How Are Nation-States After the Crypto Mass Adoption?
This is a very contrarian article to the current blockchain narrative.
TL;DR
Nation-states and FIATs would prosper even after the market penetration of Bitcoin, Ethereum, or DeFi stacks. Cryptocurrencies would be certainly taking some share in the market, but still, each government issues FIAT.
Reason 1: Possible Taxations
After the Crypto Mass Adoption, mixing technique is a common method in order to secure one’s assets from the government’s confiscation, including taxation. Hence, mixing based trades are far cheaper than normally taxed trades. But still, the government has several ways to seize people’s assets.
- Land Tax: Real estate is a very physical entity to forcibly remove control from people, or negotiate to pay tax for protection.
- Indirect Tax: Unless we all use the UberEats for all consumption activity, the seller is a very physical, and taxable entity. Even if you use ZCash or tornado.cash for your payment method, it doesn’t work to avoid taxation. The shop owner is the target of taxation, and he has to increase some price in order to compliment the loss of taxation.
These are the reasons why I assume still governments stay there.
Note: I would call “The biggest holder of military power in that region” as the government.
Reason 2: Monetary Theory of Price Level (MTPL)
The MTPL by Yu Kimura discovered that even the small nation-states can issue their FIAT with mild(2~3%) inflation. That seigniorage will be invested to reinforce their military power and police power. MTPL somehow kills private bankers, but don’t kill the central bankers.
Normally, government mandates to pay tax in its FIAT, and thus FIAT has value (tax-driven money view). And as I mentioned above, taxations do exist in this world, sadly. Hence, even after Crypto Mass Adoption, MTPL works. At least, major currencies have a strong backbone of taxation to maintain their demand. Hence USD, EUR, CNY, JPY, etc. would remain.
Reason 3: Cheaper Armaments
I’ll expand this logic to smaller nation-states.
Army of None — the best-recommended book by Bill Gates in 2018 — showed me a future where we can independent easier. AI-supported armed-drones are getting very cheaper and these technologies are invented in the private sector and exported to the military sector. This phenomenon implies cheaper armaments will come from the private sector first, then go to the military sector, and private sector acceleratedly can catch-up nation-states military power. This unstoppable movement implies nation-states abound around the world.
Disclaimer
FIAT-less nations
I love Bitcoin and DeFi stacks. Bitcoin and DAI can be used as the reserve currency for nation-states.
For Bitcoin, its scarcity slows down the velocity of monetary circulation and it may harm the economy of that nation, but it works. Some of nations will try doing that. (I don’t know whether they can survive or not.)
For DAI, needless to say, it is exactly same as dollar-pegged monetary policy without manual pegging operation.
The troublesome cross-border trade
More coins, less usability!
Let’s say, when Okinawa-yen there is, it would be inflated than Japanese yen. And so Okinawa’s economic situation would be much healthier.
But the matter is cross-border trade. If “Okinawan” people want to pay “Japanese application” via Okinawa-yen, background DEX conversion would be needed. A scalable Uniswap ish invention would help this problem though, we need to wait for the OVM progress.
Summing-up
These claims don’t mean I’m bearish on Crypto, rather, I’m very bullish. I just wanted to show another possibility of cryptocurrency with rational deduction.
I have a strong concern that current Crypto narrative is so fragile and many more alternative narratives are required as insurance.
Post Scripts
The communism is sometimes not bad
By referencing Leon Warlas, the Land Tax can be alternated by “Government-owned lands” idea. All lands have to be bought by the government in national-bond, and this is like sharing the seigniorage to ex-land-owners. The virtue of Warlas’s idea is the same taste as Robin Hanson’s Futarchy idea. The government can be evaluated by land price.
Independence of the Central Bank
These days, independence of the Central Bank is getting weaker in many countries. CB is powerful. They can manipulate electoral result via employment and inflation. They can issue money beyond MTPL’s safe area.
Now we can have multisig-based Bureau of Mint. Minting machinery doesn’t have to be master of all. The minting amount must be transparent to the people. Minting limiter must be defined by consensus. MTPL can lower the independence of the Central Bank, but the smart contract can harness that risk exposure.
The “nicehashable” heartless troopers
English Auction of on-demand military force is a national security issue. But I guess the strongest government in the range would pay the highest bid for it. So it is like the Nicehash in PoW mining. At least, Nation-states have to have bigger military power than “nicehashable” military power.
Gimme your huge claps if you got some takeaways from my article!
