【Sovereignty】Explanation of Basic Terms
Where Does the "Final Say" Lie? Web3 Reexamines the Question
Good morning.
I’m Mitsui, a web3 researcher.
Every Saturday and Sunday at noon, we’ll deliver articles explaining basic vocabulary. We aim to keep each article concise enough for a quick read, while also providing content you can revisit and study.
Today’s topic is “Sovereignty.”
Please watch until the very end!
Web3 is often described as “the ability to hold your own assets.” But this isn’t merely a technical matter. It represents an attempt to bring the concept of sovereignty—previously discussed only at the national level—down to the individual level.
What is sovereignty? And what does it mean for individuals to possess sovereignty? This article begins with the history of state sovereignty, delving into the meaning of “individual sovereignty” championed by Web3, along with its light and shadow.
What is sovereignty?
Sovereignty means the “ultimate authority” within a given domain. In the context of international law, it refers to a state’s right to make final decisions in all matters of legislation, judiciary, and administration within its own territory. No other state can overturn those decisions.
This concept was established as far back as the 1648 Treaty of Westphalia. Prior to this, supranational authorities such as the Pope and the Holy Roman Emperor intervened in the decision-making of individual states. The Treaty of Westphalia recognized that each state held supreme authority within its own territory, laying the foundation for the modern nation-state.
Sovereignty, in essence, is both the “right to be free from subordination to any other authority” and the “duty to assume responsibility for oneself.” It is precisely because a state possesses sovereignty that it can enact laws, issue currency, conduct foreign affairs, and establish systems to protect its citizens. Conversely, losing sovereignty means surrendering one’s destiny to others. This concept has formed the bedrock of the international order since the modern era.
The concept of currency sovereignty
Among national sovereign rights, monetary sovereignty is particularly closely tied to the economy. Why do nations issue their own currency? Because the very power to issue currency is the most potent means of controlling the economy.
Central banks control inflation and deflation by manipulating interest rates and adjusting the money supply. When the economy weakens, they inject money into the market through monetary easing; when the economy overheats, they tighten policy. These adjustments are possible precisely because the state holds the “ultimate authority” through its power to issue currency.
Looking back at history reveals just how severe the loss of monetary sovereignty can be for a nation. For example, countries that adopted the euro abandoned their own monetary policies, and during the Greek debt crisis of the 2010s, they were unable to resort to the traditional remedy of devaluing their currency. Monetary sovereignty is one of the most powerful authorities in economic management.
Does sovereignty exist for individuals?
So what about us as individuals? Can we truly say the money in our bank accounts is “ours”?
Legally, bank deposits are claims against the bank. In other words, you are merely “lending” money to the bank. If the bank fails, any amount exceeding the deposit insurance coverage may not be returned.
Additionally, accounts may be frozen or transfers restricted based on government decisions. In fact, instances where withdrawals were restricted during economic crises have occurred worldwide, including in Cyprus and Lebanon.
The financial services we use daily may appear to be “owned,” but in reality, they are closer to being “permitted for use.”
Credit cards may be suspended at the issuer’s discretion, and e-money is also bound by the operating company’s terms of service. What individuals possess is not sovereignty, but merely access rights.
The “Individual Sovereignty” Proposed by Web3
Web3 fundamentally challenges this structure. With non-custodial wallets, you are the sole manager of your assets. Neither banks nor exchanges are involved. Only those holding the private key can move those assets.
A private key is the ultimate authority itself.
You need not seek approval from anyone, nor will anyone stop you. Assets recorded on the blockchain are designed so that no state agency can freeze them, provided they follow the protocol’s rules. Bank hours, national borders, and political decisions hold no sway over this system.
This is less about technological progress and more about a shift in thinking. When asked “Who should hold the final decision-making power?”, Web3 answers: “Individuals should.”
This is an attempt to transfer the sovereignty over currency—which the state has monopolized for centuries—to individuals through the power of technology.
Is sovereignty freedom or a burden?
However, having personal sovereignty means bearing all responsibility yourself. If you lose your private key, your assets are lost forever. Unlike forgetting a password, you cannot contact customer support to recover them.
Even if you send funds to the wrong address, you cannot cancel the transaction. If you fall victim to fraud or hacking, there is no central authority you can ask to “reverse the transaction.” In fact, it is estimated that billions of dollars worth of cryptocurrency assets are inaccessible due to lost private keys and human error.
Freedom and responsibility are two sides of the same coin. Just as in national sovereignty, the sovereign state bears the responsibility to protect its citizens, so in individual sovereignty, the individual assumes all risks.
In the traditional financial system, we entrusted our sovereignty to nations and corporations in exchange for convenience. Web3 reverses this dynamic, but reclaiming sovereignty also means relinquishing our safety net.
Can sovereignty be fully realized?
At present, there are significant barriers to the full realization of individual sovereignty.
First, there is the issue of on-ramps and off-ramps for exchanging fiat currency and crypto assets. In many cases, converting to fiat currency requires going through a centralized exchange, which subjects users to Know Your Customer (KYC) procedures and regulatory oversight at that stage. This means that while sovereignty exists on-chain, the points of contact with the fiat currency world inevitably rely on traditional systems.
Furthermore, the blockchain infrastructure itself carries risks of centralization. Many nodes operate on major cloud services, and it is not uncommon for them to depend on specific RPC providers. This creates a contradiction: while touting “decentralization,” it effectively relies on a small number of infrastructure companies.
Regulatory friction cannot be ignored. Governments worldwide are tightening regulations on cryptocurrencies, and a significant gap remains between complete individual sovereignty and existing legal frameworks.
The Future Pointed to by the Idea of Sovereignty
Nevertheless, rethinking the concept of sovereignty within the context of Web3 holds significant importance.
In the digital age, questions such as “What is ownership?”, “Who owns your data?”, and “Do you have the right to manage your own assets?” are expected to become increasingly important.
The relationship between the state and the individual evolves alongside technological progress. While the concept of individual sovereignty proposed by Web3 may not be fully realized in its current form, it serves as a crucial starting point for rethinking ownership and rights in the digital age. Perhaps the value of this idea lies not in whether perfect sovereignty is achieved, but in the very act of “being conscious of where sovereignty resides.”
Summary
Web3 is not merely a “convenient payment technology.” It is an ideology that fundamentally questions the very nature of sovereignty.
However, sovereignty is not something to be protected by others. It only exists when one is prepared to protect it oneself. Choose freedom or choose security. Web3 entrusts that choice to each and every one of us.
That concludes our basic explanation of “sovereignty”!
Disclaimer：I carefully examine and write the information that I research, but since it is personally operated and there are many parts with English sources, there may be some paraphrasing or incorrect information. Please understand. Also, there may be introductions of Dapps, NFTs, and tokens in the articles, but there is absolutely no solicitation purpose. Please purchase and use them at your own risk.
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🇯🇵🇺🇸🇰🇷🇨🇳🇪🇸 The English version of the web3 newsletter, which is available in 5 languages. Based on the concept of ``Learn more about web3 in 5 minutes a day,'' we deliver research articles five times a week, including explanations of popular web3 trends, project explanations, and introductions to the latest news.
Author
mitsui
A web3 researcher. Operating the newsletter "web3 Research" delivered in five languages around the world.
Contact
The author is a web3 researcher based in Japan. If you have a project that is interested in expanding to Japan, please contact the following:
Telegram：@mitsui0x
*Please note that this newsletter translates articles that are originally in Japanese. There may be translation mistakes such as mistranslations or paraphrasing, so please understand in advance.