I feel that the true implications of the Bitcoin revolution haven’t really sunk in, yet. Not even in the broad futurist community. We basically do as if this invention hasn’t really happened. We continue thinking in the same term and ways, even if they might have been effectively invalidated by the Bitcoin revolution already! So, I think we must thoroughly integrate the implications of the Bitcoin revolution into our thinking to actually stay relevant!
Now, let me speculate about a future, and we what the changes within it imply. Let’s say in 5 years Bitcoin takes really off, and its adopted by a vast number of people as main currency. Those people will avoid banks and only use the Bitcoin ecosystem to get funding and even credits. They will buy everything they need with Bitcoin or cash (they got by selling Bitcoins). Basically, at this stage we will have a mature parallel economy based on Bitcoin. Many people will opt out of the old economy and switch to the Bitcoin economy, because it avoids many of the problems of the old economy.
Sooner or later, this will make conventional banks obsolete. Nations and financial markets will switch to Bitcoin as official national and world currency, because nobody will be willing to use the sinking ships that are conventional national currencies. Now that’s quite revolutionary in and by itself, because nations and centralized institutions will lose their control over monetary policy, but it gets more extreme: Nations will get severe problems taxing individuals and companies who all use Bitcoin. Well, at least they will get severe problems with those who use the latest anonymization technology. So, nations will be threatened by massively decreasing tax income, so they need to react. There are a couple of ways in which nations can react and all of them are quite revolutionary:
Nations could try to move towards ubiquitous surveillance everywhere to totally eliminate anonymity. That’s such an extreme measure that it won’t fly. Not with the technology that’s available in 5-10 years, and not with wealthy elites in power that strongly value their privacy. So, this probably is not what’s going to happen.
Nations go bankrupt and cease to exist. State services will be taken over by corporations which are not funded by taxes. Expect local and regional defence contractors taking over the roles of police and military forces. Who makes the laws seems to be a difficult question under these new conditions. What will stop the defence contractors from making the laws and expropriating the content of the wallets of their customers by threatening them with death or torture? Probably the fact that people will start paying multiple competing contractors, once this actually start happening. And then you will have fights between those contractors, which will effectively turn into competing gangs. Which may fight to the death until one gang turns out victorious and establishes at least a regional monopoly, effectively turning their area of influence into a military dictatorship. This could happen, but it’s a rather dystopian outcome, so let’s move on.
Nations cannot rely on conventional consumption, property, or income taxes, so they abandon them completely, whether anyone likes that or not. Instead, they switch to a system of land and resource usage fees, including cap and trade schemes for greenhouse emissions, and similar systems of funding. So, nations will be forced to adopt land value taxation, not because of ideological reasons, or superior economic efficiency, but simply because they are forced to go down that road, if they want to survive!
It should be rather obvious that option number 3 is the least bad of the options I have proposed. Does anyone see other alternatives? Please speak up, if you do.
For now, I will take option 3 as a given consequence of the Bitcoin revolution and try to find out the deeper ramifications.
So, we have a world without conventional taxes. Corporations which use a lot of resources pay resource usage fees, but those corporations who are primarily active in the digital realm pay almost no fees at all! So, their power will increase even further beyond their presence influence. Clever entrepreneurs will be even more likely to become billionaires (well, Bit billionaires, 1 000 000 Bit = 1 Bitcoin). Will this mean that income inequality will increase further (well, inequality in the Bitcoin ecosystem is already at extreme levels)? Probably yes, because there won’t be anything like progressive income taxation. Will that be bad for the economy? Yes, because income inequality is already rather bad for the economy. So, this is a problem that seems unfixable in this new world.
There’s only one solution I can see: Moving even further into the realm of futuristic economic innovations, by establishing a digital abundance economy, which uses reputation systems as their economic engines. Because too great centralization of money hurts the economy, and people don’t like that, billionaires who don’t give away their money willingly, will be rated down into oblivion, which will make any business they are deeply associated with unsustainable! The consequence will be that a system of progressive voluntary taxation will emerge. Of course, this requires income transparency, but the reputation systems will enforce monetary transparency, too, because the alternative is economic oblivion through bad reputation for those who don’t reveal with economic wealth. I’ve already explored such a system in a chapter in the second Transpolitica book called “Envisioning politics 2.0” (though the analysis of the first part of this post is missing from my chapter).
Is this desirable? Is this realistic? Is there a better alternative? Have I forgotten to consider some important factor?