Lately the endgame for web3 has been sovereign communities or network states, advocated widely between Balaji’s The Network State and investors in web3.

The vision for a sovereign community is a group of highly aligned people with a capacity for collective action that eventually crowdfunds territory and gains diplomatic recognition from pre-existing states.

Web3 infrastructure projects are seen as a ripe area for this kind of innovation. However time and time again we’ve seen this infrastructure built for short term cycles, leaving investors racing for liquidity. Of course, this infrastructure needs builders to thrive.

In a world of infinite blockspace, developers care less about optimizations and consensus and more about connections to both builders and users alike. Users don’t care about composability just because it’s possible – they care that their assets and data can be used in other interfaces and contexts.

The protocol-first playbook is a race for liquidity, rather than a playbook for sovereign communities. For protocols to succeed, they do need capital – however most L1s play out the same way.

Mercenary builders come into the ecosystem only for a temporary grant allocation (without a sustainable long-term vision); retail ends up only caring about the ‘how do I get rich’ angle; early investors become too afraid of regulatory scrutiny to vote in protocol governance; projects have to lay off staff because retail and VC dumps the token; founders thinking more about working around the law than the technology – an evolutionary cul-de-sac.

The protocol-first model of building cryptonetworks is broken.

There’s entitlement that comes with speculating on tokens, both in the retail context and in private markets which isn’t the way enduring businesses or communities are built.

Applications powering Sovereign Communities

The hardest thing about building a network state is getting people to care.

Sovereignty is marketed today as something that’s valuable especially when you need to exit. Exiting is only valuable when the group of individuals have a strong sense of collective self-identity and economic alignment.

The application-first model is far more likely to attract people interested in creating sovereign communities.

Communities like YCombinator, r/WallStreetBets, etc have a better ability to organize, act collectively, share resources, crowdfund, etc because all the members in the community are connected both online (and sometimes offline) and are intrinsically motivated to stay connected, without the promise of an early economic incentive like a token. Once you have the community, you can put together a decentralization strategy.

This is in part why protocols need to pump billions of dollars into an ecosystem to even get traction. It’s hard to get religion-like affiliation and collective identity by building protocol-first – especially where there is economic misalignment between retail and the founding team at the onset of genesis. Applications are better suited for bringing people together on the premise of a promising vision and arguably more capital efficient for promoting network effects.

A similar sequencing is advocated for in The Network State – for people to come together, build a community for like-minded individuals tied to a mission/vision, and then build an economy around it and buy a plot of land.

Farcaster

Farcaster is the strongest example of this, with the potential for being a future sovereign community. It is building client-first – like email (see: SMTP) and has generated a vast ecosystem of projects building on top of the protocol, with no monetary incentive structures like grants or the promise of a token.

The project makes a point of people not just wanting a ‘decentralized’ version of an existing social network and instead focuses on compelling crypto-native features, a high-signal community, and building intrinsic motivation – all while avoiding the overdone protocol playbook.

Progressive decentralization, while exploring cryptonative feature sets and staying away from the overdone playbook is the right move.

The team makes the point that ‘successful social networks are usually built around new communication primitives – Facebook had the wall, Twitter had the 140-character tweet.’ The age of nascent web3 social media is so new that with the onset of new crypto primitives, offering a net new product experience that doesn’t exist yet is far more compelling than a blatant clone of an existing network. This also allows the team to explore feature-based gating which grows communities, subcultures, and identities.

Interest based community members take advantage of the open infrastructure design and contribute/build on top of Farcaster, because building in a social context is a much stronger foundation for a sovereign community rather than a race for blind liquidity.

Disclaimers

Sovereign applications are much more likely to become sovereign communities.

Farcaster community members that feel compelled to create a sovereign community will indeed need a blockchain to referee a crypto economy.

Building out blockchains at the infrastructure level is valuable, however most L1s are not concerned with the citizenry of the state they’re building. At that point, a community can choose whatever blockchain they feel compelled to choose.

Other projects come close to the promise of Farcaster. Nouns comes to mind, however the project fails to build social context and focuses more on capital formation. Cosmos does as well. Despite it being an L1, directionally it gets the app-first > protocol-first idea right. Applications ultimately matter to users and applications need sovereignty. Cosmos has managed to build brand-like affinity to apps like Osmosis, but they do fall prey to the same race for liquidity as other L1s.

Why Now

Society is headed into a very scary macro situation.

Crypto will be needed to form alternate geopolitical economies (think India, China, etc) where we’ll likely see mass social coordination. We are not building tomorrow’s next gen sovereign communities with today’s protocol wars. Mass social coordination will likely happen at the application level.

A group bound by the shared vision of an application or a social network exiting to form their own network state is a political decision. If a community is just driven by ‘number go up’, then future sovereign communities are nothing different than today’s capitalistic, plutocratic society.

Huge thank you to Mustafa Al-Bassam for inspiring me with the vision of Celestia –teaching me the true promise of blockchains. Also s/o to Maya Bakhai, Meghna Rao, and Brian Flynn for the edits!