This post is a review/response to this post on 1729.
Introduction
In the essay Voluntary Governments, John Palmer discusses the possibility of a digital government enabled by emerging tech like VR and cryptocurrencies.
Why would this preferable to an analog government? Among other things, Palmer contends that this would accelerate the iteration of policies and enable inter-governmental competition so that the best governments and policies prevail.
One could argue whether or not this is a good thing, and Palmer certainly acknowledges this, but I am intrigued by this idea.
Citizenship = private keys
I am particularly interested in Palmer's notion of a "digital nation state layer", where one's citizenship could be bought and tracked in a public ledger backed by cryptography.
Currently, citizenship by investment schemes already exist for governments that wish to "trade", in some sense, the privileges of owning that country's passport and participating in public social services for cash investments or purchases of real estate within the country. These schemes typically exist for small island countries like Dominica and Vanuatu, where it's presumably harder to attract investment compared to more densely populated and faster-growing countries.
While this already works, it would be a game-changer to implement concepts from authentication like access-control and privileges to enable different degrees of citizenship (i.e. a fine-grained semi-permanent visa system).
Using this digital nation state layer, one could pick and choose and have medical privileges from the country A, education privileges from country B (and so on), and be able to cryptographically prove all of this.
This would certainly make Palmer's point about government iteration speed and competition spot on, as this would allow governments to compete between each other on who can provide the best services.
Not your keys, not your citizenship.
How far can VR go?
Palmer's point about VR was interesting, but I'm skeptical about its usefulness in enabling digital governments.
One could certainly create a sprawling and vibrant virtual city/country (it's already been done to some extent in games like Minecraft, Roblox, VRChat), and one could certainly use this virtual world to test out hypotheses and simulate real-world policies. This virtual world could then certainly be explored in VR.
Sure, these simulations will probably not map very well to reality in the beginning. But I think this is a problem that can be improved upon given enough time and iterations.
At the end of the day, however, people need physical services and there is a limit to what you can deliver through a VR country.
It would be a great addition, however, and will definitely be an offering of the most competitive digital governments.
Persecution, an unfortunate edge-case
A concern I have that was not raised in the post is the edge-case of governmental persecution for individuals that attempt to participate in these digital government schemes. Participation could easily be construed and labeled as unlawful secession by a motivated enough authoritarian government.
Yes, ownership of private keys can certainly be hidden, and one can easily claim that one's digital citizenship was lost in a boating accident. To the agents of authoritarian governments, however, this is hardly a believable claim. Additionally, it only takes a single OPSEC slip up to reveal your hand to the authorities and guarantee a very bad time.
Even if one were to successfully hide the ownership of one's private keys, it seems an order of magnitude more difficult to hide the privileges from those private keys. How would one hide health insurance from country B if it has to be used in a public hospital in country A?
These are not deal-breakers for the implementation of the ideas in the post for governments, but it is certainly something that must be considered.
On software eating currency
At lot has changed since the essay was posted in 2016, but it seems Palmer was at least somewhat right about Option 2. It seems to me that all governments will attempt to create their own digital currency and use force to stamp out competition (whether that be from universal currencies like Bitcoin or smaller currencies at the town or neighborhood level).
Only the future will tell how well this work, and whether it will stop the trend of software eating money and then governments.
Conclusion
I didn't get to touch on all parts of Palmer's essay in this post, but I am deeply interested in the application of cryptocurrency (and cryptography in general) to governments. We've seen the fruits of rapid iteration in startups, and I hope that future governments will trend towards that rather than the glacial speed of progress we've seen historically.