[innino]

What is Bitcoin's deeper significance? I don't know much, but here are some sketches.

1) Bitcoin has the potential to destroy the tools of monetary policy. 2) Bitcoin has the potential to hide taxable income from governments. 3) Governments with dwindling tax bases may react by printing traditional currency, hastening the flight to Bitcoin in a vicious cycle. 4) Traditional currencies may collapse as people rush to convert them into Bitcoin. 5) Unable to tax coercively, traditional governments may collapse.

What might replace them? Toll roads and kickstarter philanthropy in Randian democracies?

(Is this in the ballpark for Bitcoin's potential impact or not?)

[TomGullen]

If we're talking about deep significance, I also think Bitcoin could be a tool to help support world peace (hear me out!)

My understanding of one facet of the UN is that by promoting trade between UN nations it makes war between these nations more costly and difficult thus reducing the chance that war would break out.

If correct a globally accepted and popular currency which can be freely transferred across borders between citizens of every nation could help depopularise outbreak of war between nations.

You can criticise this view in many ways, but I think it's undeniable in principal that open trade between nations would serve as a barrier for initiation of war and conflict. And raising barriers against this behaviour is only a good thing.

[userulluipeste]

In the WW2, USA was safest place in the reasonably-developed world. If you were wealthy and had the ability to move your assets from one country to another, USA was a safe bet for you. Obviously, the movement of wealth was also convenient for the host country's government. Nowadays USA may not appear as the only good place to be, but if you understood the underlying idea of the above reasoning, you may also understand that at any moment a conflict/war can induce a differentiating factor for perception of safety. If the environment becomes risky with a war to be unleashed, you won't risk keeping your wealth in a system whose very existence is endangered, you'll move to a greener pasture. A greener pasture, preferably in a powerful country, with no risk of having a war carried out on its territory and therefore with a minimal exposure to any conflict. Those greener pastures usually are in the very countries that seek war in the first place. The war itself is a profitable business in many ways.

Bitcoin makes no difference against this. Actually in the regard to world conflicts, Bitcoin carries an insulating effect. It makes you more mobile and more willing to get yourself to a safe and peaceful place to live (and spend your Bitcoins there).

[zorked]

I don't understand why people think Bitcoin necessarily leads to governments collapsing. Bitcoin can be regulated in many ways:

1. If you buy a house you must show evidence that you earned the money. You can't earn all your Bitcoins Breaking-Bad (or Silk-Road) style and expect that the government will think your new-found fortune is ok. Thanks to the blockchain you kind of can't lie too much, unlike, say, cash.

2. If the government wants to ban certain activities it can do so easily. Suppose that the government wants to keep its citizens from gambling or from using mixer services, it could declare that it won't recognize Bitcoins that passed through those services as legal tender. Good luck paying property taxes with your tainted bitcoins.

... and so on. Things are not that different. In fact the blockchain may mean that the government has more, and not less, access to information: for example governments generally can't access information from other countries except in rare occasions. With Bitcoins that information is accessible by default.

Now what the government can't do with Bitcoin is play games with the money supply. People in places such as Argentina could perhaps tell us why that would be a good thing.

[pjc50]

Except that finite money supply in a growing economy with positive interest rates is both deflationary and a driver of increasing inequality.

Sensible active monetary policy and "lender of last resort" activities are vital to functioning modern economies. That's why they had to be enacted in Europe during the financial crisis despite not being properly provided for by the existing Euro framework.

[shazow]

"Tainted Bitcoins" can be trivially laundered and mixed in with normal Bitcoins. This will only become easier in the future, and conceivably make it into the protocol itself with something like ZeroCoin.

It's funny but there is a lot of similar discussion on the other side of the fence, too: "Now that the FBI has a hold of DPR's Bitcoins, how do we blacklist these tainted Bitcoins so that we don't fall for honeypots/undercover agents?"

You can't, unless you want to fork the blockchain and start a new genesis block sans the Bitcoins you don't like, but that would be disasterous and no one would agree to it. It would defeat the whole premise of Bitcoin—why are your Bitcoins more special than my Bitcoins?

Truth is, tax collection works largely on the honour system, cooperation from employers, and through audits/investigation. Bitcoin is no different. The only real benefit the blockchain could give is to help automate some of the consensual tax collection further.

[icebraining]

2. If the government wants to ban certain activities it can do so easily. Suppose that the government wants to keep its citizens from gambling or from using mixer services, it could declare that it won't recognize Bitcoins that passed through those services as legal tender. Good luck paying property taxes with your tainted bitcoins.

Bitcoins aren't actual "things", they're just values that get debited from an account and credited in another, so you can't have tainted bitcoins.

You could have tainted addresses, by checking if there's a path between a certain address and the blacklisted ones, but then anyone could taint anyone else's address by just sending them a Satoshi.

[maxerickson]

It can play games though. It can buy and hold to tighten the market and then dump coins to loosen it up.

Given the current size of the market, a government budget of a few billion dollars can easily whipsaw the bitcoin supply.

[oleganza]

If things continue going as they were for the last years: government printing money and people trying to move savings anywhere but in the currencies, then yes, all printed currencies will become worthless and if people run to Bitcoin, it will be impossible to have "budget deficits" and very hard to tax many people.

Without government people would have to find ways to voluntarily pay for things they like to have. E.g. roads, insurance etc. Some roads will be paid, some roads will be sponsored by merchants that do business on the streets, some roads will be owned by big malls etc. The market is different from the state not in that it does something differently, but that there are millions of ways to satisfy demand instead of just one.

Read more on possibilities in "Practical Anarchy": http://freedomainradio.com/FreeBooks.aspx

[vectorpush]

Bitcoin is not a threat to centralized currencies, there is room in the financial world for both. A government controlled currency has some clear advantages, relative stability being one of them. I wouldn't accept paychecks in bitcoin for the same reason I wouldn't accept paychecks in gold bullion, although both have a demonstrable value, government issued currency provides a stable way for the average person to store wealth at scale. Although everyone sneers at the federal reserve, their financial engineering plays a real role in perpetuating western affluence (though it clearly has serious problems; a topic for another day).

The significance of bitcoin is that it's an unrestricted option for anyone at any time. Just because you won't accept your paychecks in bitcoin doesn't mean you won't want to use them from time to time, if only for the freedom to bypass the astonishingly ubiquitous banking institution. I'm not even talking about anything illegal (though illegal doesn't always mean wrong), I'm talking about the minefield of wealth draining fees and bullshit (frozen accounts, chargebacks, spending limits, really slow transfer times) that bitcoin lets you avoid when you want to.

[throwaway9848]

None of those is remotely in the realm of possibility, except maybe #2 and the difference in scale (at least in the US) between total tax receipts and the float of BC is so vast that it limits it to a very small percentage of the total. All bitcoin currently in circulation amount to 0.1% of one year of US tax revenue ($2.5T v $250M).

[oleganza]

Two and a half years ago 1 BTC was 200 times less valuable - around $1. Give it two more years and it will be 10% of US tax revenue. Than everything will be possible.

[MarcusVorenus]

The only thing that governments would need to do to stay in business is to tax things that can't be hidden, like land and real estate. I'm hoping they go with a single land value tax.

[oleganza]

Then, governments cannot longer be "socialistic" by promising something for nothing. To do new awesome "government service" they'd have to raise taxes and then the lie will become obvious. Since no one really wants governments if they don't get free stuff, governments will quickly lose any moral support and will be viewed as plain thugs.