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Comment by pg_1234 | Hacker News Reader

For an example of undermining (and de-funding) central authority, if DeFi (crypto etc.) goes mainstream it will have a devastating effect on nations ability to track and tax commerce.

Mobile to mobile DeFi payments will basically enable a black-market economy where the 'cash' is issued by a foreign power and is much easier to hide.

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The assumption here is that you have enough of a functioning state with enough security to have things like "cellphone towers" and "electricity" and "IC manufacturing" while not having the ability to tax economic activity within it.

Maybe converting over to a pure Georgian style land tax for all tax revenue. It would be a much better way to raise taxes in my opinion for many reasons. You will have a hard time hiding land.

> if DeFi (crypto etc.) goes mainstream it will have a devastating effect on nations ability to track and tax commerce

This gels with the parent comment. States which heavily restrict devices and connectivity will have no problem tracking and taxing. Those which rely on a progressive tax system, or feature privacy rights, will.

Keep in mind that, for most of human history, commerce was not traced by rulers. The simplest tax is a headcount tax. You pay the tax or bad things happen to you. That some people literally cannot pay is unfortunate but unavoidable.

One of the sources of value for money is the fact that you can pay your taxes with it. Why accept a random symbol in exchange for goods? Today we put emphasis on value tax and income tax, but if those become unreasonable hard to collect, taxing observable properties would be the solution.

Imagine going to a restaurant and paying with untraceable bitcoin, the owner however has to pay a tax proportional to the number of chairs. In order to pay they have convert bitcoin to something the state accepts.

Crypto still relies on the real banking system to feed real cash into and out of their system. States have tight control over the banks.

If crypto exchanges/standards don't want to do KYC, they won't be able to interact with the real economy.

I wonder if you are misinterpreting the dependency structure of the core action that powers the "real economy" which is the act of exchange.

Before state currencies, the barter system existed -- even today, it still does exist, and crypto in a lot of ways is in theory supposed to bring things digitally back to that age old system.

States have control over banks only so far as they maintain a /global/ monopoly over force and a mandate in popular support which they can practically demonstrate. What you're talking about is the distance between de facto and de jure, and I think what you're missing is how the former leads the latter, not the other way around.

This isn't to say that your second point is completely incorrect, I just think it misplaces the center of gravity -- I think that will practically lie with the merchant given that an exchange can be decentralized enough that there is no "neck to squeeze" when misbehavior occurs.

I think its important to note that while these things are largely true (though i'd say that banks have tight control over states [5+ time felonious JPM and friends, constant bailouts, etc]… esp weaker/smaller states…), there are instances today where people trade goods and services with crypto without "cashing out" (esp more so than a decade ago) through centralized exchanges.

A variety of credit/debt based decentralized stablecoins and dexes will take over in the long run from centralized exchanges and bank account onramp. Even centralized exchanges are trying to get exposure to defi protocols now that will eventually obsolete them for traditional functions for all but the tech laggards.

This is true in El Salvador, where bitcoin has the explicit endorsement of the state.

Elsewhere, other than dark web drugs and jpegs of apes, what exactly are people buying with crypto?

Just because some (most?) people now in most places may buy only drugs/nfts (and whatever real or imagined things of contested value [eye of the beholder…]) hasn't stopped me personally from accepting eth/btc for dev work and swapping for cash in my local jurisdiction(s) (or in some cases, paying in stablecoins [dai] for food from a friend who has a few of their own stores accepted it).

But it doesn't take a genius to predict how governments would react to a technology that effectively prevented them from collecting taxes, even in relatively liberal and democratic places.

And how should governments react to people dodging taxes, really? Should they just stop collecting them and cease to exist?

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