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How the US Government Could Effectively Use Crypto

The US government could start, or officially endorse an existing crytpo coin. What they would do is build a fee into the software protocol that went to a single address that they control. This is effectively a tax. The fee could be a transaction fee, a percentage of the next block award, or a combination of both. How this works is every single transaction that occurs everywhere wihtin the system, the fee scalped goes directly to this single address that is owned by the IRS, in this case, the “New-IRS.” Forget postcards. We’re down to a single dude in one office chair in front of one computer. Imagine that being the IRS, because that’s where this is going.

The consequences of this mechanism are dramatic. First off the IRS is now one guy. Granted, this guy controls the private key for the most valuable thing in the world. This key would be the single most important key right up there with the nuclear launch code, but the system would most definitely still work. More strikingly, the US would essentially become the global government head. Every transaction wihtin the network sends tax to the US, even if it occurs between two individuals overseas. If the governments of those countries want some of the reward they need to get it from the US directly. Effectively this makes us a “global US” where every nation becomes an economic State. Of course, other countries could start their own coins to do the same thing. However, I have explained in detail elsewhere how crypto’s are new System of Trust that approximate the Knowledge Economy versus nation-state fiat currencies that service the deprecated Manufacturing and Real Etate economy, and of which the United States is the unadulterated leader. Therefore, cryptocurrenices are self-valuing. Essentially you would be comparing the size of th US economy to the size of the foreign one, which is smaller and therefore the coin would be worth less. The US could also “buy-out” their coin (own >50% of the mining, and change the protocol as they see fit), so essentially the mechanism boils down to “the largest economy wins,” in terms of becoming the dominant coin. Cryptocurrencies derive their inherent value from the social group that it represents. The entire Knowledge Economy of the United States is that very social thing; it is worth hundreds of trillions of dollars (or more, quadrillions even). In fact, it is worth so much the current fiat system that represents it cannot fully and accurately value it.

Let’s say the IRS gets 0.01% of every transaction. Bitcoin traded $6.3B over the last 24h and is worth $129B right now (note, this was only what was traded through exchanges, not every peer-to-peer transaction). Bitcoin trades it’s entire valuation ~20.5 days. The IRS hauled in US $2.3T last year, which is, ironically and totally coincidentally, also $6.3B per day. If it had a coin running 100X the valuation of bitcoin it could take a 1% “fee” on each transaction and achieve that income. 100x is ony $12.9T in market value. I would predict the value of such a coin could be more like $1.29Q, so the IRS fee could be 0.01% of all transactions. The coins the IRS earns re-enter the open market as the US goernment spends it’s money on operations (military, salaries, welfare, etc etc). Ideally the Treasury wuld be required to spend the annual amount to zero. Any excess could be distributed as a minimum living wage (I doubt there would be any “excess”, just IMHO).

Think of the productivity gains of such a system:
- Nobody files an income tax return. The burden to the public is exactly zero. For those of you that wanted “post cards,” I humbly submit to you crypto!
- Along with perosnal income tax returns, there’s no corporate taxes, social security, FUTA, excise or border taxes, etc.
- There’s no longer a need for auditing. The budget of the entire IRS drops to effectively $0.
- There is no longer any such thing as a tax crime. Even iliicit drug dealers are paying the exact same tax as the rest of us.
- There’s no such thing as non-profits or tax-exempt churches or anything political to get all hot and bothered about.
- Taxes on transactions are a “flat tax” that is as flat as it gets. Every single transaction is identical.
- As I mentioned above, international transactions pay the IRS the same fee. We effectively tax everyone world-wide for our own direct benefit.
- There’s no more national debt.

Astute readers will note the closest fiat comparison we can measure is the US GDP ($18.6T) of which the IRS gets $2.3T, which is ~12.4%. So how can a new tax be a fractional percent? Firstly, it’s a transactional tax and transactions occur more frequently than assessing incomes annually. Secondly, I submit to you the utter power and valuation of defining a New Economy (the Knowledge Economy) which is orders of magnitude (1 to 2) larger than the economy it is replacing. A similar thing occured in the transition from a largely agriarian economy (approximated by gold, now worth ~$8T) to the world-wide manufacturing and real estate economy, which became dominant in the early 20th century (now worth ~$220T).

This idea may seem laughable. But consider there are a number of forces in play that so far have proven to be true, the most important being billions of people world-wide making personal decisions in their own best self-interest (with regards to crypto). Put simply, cryptocurrency is a more efficient and less corruptible system of trust than fiat currencies, and is instantly global once it is launched. Therefore its adoption is inevitable. People miss this siginifcant point at their own peril. The adoption will not be frictionless of course, just irreversible a long time scale.

What I am talking about may be a little ahead of its time, but I think it should be considered. A lot of what you’re investing in now will be shaped by these changes if they are occurring. It will be interesting to see if we can be ahead of the curve in ways that folks on PSW seem to be.

Also worthy of note that ignoring this concept is actually a national security threat, because China could do the same thing. However, their economy is currently smaller than the US economy so their coin would not become the international standard at this time. China’s economy is predicted to become larger than the US at some point in time though.

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