It’s the year 2030.
You wake up, and read the news: The ridesharing market is up 5% this week. You smile, feeling glib about your purchase of ride-coins earlier in the week.
Spring break is close, you thought. Plenty of college kids are going to be ridesharing, which means plenty of speculators will want to sell them ridesharing coins.
Seems like you were right. You open your digital wallet, which is an app on your phone, and check the balance of your investment portfolio.
You sell off your ridecoins. You don’t get the full 5%, but you already know why: As a thank-you for your investing acumen, the government has taken the liberty of seizing your capital gains taxes instantly and invisibly, saving you the stress on tax day.
You notice your monthly paycheck has also come in—minus your income tax. How convenient.
You think back, and realize that “tax day” hasn’t involved filing any physical tax returns in years.
That’s because, on this new, government-backed digital wallet, you can see the all the money you spend, and all the money you receive, and everything from sales tax to inheritance tax is calculated—and deducted—behind the scenes, beyond your awareness.
The process is automatic, indisputable, and at times completely invisible to you.
And it isn’t just taxes that have become automatic, either. Every transaction you’re a part of—whether it was a purchase, a gift from a friend, or a donation to a cause—is instantly audited and tracked.
What’s more: Broadly speaking, the word “transaction” now applies to pretty much everything.
Your self-driving car exchanges data with other cars on the road about your route and priority; that’s a transaction.
Your cellphone, laptop, and even your TV trade data with each other, optimizing content for you and making sure you’re never stuck not knowing what movies to watch or what games to play; that’s a transaction.
Your devices also constantly communicate with your entire neighborhood, coming up with the optimal schedules to fit everyone’s individual routines, and making sure no one’s Internet connection is ever too slow when they most need it; that’s a transaction.
All of that data can be, and will be, audited by the government.
You check your email (yes, email is still around) and see a message from the IRS:
“Please list the purpose of the listed transaction(s):”
You were expecting this email, after your brother-in-law sent you a birthday present of $500.
“Birthday gift,” you write back.
But there’s a problem: Your brother-in-law actually forgot your birthday. In truth, he sent you the money because he felt he owed you for helping him move.
Unbeknownst to you, you’ve just set yourself up for an audit.
The system works at light-speed, registering the conflicting stories behind this mysterious $500, and immediately you receive a reply:
“Please expect a follow-up visit from our auditor at 6pm tonight.”
But you’ve already closed your email, and aren’t expecting such a quick reply. Why would you? You have nothing to hide, so there shouldn’t be a problem, right? You meet up with your college pals after work and decide to play basketball.
Afterward, you get in the car to drive to your niece’s violin recital, but you find your car won’t do as you say: “ERROR: Illegal Route,” it declares.
Baffled, you open your phone, and see a notification:
“TRANSACTIONS FROZEN. PLEASE GO TO LOCAL IRS AUDITOR’S OFFICE TO REQUEST RELEASE. YOUR VEHICLE HAS BEEN NOTIFIED.”
You’ve also got an angry voicemail from your brother-in-law, stating his assets have been frozen as well, and demanding to know what you said in your email that morning.
This is a world where the government has embraced the technology of cryptocurrency.
In this world, transaction data on a blockchain is legally backed, and legally binding. The effects of this are twofold:
- The genesis of a new peer-to-peer economy, where providers of any good or service can be matched with consumers without the use of any middleman. They make more money while consumers spend less, and standards of living have risen for all.
- Legal and bureaucratic procedures, which used to require hundreds of pages of documents, expensive lawyers and masses of redtape, now operate under a single premise: “CODE IS LAW.” This means executive arms of the government, such as the IRS, SEC, and police, no longer need to wait for courts to issue warrants; warrants can be issued automatically, upon certain conditions being fulfilled within the new legal system of smart contracts.
The public loves cryptocurrency. Little headaches, like breaking up the check at dinner, or divvying up the power bill with your roommates every month, are no more. You just worry about the money you spend for yourself, and watch it come in automatically when it’s owed to you.
And the government loves it, too: Now that people have stopped using paper cash in favor of the Federal Reserve’s crypto-dollar, it’s easy to track down fraudsters and criminals.
Confused, and frustrated, you allow your car to take you to the auditor’s office—the only place it can “legally” take you now, apparently—and storm inside, demanding to know how they expect you to explain your absence to your niece, sister, and brother-in-law.
“What’s this all about?” You bellow at the unwitting receptionist.
A voice behind you says your name.
“Yes?” You turn, and some suit hands you a subpoena.
“We’d like you to help us understand what kind of business dealings you’ve been having off-chain. Please provide us with your private key, a full account of any paper money or valuables you’ve received in the past year, and give us your full cooperation in this investigation, or face charges of attempted tax fraud and money laundering.”
You look back in anguish on the last ten years. How did we let this happen?
You remember the crypto-anarchists and libertarians who touted blockchain as the “Great Democratizer.” They said this technology would set us free from regulation. Instead, it’s made everything worse.
What went wrong?
How could a different world have been created?
How could the economy have been improved for everyone, without making it this easy for the government to intervene?
And who would’ve had the power to set the right wheels in motion?