We are seeing an entirely new paradigm forming before our eyes. This, of course, was in the works for more than a decade. It is now starting to emerge in a way that is undeniable.
The Network-State is something we discussed a great deal over the last few years. It is the basic premise that the system based upon geography (physical) will be pushed aside by the digital. This means the network is going to play a more crucial role in the lives of people.
It is something that already took place to a degree. Consider the idea of Apple. If you are involved in that network, think about what the ecosystem entails. A large community sprung up around Apple, something that is fostered by the company. While the tentacles aren't as large as the Network-State concept, it does show how Apple is the centerpiece to the lives of hundreds of millions of people. The fact that most will not go anywhere without their phone drives the point home.
If we take this concept and do a 1,000x, then we are starting to grasp the idea of the Network-State.
Image generated by Ideogram
I wrote that cryptocurrency and AI are inseparable. This is something that is clear due to the fact that AI agents are arriving.
We can go a step further, embracing the idea that AI does not operate in a vacuum. It is tied to a network. This means that AI, tied into cryptocurrency, will be a network based system.
As always, the question is where does it reside?
It is easy to see what Elon Musk and X are doing. Grok is already incorporated on the platform. This is the LLM that X will build upon.
The move to build a payment system is underway. Licensing is already underway, a step in allowing X to operate within the present system, similar to PayPal.
We are going to see AI agents built on X. This will be the case for most digital platforms. AI agents will require micropayments, something that X could be hindered by.
Integrating cryptocurrency is a solution. X could either use an existing cryptocurrency or form one of its own. The latter makes more sense since it would scale better. This could be built as a layer 2, providing an instant wallet system.
The glaring issue here is the centralization of most of this. X owns the network completely, with users having no stake. If the game is winner take most, this is a major problem. The net result will be a small number of major players.
At the core of the Network-State is community. This is something that is crucial. It is also not truly grasped by the masses.
We have a number of fundamental concepts entering the conversation. With the expected explosion of AI, the structure of the economy will radically change. If jobs are zapped at rates never seen before (consider 85% unemployment), yet economic activity is doubling every year (economic singularity), what does this mean for the masses?
With the existing system, we know what the picture is.
Also, how do people find meaning in the post-labor economy? Some are questioning whether we are moving towards the "meaning economy". Since the basics for survival are essentially automated, pushing the price to near zero, and few jobs are to be had, then where do people find meaning?
To me, this is a nonsensical question. Wealthy people who did not have to work for their livelihood have, for the most part, found meaning. Even when not showing up at an office daily, they still occupied their time.
Nevertheless, it is something that people are discussing.
Here is where the Network-State enters. Having a foundation in community means that people have something to focus upon. The key here is people have to look towards something outside themselves. In a world that promotes individuality and selfishness, this is a radical transition. Unfortunately, it is going to take a lot of pain for people to change.
That said, the emergence of the Network-State offers many benefits. This is from both the individual perspective along with the efficiency of the system. Friction is reduced greatly. There is also the potential for major innovation.
Crypto networks are already in place. They keep growing, expanding, and reproducing. At the same time, more compute is being applied. A similar path is being followed with AI.
The digital world is based upon two primary factors: compute and data. This means, to be viable, excelling in these areas is crucial.
It is at this point where the centralized entities position stands out. They have the money to buy the compute and the global population keeps feeding these systems. The hours that people spend on Meta and X are feeding those corporations with huge amounts of oil.
In my view, the Network-State, by default, is decentralized. This means it resides outside the traditional Web 2.0 corporations. Open source, another community (non-selfish) based idea, is paramount.
Distributed computing is making progress. Fortunately, computing is moving in a direction where centralization is impossible.
Inference is a prime example. Jensen Huang stated that he thinks this will 1 billion-fold over the next decade. A centralized entity simply cannot keep pace. That means distributed inference is necessary. Any unused compute will be connected for this purpose at some point.
Compute is required to power the services required by the community. It is no different than a nation having enough electricity to run its economy. Many countries are hindered due to unstable (insufficient) power grids. The top economies grow their energy supply at a pace equal to the growth of the economy.
Network-states will follow with compute and data. If it doesn't generate enough, things will be hindered. This could aversely affect the community, potentially stimulating an exodus.
The pillars of AI do not change. Algorithm improvements help a great deal, improving the efficiency of systems. However, they do not remove the need for more compute and data.
A thriving Network-State will need both.
