rationalize its own existence.

For an opposite take, see Ben Thompson’s diagram. He depicts the first stage of the Internet dominated by technology, which was decentralized. This was followed by a stage dominated by economics, which fostered centralized behemoths. His diagram claims that the next stage in the Internet will dwell on politics, which once again will be decentralized.

I am agnostic, but mostly on the skeptical side. Human institutions, including national government, involve trade-offs. An approach that is good at addressing some problems ends up having weaknesses in other respects. Some of these trade-offs I know how to articulate, and some I don’t.

It is reasonable to believe that software protocols can move us around within this space of trade-offs, but it is not easy to predict how that will shake out. In the end, national governments might be more important, less important, or about as important as they are today.