Debt and taxes.
Those are the only ways governments are sustained. They either raise money through taxation or issue debt while running deficits. For all of our lives, these are the two primary modes of how governments get money.
For that reason, as they become a larger part of all of our lives, the thirst only increases. On the national level, the leading countries all are running up massive debts. The debt-to-GDP ratio of the US, China, Japan is astounding. Everyone knows there is no way to pay it back.
Yet, in spite of running up larger deficits, it seems that taxes only go up. This is taking place even though average household incomes in many developed nations is on the rise. Here we see that people are paying more than they were before, even if the tax rate does not change.
Then we have to couple in all the fees that we are charged. When it comes from government, this is a form of taxation.
In short, it is a system that just keeps getting worse as time goes by. What if, however, there was another alternative? Could we see cryptocurrency as the solution to this?
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The End Of Taxation?
This is an odd viewpoint considering governments are spending a lot of time to create rules surrounding cryptocurrency. Much of this centers on the ability for them to collect taxes. After all, the government sees its place as a partner in every innovation and endeavor any of its citizens undertake. The establishment feels entitled to a piece of the action.
Obviously this is creating a divide. We are seeing tyranny on the rise. While we do not know how this will unfold, history shows that backlash tends to be the result. It is not going to be a pretty picture and is well beyond the scope of this article.
That said, are we entering a time where the paradigm shifts are so powerful that governments are going to have to either adapt, or die? The digital world is expanding at an incredible pace, a fact that leaves our present governance system lagging behind. Here is where we might see the need to innovate be the only form of survival.
Could we be starting down the path where governments actually have to compete?
If this is the case, the idea of taxation is going to be a major factor. When entities operate as monopolies, services tend to be substandard. Since consumers have little choice, the company operates as it sees fit. While there might be some oversight from the government, this is usually minimal. At that level, corporations use their power to get what they need.
When you think about it, governments have a monopoly over people. There are no choices. All is determined by where you are. Of course, you have the option of relocating but how realistic is that in most instances? Plus, the ones who are usually hurt the worst are the ones least able to afford the move.
Which brings us to the point of competition. When people have choices, the offering by entities has to improve. If it does not keep pace with the market, share is lost to the competitors. When this goes on long enough, bankruptcy is sure to ensure.
Could this be the future of governments unless they adopt sensible spending and offer revenue generation through means other than taxation?
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The Emergence Of CityCoin
Most are aware of the CityCoin project. Here we see different cities create their own token that is mined. Through this process, the city is able to generate revenues that can go directly into the Treasury.
The City of Miami, the initial coin to go live, received its first payment of $5.25 million from the mining operations. This is a drop in the bucket for a city that has a budget of over $1 billion. However, the project does show how things can change with some innovation.
Of course, for a coin to have any value whatsoever, there needs to be some utility. Simply creating a token will not instantly solve all financial woes. An entire economy has to form around it. This is really not the forte of governments. It is going to take the creativity of the private sector to integrate what is being developed into useful applications.
Nevertheless, this does show the potential. The basis of all this is to construct projects which can use yield to generate government revenue, something that can pay for services. If initiatives start to expand out while also connecting to each other, it is possible for this to emerge as a viable option to the typical taxation or debt system.
Over the next decade, could we see many governments following suit? As people come up with creative ideas, the entire ecosystem could spread. Targeted projects could be created that leverage each other in different areas for maximum gain. This all could help to feed into the local coffers.
Perhaps we will see state or provincial coin next.
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Experimentation
The key is to experiment. We see this taking place within all sectors of the cryptocurrency industry. There are a lot of "2.0" starting to emerge. This shows how people are taking previous ideas and seeking to improve upon them.
Governments are going to have to do the same thing. Over the next decade, we can expect great changes. To start, the remote work concept will make people more mobile. Hence, those governments that are oppressive are going to find themselves falling out of favor. Could the events in El Salvador be leading the way to a government that is innovating and looking to set itself apart from the norm? What happens if other countries start to follow this concept?
A reality for much of the developed world is demographics are working against them. As populations age, they percentage of people who are contributing to economic productivity declines. If the younger generations are not there to replace them, an upside down economic situation arises where more has to be applied to sustaining the older population. This creates a host of problems.
There is also the likelihood that technology is also going to make it very difficult to tax, especially on income. We are apt to see privacy layers developed over the next 5 years. This means that tracking the actions of people is going to get harder. Again, the digital world is just expanding. What happens to the tax base if this becomes a realistic option for people? Suddenly the data path simply vanishes.
Politicians are very good at making a lot of promises that someone else has to fulfill. When we look at something like the upcoming pension crisis, we can see clearly how this is going to end. There is simply no way to meet these obligations under the current scenario. Those who are depending upon this are right to be fearful.
Is this where cryptocurrency can step in? Once again, the innovation is possible. With the wealth that can be generated through technological advancement, we are now seeing way to operate that is outside what we knew. Much of our discussion centers around how the individual can benefit. However, if we apply these same concepts to government, perhaps the paradigm shift has a major impact there also.
Therefore, we will have to watch to see if cryptocurrency development can end taxation. It is possible based upon theoretical models. How realistic is it in the real world? To reach this point, governments (politicians and bureaucrats) are going to have to open themselves up to new ideas. We can see from the current cast of we have, for the most part, they are simply trying to maintain the status quo while enhancing their power.
Perhaps they will be more accepting if their lot in life is suddenly threatened. As cryptocurrency becomes more powerful, it is going to steamroll whatever resists. Governments are going to have to adapt or die.
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