---

Securing Digital Rights for Communities (Game Theory and Governance of Scalable Blockchains for Use in Digital Network States)

Chapter 21. Importance of Decentralised, Immutable Communities as Network States

Now Network States can Form

21.1 Defining Network States

A Network State is a globally distributed community that manages its own governance, has an internal economy, and cannot be easily shut down or censored by external forces. The idea is often associated with the concept of online nations that develop real world influence. Some may eventually purchase or acquire land and function with true sovereignty and a real world economy complete with trade deals and international agreements with other states. Achieving this requires:

• Immutable ledger and governance: A censorship-resistant blockchain or data layer upon which the community operates in the digital realm.
• Decentralised ownership: No single entity should control the chain, avoiding pre-mines, ICO's, or foundations.
• Sustainable economy: The community must be able to create and maintain its own token, Incentivizing contributions and causing buy demand for some sort of utility that increases proportionately to scaling, network effect and competition for demand for resources to interact with the communities base layer (as with the Resource Credit model described in previous chapters, See Chapter 7 – “Sustainable Economy & Decentralised Coin Distribution” for further information on creating sustainable economies with resource credit systems).

Unlike typical blockchain projects with ICO's or heavy centralisation, genuinely decentralised Network States distribute tokens fairly, making it impossible for any single party to dominate. This fosters a robust, self-sustaining digital community.

21.2 Power of Self-Sovereign Communities

When a community reaches critical mass, it can self-organize to:

• Communicate and collaborate without top-down control on an un-censorable text based, decentralised base layer.
• Offer real economic incentives for labour and contributions.
• Print its own token with no reliance on external permission.
• Protect members from censorship, as there is no centralised database to shut down.
• With an algorithmic stable coin on the base layer, the community can carry out trade in and conversion to stable value without needing an external DEX or CEX.

Such communities can become de facto nation states. Traditional governments rely on force or laws to secure currency demand, while these blockchain based communities rely on voluntary adoption and network incentives. Community members hold their stake because they earned it or purchased it off the open market, not because they were ordained it in a pre-mine. If they grow large enough, they can challenge or complement legacy financial and governance systems by making them more efficient and transparent.

21.3 Decentralised Token Distribution on Layer 2

Many Network States will likely form at the "layer 2" level, meaning they build on top of an existing censorship-resistant, neutral base chain. with the following characteristics:

• Fair token distribution: No large pre-mine, no venture capital in the "first ICO round," and no single dominating stakeholder.
• Earning vs. pre-ordained: Members earn tokens through valuable work or content creation, or buy them on the open market - they are not self gifted tokens at low prices in a pre sale or for "funding and development" of the project.
• Self-sustaining model: The token's utility (e.g., voting, access, on chain resource bandwidth access) creates ongoing demand with growth of transactions within the community.

Communities can thus issue tokens without creating a central point of failure. Over time, these tokens govern the community's own rules, curation and distribution mechanisms, and reward pools.

21.4 Sustainable Token Value and Staking Incentives

To foster lasting engagement:

• Voluntary demand: As more people want influence, reputation, or access to blockchain bandwidth, they buy or stake tokens, raising overall liquidity and reinforcing value.
• Layer 2 Resource credit models: Community members will have to stake both the Layer 1 governance token and the Layer 2 community token in order to obtain bandwidth or resources to operate in, post to and vote in the L2 community or Network State. As a network effect takes hold for the community, this will create demand for the token, driving its price up and making the token and community economy sustainable over time.
• Stake for influence: Members stake
  tokens to gain voting power, resource allocation, or other utilities (similar to how base layer staking controls network resources).
• Reward for participation: A daily rewards pool funded by newly minted tokens or other reward mechanisms ensure contributors receive tokens.

All of the above turns each community into its own mini economy, encouraging long term commitment rather than short term profit taking.

21.5 Liquidity Pools for Each Community

Instead of using a centralised exchange that extracts fees and can seize funds, each community maintains its own Layer 2, community specific decentralised liquidity pool for trading. Key benefits:

• Fees return to the community: Rather than paying centralised operators like Binance, trading fees feed back into community development and infrastructure operation.
• Reduced attack vectors: No custodial risk on centralised exchanges so tokens remain community owned.
• Sustainable growth: As liquidity pools deepen, more users participate which creates a virtuous cycle based on increasing liquidity and increasing confidence in the community and its economy.

Over time, these pools can become self sustaining, generating enough fees to fund infrastructure or act as shock absorbers during market downturns, subsidising trusted, but unprofitable infrastructure in times of a down turn in the market.

21.6 Community Self-Regulation of Content and Rewards

Because communities operate socially, they need to manage on-chain discussions and incentives:

• Rewarding quality: Users or apps vote on which posts, projects, or members deserve tokens.
• Downvoting abuse: Undesirable content can be downvoted or flagged, reducing its rewards or visibility.
• Consensus-based rules: The community sets thresholds for removal, tagging (e.g., NSFW), or moderating spam.

No single corporation is in control. Instead, collective rules, stake based voting, and front end policies govern how content is curated.

21.7 Content Gateways and Validators

On certain architectures (like an off-chain video storage layer), validators or gateways can decide which content is acceptable for the community. They are elected or chosen based on stake-weighted votes, so the community's values and nuances ultimately guide what gets through via elected content validators.

21.8 Stake-Weighted Tagging

Members with sufficient stake can force specific tags (e.g., NSFW, political, spoiler) onto content if they reach a voting threshold. This allows flexible, community-driven categorization without needing a central moderator.

21.9 Reward Disputes

If there is disagreement on how many rewards a piece of content deserves, or if someone has gamed the system, the community can downvote or re-allocate rewards. In advanced setups, a "jury" process might review disputes to decide whether to restore or remove tokens, or rally community support to re-upvote content that has been unfairly downvoted.

Conclusion

• Self-Sovereign Network States: Truly decentralised communities form online "nations" that can potentially buy land or exert real influence without centralised leaders or corporate backing.
• Fair Distribution: To remain censorship resistant, avoid pre-mines or ICO allocations. Community staking and fair issuance keep power spread out.
• Sustainable Economies: Internal tokens gain value through utility staked voting power, resource access, and liquidity pools that recycle fees back to the network.
• Self-Governance of Content: Community can set up effective content regulation systems on both Layer 2 Apps and Layer 1 content storage systems in order to prevent content that does not match the values of the community. They key is that one central entity cannot control censorship on chain.