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Former Coinbase exec posits blockchain-driven vision of future societies

Attendees of the Network State Conference in Amsterdam believe that a new tomorrow is possible with decentralized technologies.

The Dutch city of Amsterdam — no stranger to international conferences dedicated to cryptocurrencies, blockchain and decentralization — was recently host to the Network State Conference, which explored decentralization at an entirely different level. 

Conference speakers and attendees gathered to discuss and debate whether a new form of decentralized country is possible.

The conference kicked off with an energetic host directing the crowd to chant and shout the title before Balaji Srinivasan, an entrepreneur, investor and former chief technology officer of Coinbase, entered to make his opening speech. During his initial remarks, Srinivasan asks, “Are new countries even possible?”

Srinivasan delivered an opening address to the Network State Conference. Source: Cointelegraph

In his book The Network State, Srinivasan proposes that new countries are possible via a new type of digital community, where its members utilize blockchain and cryptocurrencies to host their social and economic institutions, and its borders lie at the extremes of the crowdfunded land owned by community nodes.

A node might begin with just a small group of friends, the idea being that this small community self-organizes to raise funds, expand and eventually form a viable network node. When you have several well-aligned community nodes, regardless of their geographical distribution, you have the foundations of a network state.

There are many goals among network state proponents, who mainly wish to construct a parallel social infrastructure as a “competing product” to what they see as the flawed systems of state-level social, political and economic institutions, thereby granting citizens of such nation-states the ability to opt-out should incumbent social structures prove insufficient for their needs and desires.

Ivy Astrix, a member of vibecamp and long-time supporter of Srinivasan, told Cointelegraph that disillusionment with the establishment was a common theme among attendees. “Can society, the U.S.A., these very coherent societies — still function? I think they can’t,” she said.

Amid this growing disenchantment with existing societal structures, Astrix said that network states “can improve ‘normal’ people’s lives [...] because they encourage a co-creation approach to life, instead of just slotting yourself into something that’s already here, just because its the ‘best’ or ‘least sucky’ option.”

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The connection between network states and blockchain technology is undeniable, as both rely on autonomous nodes that come together to form a network with an agreed set of rules. For the network state concept, crypto rails are the gold standard of their ethos, especially concerning finance.

Frederik Zwilling of Galactica Network told Cointelegraph about the practicality of this union:

“The users won’t go to the network state for itself unless there are a lot of benefits or things they want to do in this network state that attracts them.” 

Zwilling added that crypto-based, decentralized solutions are necessary for the governance of community groups — especially for those requiring analogs of nation-state-level social infrastructure.

The physical implementation of a network state

The infrastructure development underpinning the network state concept is moving in multi-decade timeframes, with projects such as Prospera, Cabin and Praxis focusing on community-building, fundraising efforts and building physical locations (nodes) that might eventually form a real-world network state.

Erick Brimen, the founder and CEO of Prospera, presented the project to attendees. Source: Cointelegraph

Many of the speakers have opened exploratory dialogues with various governments of existing nation-states regarding land ownership, borders and the formation of special economic zones. 

Still, no single community has achieved the level of autonomy from legacy systems espoused by proponents of the network state concept.

Prospera’s flagship startup city, St. John’s Bay, comes close to meeting these criteria but still falls mainly under the jurisdiction of traditional institutions, in this case, the Honduran government.

Establishing parallel societies is a task that will take decades to complete, and to reach the network effects required for a minimum-viable society, the process must begin with the kind of community building witnessed at the conference.

Given the early stage of network states, the quality of physical infrastructure is impressive, and the concept itself appears sound, but to scale beyond wealthy futurists taking over holiday resorts, a great deal more time, money and human infrastructure is required for opting out to become a viable choice.

The democratization of governance through technology, particularly that of blockchain, is a principal pillar of the network state concept and is critical to the real-world infrastructure presented at the conference.

Dom Ryder, founder of Vemp Studios, told Cointelegraph, “It’s about bringing ways to facilitate democracy and democratic values on an immutable and trustless blockchain; that is the obvious use case [of network states] to me.”

The challenge, as Ryder continued, is making the value of blockchain palpable to “normies” while divesting from the technology of its poor public perception and ensuring that its benefits are seamlessly integrated into the lives of regular people.

Aligned individuals

One could be excused for thinking that many of the speakers at the Network State Conference were simply presenting novel methods of what essentially falls under the umbrella of “virtual community building,” but this line of thinking perhaps underrepresents the coherent yet flexible nature of their shared goals.

Network state proponents do not suggest a one-size-fits-all approach to social cohesion but rather an open system from which you get out what you put in, with as few intermediaries as possible between action and effect.

Community is the basic building block of all aspects of society, and it has been proven throughout history that a critical mass of community that holds a shared goal will, at the very least, arrive at the implementation stage of that goal. Success is never a given, but the power of network effects can not be denied.

The virtual communities present at the conference, from the X-based vibecamp, the decentralized autonomous organization infrastructure of Coordinape, and the full-blown digital nation-states of Plumia and the Galactica Network, all have in common a community-first approach to implementing their vision of a network state.

Those present are attempting to achieve the critical mass of humanity required for a parallel society to take shape and provide the necessary digital infrastructure to host some or all of humanity’s basic needs, be they financial, political or social.

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The Network State Conference was a crucible for people and ideas that challenge the status quo and a small pitstop on the journey of human development.

A pragmatic mind might drift to the inescapable truth that a network state paradigm is contingent upon acceptance from or even the abject failure of current social infrastructures.

However, the sheer will and monumental human effort on show here gave reason enough to suspend disbelief — even if only temporarily.

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CBDCs offer faster settlements: Citi survey of global securities firms

The year-on-year growing support CBDCs is supported by ongoing domestic pilots and cross-border initiatives in various jurisdictions, banking giant Citi found.

Discussions around shortening local financial settlement cycles within the next five years have most securities firms eyeing central bank digital currencies (CBDCs)

CitiBank’s latest edition of the Securities Services Evolution whitepaper highlighted India’s recent move to T+1 settlements, which ensures all trade-related settlements conclude within 24 hours of a transaction. As the United States and Canada, among other leading economies, step up efforts to transition to T+1 settlement cycles, the CitiBank survey gauges the importance of distributed ledger technology (DLT), CBDCs and stablecoins in expediting this transition.

Global economies transitioning to faster settlement times. Source: Citibank

87% of the 483 survey respondents and 12 financial markets infrastructures (FMIs) see CBDCs as a viable option for shorter settlement cycles by 2026. The support for CBDCs saw a near 21% increase from securities firms when compared to the previous year.

Expected form of digital money to be used to support securities settlements. Source: Citibank

The year-on-year growing support for digital cash is supported by domestic pilots and cross-border initiatives. The Citibank report read:

“Recent crossborder multi-bank experiments are now providing detailed insights into how central bank funding can be operationalized in a digital context, both internally and across entire markets.”

However, over the next years, some of the major roadblocks to widespread adoption of digital assets include regulatory uncertainties, limited knowledge, backward compatibility with traditional financial systems and blockchain interoperabilities, among others, as listed below.

Top impediment to the widespread use of digital assets in the next three years. Source: Citibank

Out of the various financial institutions, institutional investors, banks and asset managers have the greatest ability to scale and deliver market-wide solutions, a crucial determinant to the widespread adoption of CBDCs, stablecoins and other centrally governable financial instruments.

In the coming five years, by 2028, financial aspirations will move beyond T+1, envisions Citibank’s report. Some anticipated changes will include the mainstreaming of DLTs, shorter settlement cycles, digital cash-focused funding mechanisms and removal of core banking systems.

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Just a month after India pitched the idea of conducting cross-border payments using its CBDC to 18 central banks, the Reserve Bank of Australia completed its in-house CBDC pilot.

The Australian central bank believes that a CBDC may support financial innovation in areas such as debt securities markets, could promote innovation in emerging private digital money sectors and enhance resilience and inclusion within the wider digital economy.

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Bank of Russia to set up entities for crypto mining and cross-border settlement: Report

Russia's central bank plans to create new institutions to mine crypto assets and settle international payments.

Russia is taking further steps to mitigate global sanctions in place since the invasion of Ukraine in 2022. According to local media reports, the country's central bank plans to create new institutions to mine crypto assets and settle international payments. 

In a meeting in the State Duma — one of the chambers of the Russian parliament — the head of the central bank, Elvira Nabiullina, announced that the Bank of Russia would allow cryptocurrency to be used in external settlements in a pilot program. The move, however, does not signal a change in the country's crypto environment:

“We adhere to the same position that within the country, cryptocurrency […] Should not be used, and for external settlements, we assume that this is possible in the form of an experiment. This bill is also being prepared in the form of an experimental legal regime,” Nabiullina said according to a translated summary of the report.

The plan includes the creation of "special authorized organizations" for crypto mining and international settlements — including transactions involving cryptocurrencies and other digital assets, stated Nabiullina, a former economic adviser to Russian president Vladimir Putin.

Bank of Russia deputy chairman Aleksey Guznov told journalists that the bank is negotiating with the government on how the companies will operate. “Currently, a discussion is underway with the government so that their scope of activity is clear," Guznov said, adding that private companies may be able to contribute to those initiatives in the future.

In a statement to Cointelegraph, Gabby Kusz, CEO of the Global Digital Asset & Cryptocurrency Association, noted that Russia, China and other countries are realizing "Crypto is not a new financial product, but an evolution or fundamental change in the way individuals and organizations exchange value."

She also highlighted that this movement would potentially impact the global financial system, including the United States' relevance to the future of finance in the digital era:

"Overly aggressive actions that drive crypto innovation, blockchain technology and entrepreneurs offshore only lessen the ability of the United States to lead geopolitically and from the standpoint of monetary policy."

This development comes after recent revelations that BRICS members — Brazil, Russia, India, China and South Africa — are working on creating their own currency to facilitate trade. Speaking to Cointelegraph, Mark Lurie, CEO of DeFi software company Shipyard, noted that commodities-backed currencies used for settlements — such as the ones planned by BRICS countries — are not deemed to replace the United States' dollar dominance.

"While investors are increasingly distrustful of the Fed, neither investors nor the BRICS themselves will necessarily trust the Russia-led governing body of such a currency not to devalue itself. [...] Ultimately, it's not trust but relative trust that matters most," said Lurie. 

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Russia-Ukraine war: How both sides of the conflict have used crypto to win

While tens of millions worth of crypto were donated to Ukraine in the last year, pro-Kremlin groups have also leveraged digital currencies to buy military supplies and spread propaganda.

In the Russia-Ukraine war, both sides of the conflict have been leveraging cryptocurrencies to achieve the upper hand. 

Pro-Ukraine causes have collected around $200 million from crypto donations, showing how borderless and uncensorable money could be useful in time of emergency. 

But the Russian side has taken advantage of crypto too: a total of about $5 million was raised by pro-Kremlin groups and propaganda outlets in the course of the invasion, as revealed by a recent Chainalysis report. These entities are small grassroot organizations that have used crypto to bypass western financial sanctions. 

“We're really looking at individual actors. So somebody who's on the front, somebody who's trying to help provide more military resources to the front [...] things like bulletproof vests or drones,” explained Andrew Fierman, head of Sanctions Strategy at Chainalysis and one of the authors of the report.

But those numbers don’t take into account ransomware attacks: As shown in Chainalysis data, in the course of 2022, over $450 million were paid to these entities, the majority of which were believed to be based in Russia. Some of them, like the cybercriminal group Conti, have openly supported the Russian government in its war effort.

“When it comes to ransomware payments, a lot of the time bad actors have some sort of political agendas behind what they're doing,” Fierman pointed out.

To find out more about the impact of crypto in the Ukrainian conflict and how Russia leveraged it to promote its cause, check out the full interview on our YouTube channel and don’t forget to subscribe!

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