A state is an entity that holds a monopoly over the legitimate use of physical violence within a given territory. Classic international law doctrine, e.g. Franz Oppenheimer, has long held that “a state without territory is not possible”. Yet in modern times, globalization, digital networks, and unique political situations have prompted experiments in deterritorialized statehood. Can a state function without a fixed geographic base? And what would be the implication in terms of its fundamental characteristics?

Examples of Non-Territorial Polities

Governments-in-exile. These are authorities that claim to be the legitimate government of a country but operate from outside its territory. Examples include the Polish government-in-exile during WW2, which operated from London maintaining diplomatic relations despite having no territory under its control. Similarly, Free France under Charles de Gaulle in 1940–44 was a government-in-exile that eventually reclaimed France. In the 1990 Gulf War, the Kuwaiti government-in-exile in Saudi Arabia continued to be recognized internationally until Kuwait’s territory was liberated. Thus, international legitimacy can sustain a stateless government for a time. Such governments typically view their detachment from territory as temporary.

Stateless nations and diasporas. Some national communities have endured long periods without an independent state, effectively existing as nations without territories. Examples include the Jewish people before Israel's estsablishment, the Kurdsish people, or the Palestinian people. These diasporic nations maintain national identities, governments-in-exile or representative bodies, effectively operating as “ex-territorial” nations. However, they typically aspire to territorial statehood in the long run.

Digital nations” and E-residency. Estonia’s e-Residency program (2014) extends certain state services (the permit to open companies and conduct business under Estonian jurisdiction) to people globally regardless of their physical location. Bitnation (2014), a private project aiming to create a “Decentralized Borderless Voluntary Nation” on the blockchain, sought to provide governance services like dispute resolution through smart contracts, allowing people to “opt-in” to a virtual jurisdiction. Another digital nation attempt is Asgardia, the self-proclaimed “space kingdom” founded in 2016. They launched a small satellite in 2017, claiming to be “the first nation to have all of its territory in space.” It's not widely recognized as a state, yet it has a constitution and elected officials, exemplifying the radical detachment of a state from physical land.

Micronations and experimental states. A number of entrepreneurs have attempted to found new sovereign entities with little or no land. One example is the Principality of Sealand, a self-declared country on a former WWII sea fort off the coast of England. Founded in 1967, it occupies a tiny offshore platform and has a royal family, flag, and coins. While not internationally recognized, Sealand has maintained its quasi-sovereign status for decades, even resisting an armed takeover attempt in 1978. Another recent venture is Liberland, a very small libertarian microstate. Though not formally recognized by any established country, Liberland has issued citizenships and promotes a vision of a minimal state with voluntary taxes and blockchain-based governance​. Currently the citizens mostly organize online.

Seasteading. Seasteading is the idea of building floating, self-governing communities on international waters. The Seasteading Institute advocates “permanent, autonomous ocean communities to enable experimentation with diverse social, political, and legal systems”​. In theory, seasteads would be modular floating platforms where innovators can start new societies outside the jurisdiction of existing states. This is inspired by a libertarian ethos of competing governments and “startup societies." Early experiments have faced setbacks. In 2019, a prototype seastead launched by enthusiasts off the coast of Thailand was raided and removed by the Thai navy. Thus, no true seasteading colony exists yet.

Economic Aspects

Taxation and revenue. Traditional states tax economic activity within their territory. The simple function of a territorial boundary is that it allows the state to clearly differentiate between those people and companies whose lives and activities can be regulated, and those that cannot be. Public officials may emphasize that the state can only protect and offer its services to some people, yet one should be weary, because the real motivation for having a territory is to clearly demarcate the state's tax subjects. This is normal and expected given the economic incentives.

Competing to tax. The conquest theory of the state’s origin holds that the state began not as a social contract or voluntary association, but as the result of one group violently subjugating another. There is significant historical evidence supporting this theory, over e.g. Hobbes' social contract. Do you think that the Roman empire came about in any other way than through conquest? Or perhaps the colonial countries from the 20th century? Historically, the transition to statehood is unambiguously marked by stratification, taxation, forced labor, and administrative hierarchy imposed by elites.

Franz Oppenheimer in "The State" (1908), famously distinguished between the economic means - peaceful production and voluntary exchange - and the political means - appropriation of others’ labor via force (conquest and taxation). The state is an organization of the political means. Most policies redistribute wealth from one group to another. This should be obvious. A state without territory cannot easily enforce taxes in a geographic zone.

This is why disputes over borders, secessionist movements, and territorial annexations are not merely matters of national pride or identity - they are contests over who has the right to extract resources from whom. A border is not just a line on a map, but a boundary between different fiscal regimes. The competition between states for productive territory - either through war, colonization, or economic influence - can thus be seen as a competition for tax bases.

Furthermore, the state's territorial nature helps explain the evolution of legal and surveillance mechanisms. The development of cadastral surveys, identity registries, and census data is not coincidental; these are tools that enable the precise identification and classification of tax subjects. Administrative clarity is often pursued not for the benefit of the governed, but for the convenience of those who govern.

A hypothetical scenario. Given the above, let's imagine that a corporate entity, firm XYZ, decides to become a competitor of the state in terms of providing services like identity verification, dispute arbitration, and asset management. For simplicity, assume these services are territory-independent and can be provided to everyone, irrespective of their geographical location. The contract between the firm XYZ and its client could be interpreted as a "passport", verifying that the client is in fact, a client, and they have subscribed to this and that service. So far so good, but this is not much different from what we have now. Firms like XYZ already exist and they compete against each other in the open markets to attract more clients. They operate within the territorial constraints of the states in which their clients reside.

The crux. The problem is that people, obviously, need to live somewhere. This is a physical requirement, which brings in the question of territory. People living closeby will have conflicts in terms of who wants to live where. These are solved through property rights. If firm XYZ buys some remote previously-unowned island and starts selling residency passports in addition to defense and legal services, this starts to look a lot like the services of a state. Yet, there is a difference: when a citizen buys land, the state allows the person to live there, but it still continues to expropriate them through taxation to fund the services it provides.

We can imagine that with company XYZ this may not be the case - once the client buys land, they become a permanent owner of it. There are two aspects to the contract - one about the initial purchase of the land, and another about subscribing to another company providing those basic services that facilitate a convenient life on that land, e.g. defense, insurance, legal verification, public goods, etc. The two contracts don't have to be with the same firm. In fact, there could be many contracts - one for the purchase of the land, one for the registration of the purchase in some cadaster, one for the defense, one for the inusurance, and so on. A developed market could provide modular solutions allowing each landowner to customize their service memberships as they see fit.

If a person is not satisfied with a service, they can terminate the corresponding contract. This should not impact the ownership of the land. Is this allowed with states? It is not, because if you are unhappy with a particular state service, you cannot stop paying taxes and continue to live there. The state will prosecute you and, rest assured, it will make your life difficult. What one can do is emigrate and live like an expat. If everyone was perfectly flexible in terms of willingness to relocate, the possibility of massive waves of citizens emigrating would create competitive pressure between the rulers of different states to keep their policies in check.

Yet, this is also not the most desirable solution because it is difficult to emigrate. At the least, the land you own is fixed in terms of geographical location. Thus, what you want to have is modular services from which you can opt out. Why? Because if there is a market for such services, then switching to a firm that provides an improved service over your current one will make your life better. Simple as that. Denying this possibility to switch between service providers hurts citizens.

Even if one doesn't own any land, they still have to live somewhere. It would be best if the contract allowing you to stay at a precise location is separated from the contracts providing all the basic services at that location. Even the most democratic state provides only a bundle of services. What is missing is the possibility to opt-out from some of them.

Individualistic secession. We've established that it would be best for the consumer to have the ability to choose amongst different service providers without changing their geographical location. In terms of states, this resembles the right to secession, but on the level of the individual. Consider that currently, even if you "own" land within the state's territory, you are effectively only renting it. You own it only insofar as you keep paying taxes. If you stop paying them, your property rights will be revoked and the land will be taken away from you.

Secession is a heavily debated topic. International law recognizes self-determination as a broad concept of the right to choose one's own governance. Yet, it is ambivalent about secession, understood as the specific act of breaking away from an existing state. Naturally, the right to secession goes against the state's economic interest and there is no higher authority standing above the state which can enforce or arbitrate conflicts between the state and the individual. At the level of states there is only anarchy. Enforcement is attained through coalitions of other states implementing economic sanctions and waging war.

Any realistic implementation of modular governance would face significant resistance from traditional states, which rely on territorial control to enforce taxation and preserve their power. That is the sad conclusion.