Blockchains as “Places”: Metaverse, Network States, Digital IDs and E-Governance
“Blockchain isn’t just decentralizing money. It’s decentralizing governments.”
“Blockchain isn’t just decentralizing money. It’s decentralizing governments.”
“Blockchain isn’t just decentralizing money. It’s decentralizing governments.”
Introduction
Blockchain technology is reshaping how governments and nations deliver public services. By enabling decentralized, transparent and immutable transactions, Bitcoin-inspired systems are streamlining identity verification, welfare distribution, and digital payments; ensuring citizens receive services instantly and without bureaucratic friction.
The technology is seeing innovations to comply with data and privacy regulations set by governments and policymakers. Countries are making necessary tweaks in their own regulatory framework to make blockchain-based technologies mainstream. While governments realize how blockchain technology can redefine governance standards, a new idea has emerged of a Network State; a borderless nationhood built on blockchain and metaverse.
Beyond Transactions: The Broader Vision of Blockchain
Blockchain technology is evolving beyond financial applications, transforming into complete ecosystems that integrate identity, governance and digital economies. Countries like South Korea and the Island of Palau are investing heavily in blockchain to create virtual spaces for citizenship and public services. These spaces can function separately from traditional government structures.
South Korea is re-imagining residency and citizenship identity with blockchain technology. Starting from December 27, it implemented a digital ID infrastructure using blockchain. The new digital identification system is available to South Koreans aged 17 and older, who hold resident registration cards.
Data privacy concerns? The decentralized identity (DID) systems in a blockchain network, allows users and entities to identify and authenticate themselves without a centralized authority.
The tiny island nation of Palau has launched a digital residency programme for foreign nationals. After the application is approved, a digital resident ID card in the form of a non-fungible token (NFT) is issued.
Digital IDs can play a significant role in delivery of government services.
A World Bank report observed that lack of official identification (ID) prevents people from fully exercising their rights and isolates them socially and economically. “Yet in the developing world, nearly 2 billion people lack an official ID. The problem imposes a particular burden on poor rural women, whose lack of an ID often nullifies their legal right to divorce or exert property claims or directly receive government benefits. The expansion of digital mobile phone technology in developing countries has accelerated the emergence of digital identification and the electronic delivery of services.”
Network States, Metaverse & Digital Citizenship
A Network State is this utopian idea of creating a digital nation that is "ideologically aligned, but geographically decentralized. The people are spread around the world in clusters of varying size, but their hearts are in one place".
Dr. Balaji Srinivasan expounds on the idea in his book "The Network State".
A Network State begins as a community with a shared purpose, evolving into a network union that takes collective actions in community’s interest. It builds trust offline through in-person meetups, while building an economy online with the use of cryptocurrency.
Once trust and funds grow, the community crowdfunds physical spaces and transitions its digital citizens into real-world communities.
These physical nodes are then linked into a network archipelago spread across geographies, accessible via web3 crypto passports. Mixed reality - metaverse and physical spaces - seamlessly links online and offline worlds of the Network State.
As the society scales, it conducts an on-chain, auditable census to showcase its population, income, and real estate footprint. With sufficient traction, it seeks diplomatic recognition, progressing towards sovereignty as a true Network State.
The rules of governance and laws will apply not only in the virtual metaverses of the Network State, but also in the community-managed physical spaces. These will be consensus-based laws that have evolved after the organic formation of the community.
The legal framework will encourage self-governance. Citizens will be able to decide if they wish to opt-in when changes are proposed in policies.
As The Network State puts it, the user has “consented to be governed by a startup society if he has signed a social smart contract that gives a system administrator limited privileges over that user’s digital life in return for admission to the startup society”. The government’s reach in the citizen’s life will be limited by a social smart contract.
Network States will allow citizens to even run their own policy experiments with other opt-in participants.
Here is a glimpse of how the metaverse and physical world of Network State can be governed on blockchain systems. The ENS (Ethereum Name Service) protocol acts as a digital identity, allowing users to log into startup societies, access digital and physical spaces, and thereby opt-in the community’s governance rules in those spaces. Kleros, a decentralized justice protocol, can facilitate disputes resolution. If someone is found to be in violation, their deposits could be frozen and their ENS locked out of all doors for a time period as a punishment.
An integrated cryptocurrency acts as the digital ledger of all the financial and non-financial transactions in the Network State. “This is the digital backbone of the network state. It manages the internal digital assets, the smart contracts, the web3 citizen logins, the birth and marriage certificates, the property registries, the public national statistics, and essentially every other bureaucratic process that a nation state manages via pieces of paper. Because it’s protected by encryption, it can coordinate all the functions of a state across the borders of legacy nation states,” Srinivasan explains.
KYC And GDPR Compliance
Immutability and transparency of the data enabled by blockchain technology allows any member institution to prove to regulators that the secure blockchain platform provides trustworthy information. A blockchain KYC utility would not remove the need for financial institutions to perform screening and monitoring of customers. Instead, it provides a streamlined way to gain swift and secure access to clean, up-to-date customer data. The result is a reduction in labor-intensive information gathering, overall KYC processing time, and associated costs.
A blockchain KYC utility could also offer regulators a better understanding of how customers have been onboarded and the application of underlying KYC information. This would, in turn, enable regulators to better understand customer activity. All actions by financial institutions and customers would be fully recorded and tracked, while activity data on the platform would be fully auditable.
Customers may understandably have privacy concerns about sharing of their personal and financial data. Here, blockchain offers another advantage, with certain models giving customers the power to approve which organizations have access to their information, and when. Digital integration could make the approval process simple, such as pushing a permission request with a one-time password (OTP) to the customer’s phone for approval. Other solutions could be integration of smart digital signatures or using biometrics.
One of the biggest concerns of GDPR’s impact on blockchain, is that the immutability of recorded transactions violates GDPR’s “right to be forgotten.” Article 17(1) of GDPR clearly provides that a data subject has the “right to be forgotten” by demanding the erasure of his/her personal data upon the withdrawal of consent, or upon his or her objections to the processing. However, Article 17(1)(b) and (3) recognizes that the data subject’ “right to be forgotten” can be overridden by the controller’s legal or legitimate grounds to process the personal data, or for compliance with a legal obligation. In the context of blockchain, it is easy to imagine a scenario where an individual’s right to be forgotten is overridden by the legitimate interest of the owners or operators of blockchain to comply with legal obligations.
Take for instance, in the financial context, financial institutions have to comply with KYC rule and must keep records of such transactions, including the personal data of the parties involved in the transaction.
While popular cryptocurrencies, such as Bitcoin, use public blockchains, businesses and industries are developing private or permissioned blockchains. The key difference between a public and private blockchain is that in a public blockchain, there is no central authority and anyone can view the information contained in the digital ledger; whereas in a private blockchain, a central authority oversees who has access and how the data is distributed and stored. Creation or adoption of private blockchains will allow companies to account for, and ensure compliance with, GDPR.
Another feature that could be useful for blockchain in the context of GDPR compliance, is the concept of “off-chain storage” of personal data. Instead of uploading an individual’s personal data onto the digital ledger, personal data can simply be maintained off the blockchain in a central location with only a hash of the personal data recorded on the ledger. Upon request, the personal data stored off the chain can simply be deleted, rendering the hash key useless.
Finally, another solution around the immutability of blockchain is to utilize smart contracts. Smart contracts are self-executing contracts with the terms of the agreement between the parties written into the code and are automatically triggered by the occurrence of a condition or event. Smart contracts can be written in a way that revokes all access rights and/or deletes the contents after a set period of time, rendering the personal data inaccessible.
E-Governance and Public Services
Countries and governments are realizing how blockchain technology can enhance the quality of public service for its citizens.
The East European nation of Estonia is an interesting case-study. It has not stopped at one or two sectors, but is using blockchain technology across sectors to provide its citizens seamless and immediate access to public services.
Through the e-Estonia initiative, the country has integrated essential services—such as healthcare, education, banking, and taxes—into a unified digital ecosystem. Citizens can perform everyday tasks like voting, signing documents, and accessing medical records online with the help of a secure digital ID.
A key aspect of Estonia’s digital success is the "once only" principle, which ensures that citizens never have to enter the same piece of information twice across government services. Data is securely shared between different agencies, allowing processes like tax filing to be completed in minutes. With the help of the government’s X-Road platform, data is encrypted and decentralized, reducing the risk of breaches while ensuring transparency. Citizens also have full control over their personal data, with the ability to monitor who accesses their information, thereby preventing unauthorized use.
In December 2024, Estonia even made a complex and stressful process like divorce; an entirely digital service with the help of blockchain technology.
Couples can file for divorce by submitting applications digitally, access pre-filled forms, and finalize their divorce. The service includes a mandatory 30-day reflection period, ensuring thoughtful decision-making. It also provides tools for dividing marital property and guidance for families dealing with custody agreements.
One of Estonia’s most innovative programs is its e-Residency initiative, launched in 2014. This programme allows non-Estonians to establish and manage businesses remotely within the European Union. E-residents receive a digital ID that enables them to access banking services, sign contracts electronically, and even pay taxes in Estonia without ever setting foot in the country. This initiative has attracted thousands of entrepreneurs, particularly those in tech and e-commerce, making Estonia an international hub for digital business.
Unlike traditional residency applications, which can take months or even years, e-Residency applications are processed within a few weeks.
More governments are starting to adopt blockchain. China’s Guangdong province has launched a blockchain-based financing platform to help small companies get quicker loan financing from banks. In 2016, Georgia built a land registry system based on blockchain, becoming the first country to do so. After successful implementation Georgia, more countries are adopting blockchain for their land registries. Sweden has also done the same for its land registry. The Netherlands is using a blockchain-based infrastructure for its pension program, which has reduced its management costs. The Maltese government has used the Blockcerts standard to implement a system whereby its Ministry for Education and Employment can verify any academic credential using blockchain.
PwC economists expect blockchain to boost global GDP by US$1.76 trillion by 2030 as the technology sees wider use-cases across industries and public and private sector.
According to Mckinsey, a lot of the initial economic value will be generated just by bringing in more efficiencies in the systems. “Blockchain might have the disruptive potential to be the basis of new operating models, but its initial impact will be to drive operational efficiencies,” a Mckinsey report pointed out.
To implement blockchain at scale, more work is needed. Governments, along with the private sector, need to build common standards. The true power of blockchain is in its network effect, which can be harnessed when there is interoperability and not “multiple siloed blockchain”. As more governments and businesses realize blockchain’s potential, we will see more solutions and innovations to make blockchain more mainstream.
Blockchain, Fiat Money and the Rise of Network States
The Austrian School of Economics has long argued that sound money—free from government manipulation—is crucial for economic stability and individual freedom. Yet, over the past decades, central banks have embraced quantitative easing as a permanent tool, injecting massive amounts of liquidity into the system and weakening trust in fiat currencies. This constant expansion of the money supply has fueled inflation, widened wealth gaps and made traditional monetary systems increasingly fragile.
Blockchain-based digital currencies, particularly Bitcoin, offer an alternative aligned with these principles—a decentralized, non-inflationary monetary system governed by fixed supply rules rather than political agendas. This shift isn’t just financial, it’s about governance and society as a whole. As fiat money becomes more unstable, the concept of the Network State gains traction. These emerging digital nations rely on self-sovereign digital identities, smart contracts and decentralized finance to operate outside the reach of traditional nation-states and their monetary policies.
In this new paradigm, citizenship is no longer linked to geography but to economic and ideological alignment. Just as fiat-based economies function on central bank policies, Network States could operate on crypto-native economies, where governance, social contracts and even public services are executed through decentralized mechanisms. As people lose faith in legacy institutions, blockchain isn’t just reshaping money—it’s redefining governance, identity and the very concept of nationhood.
About the Author
Dan is the Managing Partner for LATAM & Middle East at Multipolitan. He also serves on Multipolitan’s Government Advisory Team, specializing in consulting governments in LATAM on sovereign innovation strategies. With over two decades of experience in finance and strategic roles at leading institutions such as JP Morgan and Goldman Sachs, Dan has an exceptional track record in building high-performing teams, scaling businesses, and guiding ultra-high-net-worth individuals through sophisticated investment solutions.
Introduction
Blockchain technology is reshaping how governments and nations deliver public services. By enabling decentralized, transparent and immutable transactions, Bitcoin-inspired systems are streamlining identity verification, welfare distribution, and digital payments; ensuring citizens receive services instantly and without bureaucratic friction.
The technology is seeing innovations to comply with data and privacy regulations set by governments and policymakers. Countries are making necessary tweaks in their own regulatory framework to make blockchain-based technologies mainstream. While governments realize how blockchain technology can redefine governance standards, a new idea has emerged of a Network State; a borderless nationhood built on blockchain and metaverse.
Beyond Transactions: The Broader Vision of Blockchain
Blockchain technology is evolving beyond financial applications, transforming into complete ecosystems that integrate identity, governance and digital economies. Countries like South Korea and the Island of Palau are investing heavily in blockchain to create virtual spaces for citizenship and public services. These spaces can function separately from traditional government structures.
South Korea is re-imagining residency and citizenship identity with blockchain technology. Starting from December 27, it implemented a digital ID infrastructure using blockchain. The new digital identification system is available to South Koreans aged 17 and older, who hold resident registration cards.
Data privacy concerns? The decentralized identity (DID) systems in a blockchain network, allows users and entities to identify and authenticate themselves without a centralized authority.
The tiny island nation of Palau has launched a digital residency programme for foreign nationals. After the application is approved, a digital resident ID card in the form of a non-fungible token (NFT) is issued.
Digital IDs can play a significant role in delivery of government services.
A World Bank report observed that lack of official identification (ID) prevents people from fully exercising their rights and isolates them socially and economically. “Yet in the developing world, nearly 2 billion people lack an official ID. The problem imposes a particular burden on poor rural women, whose lack of an ID often nullifies their legal right to divorce or exert property claims or directly receive government benefits. The expansion of digital mobile phone technology in developing countries has accelerated the emergence of digital identification and the electronic delivery of services.”
Network States, Metaverse & Digital Citizenship
A Network State is this utopian idea of creating a digital nation that is "ideologically aligned, but geographically decentralized. The people are spread around the world in clusters of varying size, but their hearts are in one place".
Dr. Balaji Srinivasan expounds on the idea in his book "The Network State".
A Network State begins as a community with a shared purpose, evolving into a network union that takes collective actions in community’s interest. It builds trust offline through in-person meetups, while building an economy online with the use of cryptocurrency.
Once trust and funds grow, the community crowdfunds physical spaces and transitions its digital citizens into real-world communities.
These physical nodes are then linked into a network archipelago spread across geographies, accessible via web3 crypto passports. Mixed reality - metaverse and physical spaces - seamlessly links online and offline worlds of the Network State.
As the society scales, it conducts an on-chain, auditable census to showcase its population, income, and real estate footprint. With sufficient traction, it seeks diplomatic recognition, progressing towards sovereignty as a true Network State.
The rules of governance and laws will apply not only in the virtual metaverses of the Network State, but also in the community-managed physical spaces. These will be consensus-based laws that have evolved after the organic formation of the community.
The legal framework will encourage self-governance. Citizens will be able to decide if they wish to opt-in when changes are proposed in policies.
As The Network State puts it, the user has “consented to be governed by a startup society if he has signed a social smart contract that gives a system administrator limited privileges over that user’s digital life in return for admission to the startup society”. The government’s reach in the citizen’s life will be limited by a social smart contract.
Network States will allow citizens to even run their own policy experiments with other opt-in participants.
Here is a glimpse of how the metaverse and physical world of Network State can be governed on blockchain systems. The ENS (Ethereum Name Service) protocol acts as a digital identity, allowing users to log into startup societies, access digital and physical spaces, and thereby opt-in the community’s governance rules in those spaces. Kleros, a decentralized justice protocol, can facilitate disputes resolution. If someone is found to be in violation, their deposits could be frozen and their ENS locked out of all doors for a time period as a punishment.
An integrated cryptocurrency acts as the digital ledger of all the financial and non-financial transactions in the Network State. “This is the digital backbone of the network state. It manages the internal digital assets, the smart contracts, the web3 citizen logins, the birth and marriage certificates, the property registries, the public national statistics, and essentially every other bureaucratic process that a nation state manages via pieces of paper. Because it’s protected by encryption, it can coordinate all the functions of a state across the borders of legacy nation states,” Srinivasan explains.
KYC And GDPR Compliance
Immutability and transparency of the data enabled by blockchain technology allows any member institution to prove to regulators that the secure blockchain platform provides trustworthy information. A blockchain KYC utility would not remove the need for financial institutions to perform screening and monitoring of customers. Instead, it provides a streamlined way to gain swift and secure access to clean, up-to-date customer data. The result is a reduction in labor-intensive information gathering, overall KYC processing time, and associated costs.
A blockchain KYC utility could also offer regulators a better understanding of how customers have been onboarded and the application of underlying KYC information. This would, in turn, enable regulators to better understand customer activity. All actions by financial institutions and customers would be fully recorded and tracked, while activity data on the platform would be fully auditable.
Customers may understandably have privacy concerns about sharing of their personal and financial data. Here, blockchain offers another advantage, with certain models giving customers the power to approve which organizations have access to their information, and when. Digital integration could make the approval process simple, such as pushing a permission request with a one-time password (OTP) to the customer’s phone for approval. Other solutions could be integration of smart digital signatures or using biometrics.
One of the biggest concerns of GDPR’s impact on blockchain, is that the immutability of recorded transactions violates GDPR’s “right to be forgotten.” Article 17(1) of GDPR clearly provides that a data subject has the “right to be forgotten” by demanding the erasure of his/her personal data upon the withdrawal of consent, or upon his or her objections to the processing. However, Article 17(1)(b) and (3) recognizes that the data subject’ “right to be forgotten” can be overridden by the controller’s legal or legitimate grounds to process the personal data, or for compliance with a legal obligation. In the context of blockchain, it is easy to imagine a scenario where an individual’s right to be forgotten is overridden by the legitimate interest of the owners or operators of blockchain to comply with legal obligations.
Take for instance, in the financial context, financial institutions have to comply with KYC rule and must keep records of such transactions, including the personal data of the parties involved in the transaction.
While popular cryptocurrencies, such as Bitcoin, use public blockchains, businesses and industries are developing private or permissioned blockchains. The key difference between a public and private blockchain is that in a public blockchain, there is no central authority and anyone can view the information contained in the digital ledger; whereas in a private blockchain, a central authority oversees who has access and how the data is distributed and stored. Creation or adoption of private blockchains will allow companies to account for, and ensure compliance with, GDPR.
Another feature that could be useful for blockchain in the context of GDPR compliance, is the concept of “off-chain storage” of personal data. Instead of uploading an individual’s personal data onto the digital ledger, personal data can simply be maintained off the blockchain in a central location with only a hash of the personal data recorded on the ledger. Upon request, the personal data stored off the chain can simply be deleted, rendering the hash key useless.
Finally, another solution around the immutability of blockchain is to utilize smart contracts. Smart contracts are self-executing contracts with the terms of the agreement between the parties written into the code and are automatically triggered by the occurrence of a condition or event. Smart contracts can be written in a way that revokes all access rights and/or deletes the contents after a set period of time, rendering the personal data inaccessible.
E-Governance and Public Services
Countries and governments are realizing how blockchain technology can enhance the quality of public service for its citizens.
The East European nation of Estonia is an interesting case-study. It has not stopped at one or two sectors, but is using blockchain technology across sectors to provide its citizens seamless and immediate access to public services.
Through the e-Estonia initiative, the country has integrated essential services—such as healthcare, education, banking, and taxes—into a unified digital ecosystem. Citizens can perform everyday tasks like voting, signing documents, and accessing medical records online with the help of a secure digital ID.
A key aspect of Estonia’s digital success is the "once only" principle, which ensures that citizens never have to enter the same piece of information twice across government services. Data is securely shared between different agencies, allowing processes like tax filing to be completed in minutes. With the help of the government’s X-Road platform, data is encrypted and decentralized, reducing the risk of breaches while ensuring transparency. Citizens also have full control over their personal data, with the ability to monitor who accesses their information, thereby preventing unauthorized use.
In December 2024, Estonia even made a complex and stressful process like divorce; an entirely digital service with the help of blockchain technology.
Couples can file for divorce by submitting applications digitally, access pre-filled forms, and finalize their divorce. The service includes a mandatory 30-day reflection period, ensuring thoughtful decision-making. It also provides tools for dividing marital property and guidance for families dealing with custody agreements.
One of Estonia’s most innovative programs is its e-Residency initiative, launched in 2014. This programme allows non-Estonians to establish and manage businesses remotely within the European Union. E-residents receive a digital ID that enables them to access banking services, sign contracts electronically, and even pay taxes in Estonia without ever setting foot in the country. This initiative has attracted thousands of entrepreneurs, particularly those in tech and e-commerce, making Estonia an international hub for digital business.
Unlike traditional residency applications, which can take months or even years, e-Residency applications are processed within a few weeks.
More governments are starting to adopt blockchain. China’s Guangdong province has launched a blockchain-based financing platform to help small companies get quicker loan financing from banks. In 2016, Georgia built a land registry system based on blockchain, becoming the first country to do so. After successful implementation Georgia, more countries are adopting blockchain for their land registries. Sweden has also done the same for its land registry. The Netherlands is using a blockchain-based infrastructure for its pension program, which has reduced its management costs. The Maltese government has used the Blockcerts standard to implement a system whereby its Ministry for Education and Employment can verify any academic credential using blockchain.
PwC economists expect blockchain to boost global GDP by US$1.76 trillion by 2030 as the technology sees wider use-cases across industries and public and private sector.
According to Mckinsey, a lot of the initial economic value will be generated just by bringing in more efficiencies in the systems. “Blockchain might have the disruptive potential to be the basis of new operating models, but its initial impact will be to drive operational efficiencies,” a Mckinsey report pointed out.
To implement blockchain at scale, more work is needed. Governments, along with the private sector, need to build common standards. The true power of blockchain is in its network effect, which can be harnessed when there is interoperability and not “multiple siloed blockchain”. As more governments and businesses realize blockchain’s potential, we will see more solutions and innovations to make blockchain more mainstream.
Blockchain, Fiat Money and the Rise of Network States
The Austrian School of Economics has long argued that sound money—free from government manipulation—is crucial for economic stability and individual freedom. Yet, over the past decades, central banks have embraced quantitative easing as a permanent tool, injecting massive amounts of liquidity into the system and weakening trust in fiat currencies. This constant expansion of the money supply has fueled inflation, widened wealth gaps and made traditional monetary systems increasingly fragile.
Blockchain-based digital currencies, particularly Bitcoin, offer an alternative aligned with these principles—a decentralized, non-inflationary monetary system governed by fixed supply rules rather than political agendas. This shift isn’t just financial, it’s about governance and society as a whole. As fiat money becomes more unstable, the concept of the Network State gains traction. These emerging digital nations rely on self-sovereign digital identities, smart contracts and decentralized finance to operate outside the reach of traditional nation-states and their monetary policies.
In this new paradigm, citizenship is no longer linked to geography but to economic and ideological alignment. Just as fiat-based economies function on central bank policies, Network States could operate on crypto-native economies, where governance, social contracts and even public services are executed through decentralized mechanisms. As people lose faith in legacy institutions, blockchain isn’t just reshaping money—it’s redefining governance, identity and the very concept of nationhood.
About the Author
Dan is the Managing Partner for LATAM & Middle East at Multipolitan. He also serves on Multipolitan’s Government Advisory Team, specializing in consulting governments in LATAM on sovereign innovation strategies. With over two decades of experience in finance and strategic roles at leading institutions such as JP Morgan and Goldman Sachs, Dan has an exceptional track record in building high-performing teams, scaling businesses, and guiding ultra-high-net-worth individuals through sophisticated investment solutions.
Introduction
Blockchain technology is reshaping how governments and nations deliver public services. By enabling decentralized, transparent and immutable transactions, Bitcoin-inspired systems are streamlining identity verification, welfare distribution, and digital payments; ensuring citizens receive services instantly and without bureaucratic friction.
The technology is seeing innovations to comply with data and privacy regulations set by governments and policymakers. Countries are making necessary tweaks in their own regulatory framework to make blockchain-based technologies mainstream. While governments realize how blockchain technology can redefine governance standards, a new idea has emerged of a Network State; a borderless nationhood built on blockchain and metaverse.
Beyond Transactions: The Broader Vision of Blockchain
Blockchain technology is evolving beyond financial applications, transforming into complete ecosystems that integrate identity, governance and digital economies. Countries like South Korea and the Island of Palau are investing heavily in blockchain to create virtual spaces for citizenship and public services. These spaces can function separately from traditional government structures.
South Korea is re-imagining residency and citizenship identity with blockchain technology. Starting from December 27, it implemented a digital ID infrastructure using blockchain. The new digital identification system is available to South Koreans aged 17 and older, who hold resident registration cards.
Data privacy concerns? The decentralized identity (DID) systems in a blockchain network, allows users and entities to identify and authenticate themselves without a centralized authority.
The tiny island nation of Palau has launched a digital residency programme for foreign nationals. After the application is approved, a digital resident ID card in the form of a non-fungible token (NFT) is issued.
Digital IDs can play a significant role in delivery of government services.
A World Bank report observed that lack of official identification (ID) prevents people from fully exercising their rights and isolates them socially and economically. “Yet in the developing world, nearly 2 billion people lack an official ID. The problem imposes a particular burden on poor rural women, whose lack of an ID often nullifies their legal right to divorce or exert property claims or directly receive government benefits. The expansion of digital mobile phone technology in developing countries has accelerated the emergence of digital identification and the electronic delivery of services.”
Network States, Metaverse & Digital Citizenship
A Network State is this utopian idea of creating a digital nation that is "ideologically aligned, but geographically decentralized. The people are spread around the world in clusters of varying size, but their hearts are in one place".
Dr. Balaji Srinivasan expounds on the idea in his book "The Network State".
A Network State begins as a community with a shared purpose, evolving into a network union that takes collective actions in community’s interest. It builds trust offline through in-person meetups, while building an economy online with the use of cryptocurrency.
Once trust and funds grow, the community crowdfunds physical spaces and transitions its digital citizens into real-world communities.
These physical nodes are then linked into a network archipelago spread across geographies, accessible via web3 crypto passports. Mixed reality - metaverse and physical spaces - seamlessly links online and offline worlds of the Network State.
As the society scales, it conducts an on-chain, auditable census to showcase its population, income, and real estate footprint. With sufficient traction, it seeks diplomatic recognition, progressing towards sovereignty as a true Network State.
The rules of governance and laws will apply not only in the virtual metaverses of the Network State, but also in the community-managed physical spaces. These will be consensus-based laws that have evolved after the organic formation of the community.
The legal framework will encourage self-governance. Citizens will be able to decide if they wish to opt-in when changes are proposed in policies.
As The Network State puts it, the user has “consented to be governed by a startup society if he has signed a social smart contract that gives a system administrator limited privileges over that user’s digital life in return for admission to the startup society”. The government’s reach in the citizen’s life will be limited by a social smart contract.
Network States will allow citizens to even run their own policy experiments with other opt-in participants.
Here is a glimpse of how the metaverse and physical world of Network State can be governed on blockchain systems. The ENS (Ethereum Name Service) protocol acts as a digital identity, allowing users to log into startup societies, access digital and physical spaces, and thereby opt-in the community’s governance rules in those spaces. Kleros, a decentralized justice protocol, can facilitate disputes resolution. If someone is found to be in violation, their deposits could be frozen and their ENS locked out of all doors for a time period as a punishment.
An integrated cryptocurrency acts as the digital ledger of all the financial and non-financial transactions in the Network State. “This is the digital backbone of the network state. It manages the internal digital assets, the smart contracts, the web3 citizen logins, the birth and marriage certificates, the property registries, the public national statistics, and essentially every other bureaucratic process that a nation state manages via pieces of paper. Because it’s protected by encryption, it can coordinate all the functions of a state across the borders of legacy nation states,” Srinivasan explains.
KYC And GDPR Compliance
Immutability and transparency of the data enabled by blockchain technology allows any member institution to prove to regulators that the secure blockchain platform provides trustworthy information. A blockchain KYC utility would not remove the need for financial institutions to perform screening and monitoring of customers. Instead, it provides a streamlined way to gain swift and secure access to clean, up-to-date customer data. The result is a reduction in labor-intensive information gathering, overall KYC processing time, and associated costs.
A blockchain KYC utility could also offer regulators a better understanding of how customers have been onboarded and the application of underlying KYC information. This would, in turn, enable regulators to better understand customer activity. All actions by financial institutions and customers would be fully recorded and tracked, while activity data on the platform would be fully auditable.
Customers may understandably have privacy concerns about sharing of their personal and financial data. Here, blockchain offers another advantage, with certain models giving customers the power to approve which organizations have access to their information, and when. Digital integration could make the approval process simple, such as pushing a permission request with a one-time password (OTP) to the customer’s phone for approval. Other solutions could be integration of smart digital signatures or using biometrics.
One of the biggest concerns of GDPR’s impact on blockchain, is that the immutability of recorded transactions violates GDPR’s “right to be forgotten.” Article 17(1) of GDPR clearly provides that a data subject has the “right to be forgotten” by demanding the erasure of his/her personal data upon the withdrawal of consent, or upon his or her objections to the processing. However, Article 17(1)(b) and (3) recognizes that the data subject’ “right to be forgotten” can be overridden by the controller’s legal or legitimate grounds to process the personal data, or for compliance with a legal obligation. In the context of blockchain, it is easy to imagine a scenario where an individual’s right to be forgotten is overridden by the legitimate interest of the owners or operators of blockchain to comply with legal obligations.
Take for instance, in the financial context, financial institutions have to comply with KYC rule and must keep records of such transactions, including the personal data of the parties involved in the transaction.
While popular cryptocurrencies, such as Bitcoin, use public blockchains, businesses and industries are developing private or permissioned blockchains. The key difference between a public and private blockchain is that in a public blockchain, there is no central authority and anyone can view the information contained in the digital ledger; whereas in a private blockchain, a central authority oversees who has access and how the data is distributed and stored. Creation or adoption of private blockchains will allow companies to account for, and ensure compliance with, GDPR.
Another feature that could be useful for blockchain in the context of GDPR compliance, is the concept of “off-chain storage” of personal data. Instead of uploading an individual’s personal data onto the digital ledger, personal data can simply be maintained off the blockchain in a central location with only a hash of the personal data recorded on the ledger. Upon request, the personal data stored off the chain can simply be deleted, rendering the hash key useless.
Finally, another solution around the immutability of blockchain is to utilize smart contracts. Smart contracts are self-executing contracts with the terms of the agreement between the parties written into the code and are automatically triggered by the occurrence of a condition or event. Smart contracts can be written in a way that revokes all access rights and/or deletes the contents after a set period of time, rendering the personal data inaccessible.
E-Governance and Public Services
Countries and governments are realizing how blockchain technology can enhance the quality of public service for its citizens.
The East European nation of Estonia is an interesting case-study. It has not stopped at one or two sectors, but is using blockchain technology across sectors to provide its citizens seamless and immediate access to public services.
Through the e-Estonia initiative, the country has integrated essential services—such as healthcare, education, banking, and taxes—into a unified digital ecosystem. Citizens can perform everyday tasks like voting, signing documents, and accessing medical records online with the help of a secure digital ID.
A key aspect of Estonia’s digital success is the "once only" principle, which ensures that citizens never have to enter the same piece of information twice across government services. Data is securely shared between different agencies, allowing processes like tax filing to be completed in minutes. With the help of the government’s X-Road platform, data is encrypted and decentralized, reducing the risk of breaches while ensuring transparency. Citizens also have full control over their personal data, with the ability to monitor who accesses their information, thereby preventing unauthorized use.
In December 2024, Estonia even made a complex and stressful process like divorce; an entirely digital service with the help of blockchain technology.
Couples can file for divorce by submitting applications digitally, access pre-filled forms, and finalize their divorce. The service includes a mandatory 30-day reflection period, ensuring thoughtful decision-making. It also provides tools for dividing marital property and guidance for families dealing with custody agreements.
One of Estonia’s most innovative programs is its e-Residency initiative, launched in 2014. This programme allows non-Estonians to establish and manage businesses remotely within the European Union. E-residents receive a digital ID that enables them to access banking services, sign contracts electronically, and even pay taxes in Estonia without ever setting foot in the country. This initiative has attracted thousands of entrepreneurs, particularly those in tech and e-commerce, making Estonia an international hub for digital business.
Unlike traditional residency applications, which can take months or even years, e-Residency applications are processed within a few weeks.
More governments are starting to adopt blockchain. China’s Guangdong province has launched a blockchain-based financing platform to help small companies get quicker loan financing from banks. In 2016, Georgia built a land registry system based on blockchain, becoming the first country to do so. After successful implementation Georgia, more countries are adopting blockchain for their land registries. Sweden has also done the same for its land registry. The Netherlands is using a blockchain-based infrastructure for its pension program, which has reduced its management costs. The Maltese government has used the Blockcerts standard to implement a system whereby its Ministry for Education and Employment can verify any academic credential using blockchain.
PwC economists expect blockchain to boost global GDP by US$1.76 trillion by 2030 as the technology sees wider use-cases across industries and public and private sector.
According to Mckinsey, a lot of the initial economic value will be generated just by bringing in more efficiencies in the systems. “Blockchain might have the disruptive potential to be the basis of new operating models, but its initial impact will be to drive operational efficiencies,” a Mckinsey report pointed out.
To implement blockchain at scale, more work is needed. Governments, along with the private sector, need to build common standards. The true power of blockchain is in its network effect, which can be harnessed when there is interoperability and not “multiple siloed blockchain”. As more governments and businesses realize blockchain’s potential, we will see more solutions and innovations to make blockchain more mainstream.
Blockchain, Fiat Money and the Rise of Network States
The Austrian School of Economics has long argued that sound money—free from government manipulation—is crucial for economic stability and individual freedom. Yet, over the past decades, central banks have embraced quantitative easing as a permanent tool, injecting massive amounts of liquidity into the system and weakening trust in fiat currencies. This constant expansion of the money supply has fueled inflation, widened wealth gaps and made traditional monetary systems increasingly fragile.
Blockchain-based digital currencies, particularly Bitcoin, offer an alternative aligned with these principles—a decentralized, non-inflationary monetary system governed by fixed supply rules rather than political agendas. This shift isn’t just financial, it’s about governance and society as a whole. As fiat money becomes more unstable, the concept of the Network State gains traction. These emerging digital nations rely on self-sovereign digital identities, smart contracts and decentralized finance to operate outside the reach of traditional nation-states and their monetary policies.
In this new paradigm, citizenship is no longer linked to geography but to economic and ideological alignment. Just as fiat-based economies function on central bank policies, Network States could operate on crypto-native economies, where governance, social contracts and even public services are executed through decentralized mechanisms. As people lose faith in legacy institutions, blockchain isn’t just reshaping money—it’s redefining governance, identity and the very concept of nationhood.
About the Author
Dan is the Managing Partner for LATAM & Middle East at Multipolitan. He also serves on Multipolitan’s Government Advisory Team, specializing in consulting governments in LATAM on sovereign innovation strategies. With over two decades of experience in finance and strategic roles at leading institutions such as JP Morgan and Goldman Sachs, Dan has an exceptional track record in building high-performing teams, scaling businesses, and guiding ultra-high-net-worth individuals through sophisticated investment solutions.
Get Exclusive Access
To The Full Report
Something else?
.png)
Multipolitan Crypto Report
The Future Is Onchain
Explore how global trends are shaping crypto wealth strategies for investors.
Commentaries