The Network State and the Digital Hansa
Mattereum as a Synthetic Jurisdiction
Recently, I attended the Network State Conference in Amsterdam, as the innovative Mattereum Asset Passport (MAP) created by my company could have an important role to play in a network state future. The fact that MAPs work via the 1958 New York Convention on Arbitration enables them to use the new UK Digital Dispute Resolution Rules (which the Mattereum team helped draft) in 172 jurisdictions worldwide. This means, in effect, they create a synthetic jurisdiction that sits between nation states, resting on international treaties, The Mattereum model can be seen as a new form of network state itself, as well as a convenient legal tool to be used by other network states (or indeed any other individual or entity) for managing trade in physical goods. It could become a “pluggable” legal layer to support other network states, particularly the ones exporting physical goods. If a thing has a price tag, it can be part of this synthetic jurisdiction, irrespective of whether the object is land in Oregon, gold in a vault in Singapore or investment grade whisky in a barrel in Scotland, subject to the same law and the same guarantees. It is a state for physical objects, rather than a state for people, but arguably a state nonetheless. What makes it so is that it has the machinery to resolve legal disputes between people, under the rules that they opt into when they use Mattereum. It’s where your legal problems go to be resolved. Resolving trade disputes is one of the more critical aspects of a state, isn’t it?
The innovative Mattereum Asset Passport created by my company could have an important role to play in a network state future
This is not new to us; while network states are gaining in prominence and importance as their potential becomes clear, Mattereum has been thinking about this kind of thing from the very start. Five years ago, in the early days of our company, I wrote a speculative document about this very thing with two of my colleagues from Mattereum. Until now it has not been published outside the organisation but given its new relevance I thought I would share it. The language does not perhaps use current terminology (e.g. for Free Economic Zones read network states, for smart property register, read MAPs), but I feel the ideas are possibly even more relevant now than they were then.
“Towards a Digital Hansa:
Past Precedents as Inspiration for a Global Confederation of Free Economic Zones By James Hester, Anton Shelupanov, and Vinay Gupta
As Free Economic Zones (FEZs) have emerged and developed, these unique commercial entities have gradually come to share more in common with each other than with the parent nation states in which they are located. It is only natural, then, that a desire would arise to unify their efforts towards common business goals, as for example in the Eurasian belt where the Digital Silk Road initiative seeks to facilitate interaction between FEZs in the region. Since formal unification would be geopolitically disruptive, the goal should be a strong but informal confederation capable of acting on the world stage at state-like levels and capable of facilitating commerce between members. As it happens, there exists a precedent for such a vast and formidable mercantile body in Europe’s past which could provide an inspiring model for how an equivalent organisation could be formed and governed today.
The Hanseatic League, also known as the Hansa (Middle Low German for ‘guild’), was a confederation of trading centres in the Holy Roman Empire which, founded in the 12th century, became the dominant mercantile power in Northern Europe for the next four centuries. Composed primarily of German towns and headquartered in Lübeck, member towns worked to ensure mutual protection of trade and the smooth conduct of commerce between them. They were never formally unified, being towns under the control of the Empire or neighbouring kingdoms including Sweden, Denmark, England, and Kievan Rus. Yet all members adhered to the bonds required of them in the Hanseatic charters, and heads of state learned quickly not to antagonise them lest they risk being cut out of trade (effectively an economic death sentence). They were governed by the consensus of their members, with regular meetings of representatives from each town to decide on pressing issues. They even levied troops and ships from members for mutual protection when necessary, meaning that they were capable of amassing a respectable military presence. So although not a state, they acted with near state-like power and were regarded as such by Europe’s leaders.
When we consider the degree of organisation which was achieved by the Hansa with the technology at their disposal, it is easy to see how a similar institution is not only possible today, but greatly enhanced and facilitated by our current technological innovations. Near-instant communication enables unprecedented efficiency in logistics coordination and maintaining relationships with clients and partners. Containerisation has revolutionised the transport of goods through standardisation and optimal use of space. And now, blockchain technology stands poised to automate elaborate and time-consuming administrative and legal procedures, reducing once exasperating but inevitable aspects of conducting business to previously unthinkable levels of ease and straightforwardness. Not only could we establish such an institution today and reap the resulting commercial benefits, we could do it better than our ancestors ever dreamed.
So what would an equivalent confederation of FEZs, our Digital Hansa, look like? A single strong economic centre (Lübeck) provided the foundation on which the original Hansa was built, with all members consenting to abide by the ‘Law of Lübeck’ in governing their activities. To avoid any one member becoming overly influential, member FEZs could jointly adopt a governance framework of a neutral body such as UNCTAD (United Nations Conference on Trade and Development). They would also agree on a means of achieving consensus on policy and activities, and commit to abide by a single set of standards and regulations. These would apply appropriately across the confederation’s three tiers: individual companies operating in an FEZ, individual FEZs, and the combined global network.
Members would also pledge mutual aid to one another. This aid would take several forms. Parent states would negotiate the necessary economic concessions to enable member FEZs and their component companies to conduct business among themselves in the same manner worldwide. Members would speak with a collective voice in international forums such as the UN, and organise a communal legal defence and hardship funds to be drawn upon by any member in need. It is even possible, after delicate negotiations with each parent state, to organise some form of mutual defence pact whereby member states would contribute somehow to the protection of one another in times of necessity. A useful existing model is the single market and customs union established across members of the European Union. Just as these agreements remove economic barriers and facilitate trade with EU member states, a Digital Hansa would enable unhindered commerce between FEZs regardless of their location on Earth.
The blockchain applications developed by Mattereum are well placed to provide much of the necessary digital infrastructure for a global confederation of Free Economic Zones. The identities of member individuals and companies, the standards adhered to by all tiers of the organisation, and perhaps a complementary industry-standard accreditation such as a D-U-N-S Number, would be recorded on an immutable and accessible digital record. Consequently, external businesses engaging with members would be able to easily verify relevant details and proceed, safe in the knowledge that any company operating within a member FEZ operates under the same established regulations and practices.
The Smart Property Register operated by Mattereum would track and manage assets and resources across the confederation’s three tiers. No matter the asset’s location in the world, while in custody of a member, clients could rest assured that its storage and transport would be managed with an established standard of care. Tokenization of assets would also enable trade to be conducted without necessitating the transfer of physical goods from owner to owner.
Furthermore, since economic concessions from parent states would enable the transport of goods between member FEZs with reduced or eliminated tariffs and other expenses normally incurred while engaging in international trade, using member companies for transport and logistics would become particularly enticing.
For whatever governing framework member FEZs choose to jointly subscribe, Mattereum’s smart contracts could provide the means by which members commit to abide by them. This would prove especially useful in the resolution of disputes. Mattereum’s arbitration mechanisms would be in place both to resolve any claims or grievances that arise, and enable governing powers to enforce resolutions with all due authority and means. Streamlining such otherwise onerous processes will both reduce administrative and legal costs for all parties, as well as allay fears of time and resources wasted should a dispute arise.
The positive impacts would be considerable. Political benefits would be significant, as parent states which are not currently influential players on the world stage would gain influential partnerships in the wider international community. They would also have a greater voice in world affairs by virtue of the confederation’s collective actions. The economic benefits would be equally striking. Member companies would dramatically reduce administrative and legal costs, and would also see increased profits as clients are attracted to the reduction of costs and hassle which would come from working with members. Furthermore, the necessary digital infrastructure would already be in place within member FEZs, allowing businesses to plug into existing systems rather than building them from the ground up. Parent states would also reap commercial benefits through greater internal economic activity and increases in FDI.
Perhaps the greatest impact of a Digital Hansa would be the advent of a new commercial ecosystem. The confederation imagined here would create a new global standard of business conduct which would dramatically strengthen relationships between companies and clients. If a company is ‘Hansa’-backed, no matter its location or its jurisdiction, clients could know exactly what that means, and proceed with confidence. As the original Hansa ushered in a period of previously unprecedented commercial cooperation and prosperity for the Holy Roman Empire, a Digital Hansa stands ready to do the same for the world.”
Over the last year or so, I have written pieces about how the innovation created by Mattereum, the Mattereum Asset Passport (MAP) can help bring about limitless ecommerce, how it can help AI revolutionise the way we do business, how it can enable not only a circular economy but the more efficient and realistic spiral economy as well as how it can transform the trade in real world assets through tokenization and fractionalization, and now I am talking network state. I sometimes feel we could be seen as just jumping on the latest bandwagon to catch the eye of VCs looking for the flavour of the month, but then I realise that we are just showing different facets of the same thing.
We are showing different facets of the same thing
Mattereum’s innovation is deep and profound; it took six years and several million pounds to get our system to work, it was not easy, and no one else has come close to achieving the same thing, but it is working, and has been live and serving customers for over two years now.
By creating a connection between a token on the blockchain and a physical thing in the real world that will stand up in court in 172 jurisdictions worldwide we have made something that will provide the deep foundations for trade in the future. It really can make ecommerce faster and smoother by removing the majority of the barriers to high value transactions. The same thing makes it possible for AI to recognise that the digital twin of a physical object really does represent something in the real world and to enable the tracking of objects through their lives so they can be reused and recycled efficiently. In addition, by being able to facilitate the tokenization and fractionalization of physical assets with ownership firmly established, it does utterly change the way things like real estate and gold can be traded. So too, can it provide a way for network states to manage physical assets that enhances their function, and there will be other things it can revolutionise too, it’s just waiting for people to identify the potential.
The MAP is deep infrastructure, like railway lines or HTML; it does the same thing, whatever the traffic you choose to run on it, and it has the potential to change the future just as much.
If you are working on a project that you think could be enhanced by the Mattereum system get in touch with us via contact@mattereum.com
