Three years ago, a crypto-loving client, who called himself "Freedom Streaming," and, allegedly, lectured in the University of Berkeley, shared that he helped found the 2015 decentralized state of the Free Republic of Liberland.

This fierce crypto-anarchist said Liberland uses blockchain and cryptocurrency. (Read also: An Introduction to Blockchain Technology.) It has minimal laws, no taxes, no police, no borders. To enter the country, you illegally cross through neighboring Croatia and run the risk of being jailed in Croatia overnight.

As of early 2020, Liberland, whose motto is: "Live and Let Live", has half a million citizens. Its government runs on the EOS blockchain and the country uses its own Merit (LLM) cryptocurrency. (Read also: An Intro To Bitcoin: Can A Virtual Currency Work?)

Liberland Government

The Free Republic of Liberland was established April 13, 2015, by three people plunging its black and yellow flag into a sliver of land between Croatia and Serbia: Czeck politician Vit Jedli?ka, his girlfriend Jana Markovicova, and a friend.

They grabbed the territory from a list of no-man’s lands on Wikipedia and chose that specific date because it was the birthday of Thomas Jefferson.

"He was a man," Jedli?ka said at Blockchain Life 2018, "who wrote the great Declaration of Independence. This contract set the development of that superpower free for at least 200 years. But now, even the United States has turned away from its original Founding Fathers' ideas. Their taxes are around 30 to 40%. America has plenty of non-useful rules."

Liberland, Jedli?ka resolved, would be founded on the tripartite of Republic, Democracy and Meritocracy:

It would have some elements of a republic, meaning the government should be limited to what it can do; some elements of a democracy, especially the idea that the citizens can veto laws that the government inserts, and we also wanted to fit in this strange system in which one person has a stake in the society, depending on how helpful they are to the society. That's called a Meritocracy.

The Free Republic of Liberland — founded on Libertarian principles — would recognize all currency but mainly use cryptocurrency. Citizenship would be capped at 140,000 people, and the new state would be run on a DAO, or open source government, operating through the blockchain.

Liberland's Decentralized Autonomous Organization (DAO)

As an e-government built on DAOstack, all Liberland's governing bodies would be voted in electronically over the blockchain and perform their functions over that same ledger.

"In Europe," Jedli?ka told Facebook Club, Bitcoin Malta, "you're 3.5% poorer every year because of your country's regulations. In fact, because these regulations have a compiled effect over the years, it's like someone dropped an atomic bomb on half the continent because there are all these businesses that are not created because of these rules and high taxes. People could be far richer if there were none of these crazy rules."

The concept of the Free Republic of Liberland appealed to people around the world.

It's the zeitgeist. People are fed up with their government and there's no way to fix it. Especially now with the European Union. People want to contribute to their society, but they don't feel like supporting wars and unnecessary rules, and therefore Liberland was created and our solution works even without the blockchain. The blockchain and our economy is just a cherry on top

The problem was that Jedli?ka expected to get 20,000 applications in the first year. By the first hour, he got 20,000 calls. At the end of the first week, he and First Lady Jana Markovicova flipped through 200,000 applications.

How could they handle all that themselves!

They needed a real-time solution that would help them process these applications in a cheap, fast, secure, reliable and transparent environment. They also needed a place for their team, scattered worldwide, to collaborate.

Liberland became the first country to use the blockchain for state governance.

Government on the Blockchain

By January 2020, Liberland had two Vice Presidents, five Ministers, and 20 ambassadors, with plans to expand to 20 members. (Recently, Jedli?ka appointed his Finance Minister, Ali Kassab).

Liberland's administration uses a decentralized ledger built on DAOStack to share and discuss regulations in real-time and to solve its problems. The platform also serves as its registry, hub for insurance agencies (among other business that include 1,200 architects), for licences for vehicles, property management, meeting groups (such as Liberland athletes), and so forth. It'´s also the spot for Liberland citizens to settle their disputes.

"In other countries," Jedli?ka said, "government over the ledger is theoretical. Here we really do it."

Their DAO, in short, he explained to the AIBC Summit in 2018, "helps us deliver fast, affordable and transparent justice on every single matter that happens to each one of our citizens - no matter what it is, to whom or when. It's fast, transparent and honest."

Liberland's Currency: Merit (LLM)

As an economist, Jedli?ka had been inspired by Claude-Frédéric Bastiat, a French economist, writer and member of the French National Assembly.

"He's kind of the grandfather of Liberland," Jedli?ka noted at the 2018 Bitcoin Forum, "About 250 years ago, he advocated for less taxation and less regulation, saying all these things hamper the growth and prosperity of people."

"Really what's happening around is robbery." He elaborated on Essen TV that same year. “The law has shifted. Instead of protecting people, the law takes money from one person or group and gives it to other people or groups. The rich steal from the poor and the poor steal from the rich through the welfare system, so it creates a system of redistribution which doesn't create social happiness or efficiency.”

Liberland's crypto-economic system was set up to remedy the issue. No more money, just a shared currency on a shared blockchain that's transparent, fast, cheap and convenient for all.

"The community is growing," Jedli?ka told Bitcoin Club Malta in 2018.

"Right now about 60 million people globally use cryptocurrency, but it will be hundreds of millions in the near future. And we will see a shift from a state-controlled money management to a private-controlled money management. States will have a hard time catching up with the change. They said there's no alternative to state currency but now there is an alternative and it's doing fairly well."

Merit (LLM): Your 3 rewards

Merit serves various purposes, foremost of which is the vote, your ticket out of jail and your collateral to a share in Liberland's future.

To discuss each separately:

Merit defines your right to vote

In contrast to the “one person, one vote” principle, Liberland´s right to vote depends on the number of Merits you own that, in turn, depends on what you did “that actually make the country possible and contributed to its creation”. As Jedli?ka put it,“We are fixing this strange relation between state and taxpayer, where it doesn’t matter how much you pay in taxes, you always have [only] one vote.”

Merit is your ticket out of jail

In a regular country, if you break the law you go to jail (or so we hope. In Liberland, where laws are few and you're allowed to have weapons, Merit could prevent jail. “If you have enough collateral to pay for the damage that you have created, you might not even go to jail because the people that you have hurt could be compensated from your collateral,” Jedli?ka told Breaker Magazine.

Merit buys citizenship

Want some property in the youngest state, albeit it's most times flooded with water? Pay $10,000 in Merits. Liberland may be only 7 km2 (2.7 sq mi), or roughly the same size as Gibraltar.

Still it has embassies in more than 100 cities including Portugal and Mexico; the United States politician and former candidate for U.S. Presidency Ron Paul was awarded citizenship, and Somaliland, a self-declared state that proclaimed its independence from Somalia in 1991, recognized it too.

How Can I Get Merit?

Here's your rundown:

  • Merts are earned by building infrastructure, helping with administration, carrying out manual labor, promoting the country, or promising to reside there permanently and contribute to the community.

  • You'll find Merits on the crypto trading Altilly exchange, where they are paired with USDT, as well as with cryptocurrencies BTC, ETH, and XQR.

  • As of February, 14, 2020, Merit (LLM) has an overall market capitalization of roughly $1.1 million and each coin trades for $1.02 USD.

  • Liberland's trove of Merits is capped at 700 million Merits and is controlled and distributed by the DAO.

Floating Liberland & "The Bitcoin Ship"

Meanwhile, because of political problems with Croatia, Jedli?ka set up a ship moored on the Danube called "Bitcoin Freedom" that serves as an “alternative space” for Liberland's citizens and from which you can socialize, launch your ICO or barter in Merits. Liberland citizens also get married on that ship that houses around 30 people.

The boat is the venue for an annual festival called "Floating Liberland" and for setting up housing developments called "Diaspora Villages” by Liberlanders around the world.

After all, why wouldn't you want to live in the Free Republic of Liberland!

In the words of Jedli?ka

"What we're doing is timeless. We're the structure of humanity for more freedom. We're the country with the most blockchain experts and crypto freaks from around the world. We're the best country for the best people."