What is the value of a nation? Think about that for a moment. If we had to put a value on the United States, or Ecuador for that matter, what would it be? How would we go about valuing it?
Many might point to GDP. That is one metric that could be used albeit not entirely accurate. What about the value of the real estate? We could add that up to get one line on the balance sheet.
Another way is to look at the different industries and determine the present value of future earnings. But then what about all the research & development capabilities? For example, how do we rate a country with a lot of technology versus one that does not?
As we can see there are many variables that go into the model we are trying to construct. It seems like this is an impossible task. Honestly, whatever metrics are used, we would only get rough estimates. There is no way to get an accurate value of a nation.
Isn't it ironic that some believe the market can value a blockchain ecosystem accurately?
Digital Nations
Blockchains need to be looked at through the same lens as a country. When we are dealing with an ecosystem, the value, at least in part, is determined by what is being built on there. This is something that factors into all future expansion.
These entities carry the same complexity as nations. As we see them forming, they literally are becoming digital nations. People are opting where they prefer to "plant their flag" and settle down. This is where the building starts.
Governance tokens, in a staked-based system, is what determines one's percentage of "ownership". Those with skin-in-the-game get to make the decisions as to what takes place. When one spends time growing his or her holdings, the standing within the community will expand.
Entire economies are forming. The ecosystems with the most activity are going to carry the highest value. All are starting bare, a blank canvas if you will.
Think of it like the United States a couple hundred years ago. At that time, most of the physical nation was undeveloped. The economic output of the entire country was minimal, lagging many of the European counterparts. Yet, over a span of 125 years or so, the nation became the largest, most diverse, economy in the world.
We can also see a similar path taken by China, although with a different focus. In a little more than 40 years, that nation went from an economy build upon agriculture to one of the largest in the world. The population was always large, yet the output was minimal. The strides made in such a relatively short period of time were unprecedented.
If we take things from this perspective, we can see how the economic value created within some of these ecosystems can end up in the trillions. During the latest CryptoManiacs podcast, it was discussed that the money on Ethereum is absolutely mind-blowing. That is a chain where there is enormous wealth. What is ironic is that this is just the beginning. In a few years, it will be orders of magnitude larger. The Ethereum Economy is exploding.
Decentralized Network-States
There is little doubt we are forging deeper into the digital world. Eventually, a significant percentage of our experiences will occur in the virtual realm. This brings a completely new set of rules, most of which we are establishing as we progress.
Over the years, we saw a lot of maximalism. There are people who take the tribal mentality to the extreme. For some reason, they believe there will only be one blockchain that handles everything. This seems a bit absurd, especially in light of what is taking place.
Again, once we understand we are building Decentralized Network-States, then we can grasp at how things will progress. Drawing upon the nation parallel, is it a good idea to exist on your own island? Countries achieve greater success when they interact with other ones. Trade, alliances, and diplomatic agreements are drawn up periodically to benefit the different parties. Nations that operate mostly in isolation, like Cuba and North Korea, tend not to fare very well.
It is going to be the same thing with Decentralized Network-States. Without interoperability, the ecosystem is "cut off from the rest of the world". Since no blockchain is going to have everything, it causes some issues. Thus, collaboration, partnerships, and integration with outside systems is necessary.
Certainly one can be very optimistic about the Network-State he or she chooses to build upon. However, since there will be no winner take all, it is best to remember that outside interaction is the pathway to larger success.
Within this context, how things are going to unfold becomes a lot clearer. In the spirit of voluntaryism, anyone is free to choose where he or she focuses time and effort. Nobody is forced into any ecosystem. It is all personal choice. If one does not like what is taking place, he or she can simply leave. Unlike our present system, nobody is forced to operate under any single governance system being erected.
Sub-States Creating Distributed Network-States
The idea of communities help us to further this process. As we can conceptualize, these would equate to states or provinces. They are "networks" within the larger Decentralized Network-State.
What is fascinating is the communities can be built around anything. Whatever causes people to come together and assemble is a potential community. These are the entities that would benefit from interoperability. Thus, in the digital world, the "placement" of a community is rather dynamic. Many of the difficulties faced in the physical world do not apply here.
As communities form and expand, that is where the overall Network-State starts to emerge. The underlying technology begins to transform into an organic complex system. All the different entities tied to it following their own natural path, contributing to the increase in size.
Naturally, individuals can be dynamic also. This takes the Network Effect to an entirely different level. Many point to Metcalfe's Law as the model for this. However, this understates exactly what is taking place.
Individuals are also dynamic. They can use many different applications. Thus, unlike the physical world, they can be in many states/provinces simultaneously. This is why Metcalfe's Law understates the total potential.
Reed's Law actually captures what is taking place. As these ecosystems fill out, what we end up with is Distributed Network States. This is the fourth level of the evolutionary process.
- Nation-States
- Network-States (Facebook)
- Decentralized Network-States
- Distributed Network-States
Notice the similarity between the graphical representation of Metcalf's/Reed's Law and a distributed network.
How this unfolds is the interconnectedness of what is built. For example, we see gaming and DeFi starting to blend together. Thus, one can be in a game utilizing DeFi applications that are built within. Here we can see the exponential value of the ecosystem growing as both features are enhanced.
This is how the "countries" of the digital world will form. We are already in the early phases with many applications and games being build on different blockchain platforms. We are also seeing interoperability being undertaken which is joining some of the "nations" together. The bridging of what is created if vital to the process going forward.
It should be apparent how the value that is generated is going to be enormous. We are going to see numbers that far surpass what is generated in the physical world.
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