Is the ultimate goal of the Web3 industry to build a cyber nation?

Author: Yue Xiaoyu, Source: X, @yuexiaoyu111

1. How far away is the emergence of a network state?

First, the well-known investor Balaji wrote a book called "The Network State", in which he proposed the concept of a network state.

A network state refers to a highly consistent online community with the ability to act collectively, capable of purchasing land around the world through crowdfunding, and ultimately obtaining diplomatic recognition from existing sovereign states.

In this concept, a cyber state starts as a digital community and gradually transitions to a physical presence, leveraging blockchain technology for governance and resource allocation without relying on traditional institutions.

Ethereum founder Vitalik, also known as V God, has mentioned and discussed this concept many times.

He believes that blockchain is highly compatible with the spirit of a cyber state and is a vital infrastructure for a cyber state.

V God even explored this concept through practical actions. The most famous one was the Zuzalu experiment launched in Montenegro in 2023:

This was a two-month temporary "popup city" that brought together more than 200 Ethereum community members, crypto executives, biotech entrepreneurs and researchers. The focus included discussions on longevity science, public goods and cyber-states.

But Vitalik admitted that the next steps were unclear, especially in terms of governance, such as centralization and elitism.

2. With the maturity of infrastructure, Arbitrum, the leader in Ethereum's Layer2, has proposed its vision of building a digital sovereign nation.

This digital sovereign nation has three core elements:

First, there needs to be a diversity of participants and stakeholders. The final form of presentation is a DAO. ArbitrumDAO has complete on-chain control over protocol upgrades and fund holdings. This control is the foundation for realizing its vision of a digitally sovereign nation. Second, valuable digital resources are required. Here, these resources refer to Arbitrum's block space and execution environment, which are actually high-profit digital commodities.

The economics of Layer 2 enable it to retain a significant amount of network revenue, with the average gross margin on Arbitrum One transactions exceeding 95%.

The value generated by Arbitrum on-chain activities can be directly accumulated into the ArbitrumDAO treasury.

Third, there is a need to generate economic pilot zones through treasury deployment.

The ability to generate and retain revenue enables ArbitrumDAO to reinvest assets in new projects.

These projects, in turn, drive demand for Arbitrum block space and activity, which becomes a growth flywheel.

3. If we regard Arbitrum as a country, we can look at the specific situation of this country

(1) First, this country is a federal system

The largest central area is Arbitrum One, and there are 48 Arbitrum Chains.

However, this country is not a loose alliance, but has a strong binding and association relationship. Its common technical foundation determines that it can achieve a high degree of interoperability.

These federations also have very high autonomy: they can customize Gas tokens, choose their own DA (data availability scheme), and settle to

(2) The GDP of this country reaches 200 million US dollars

On-chain GDP, that is, the total application revenue generated on the network.

Among them, Uniswap, GMX and Aave, the three giant applications, have accounted for 40.5% of the GDP on the Arbitrum One chain.

(3) The pillar industry of this country is DeFi

Every country has its own pillar industry. For Arbitrum, the pillar industry is DeFi.

However, having only one core industry is still too single, so Arbitrum is actively expanding into other industries, such as RWA, games, and social networking.

Of course, Arbitrum expects its various federations to explore, that is, to realize different types of ecosystems on different sub-chains.

4. To summarize

The blockchain industry is always giving birth to some very innovative new things.

Fundamentally, blockchain is a technology that transforms production relations, with the goal of reconstructing the current organizational form.

Then, the cyber state can be said to be the ultimate goal, a more grand vision.

Arbitrum has clearly set a digital sovereign state as its vision, which can be said to be an extremely bold attempt.

These regional and phased experiments will ultimately bring about a breakthrough from quantitative change to qualitative change.