The story begins in Los Angeles in the 21st century, no longer part of the United States. The federal government of the United States has ceded most of its power and territory to private organizations and entrepreneurs. Franchising, individual sovereignty, and private vehicles reign supreme over the landscape (along with drug trafficking, violent crime, and traffic congestion). Mercenary armies compete for national defense contracts while private security guards preserve the peace in sovereign, gated housing developments. Highway companies compete to attract drivers to their roads and all mail delivery is by hired courier. The remnants of government maintain authority only in isolated compounds where they transact tedious make-work that is, by and large, irrelevant to the dynamic society around them.
Much of the territory ceded by the government has been carved up into sovereign enclaves, each run by its own big business franchise (such as "Mr. Lee's Greater Hong Kong", or the corporatized American Mafia) or the various residential burbclaves (suburban enclaves). This arrangement resembles anarcho-capitalism, a theme Stephenson carries over to his next novel The Diamond Age. As described in both novels and the short story "The Great Simoleon Caper", hyperinflation has sapped the value of the U.S. dollar to the extent that trillion dollar bills—Ed Meeses—are nearly disregarded and the quadrillion dollar note—the Gipper—is the standard 'small' bill. Hyperinflation encouraged people to instead use electronic currency which is exchanged in encrypted online transactions and is hence untaxable. For physical transactions they resort to alternative, non-hyperinflated currencies such as yen or "Kongbucks" (the official currency of Mr. Lee's Greater Hong Kong). Hyperinflation has also negatively affected much of the rest of the world (with some exceptions like Japan), resulting in waves of desperate refugees from Asia who cross the Pacific in rickety ships hoping to arrive in North America.
The Metaverse, a phrase coined by Stephenson as a successor to the Internet, constitutes Stephenson's vision of how a virtual reality-based Internet might evolve in the near future. Resembling a massively multiplayer online game (MMO), the Metaverse is populated by user-controlled avatars as well as system daemons. Although there are public-access Metaverse terminals in Reality, using them carries a social stigma among Metaverse denizens, in part because of the poor visual representations of themselves as low-quality avatars. Status in the Metaverse is a function of two things: access to restricted environments such as the Black Sun, an exclusive Metaverse club, and technical acumen, which is often demonstrated by the sophistication of one's avatar.