With tax day upon us, it’s fun to reminisce about how we pay our tithes to the government in the interest of the greater good. After all, taxes are what build the roads and fuel the spiraling bureaucratic leviathan that supports to the American dream, right? Tongue and cheek as these statements may seem, taxes are at the foundation of our private lives and create demand for our domestic (and world reserve) currency – the dollar. By requiring government revenue be reported in US Dollars the Feds create need for the dollar which is hard pressed to die any time soon, and this is something to keep in mind for Bitcoin advocates everywhere.
Think about it – you pay the IRS in dollars. Plain and simple. They require their cut upon wages earned in the currency they choose and you don’t have a say in the matter. The only certainties in life are death and taxes, and US taxes are paid in dollars.
Now this doesn’t mean this paradigm will never change. A currency crisis is not beyond the realm of possibility for the dollar, euro, yen, renminbi, etc, however, the old guard will not go down without a fight. But when they do fall into the abyss, this will be Bitcoin’s opportunity to take center stage, likely along with gold, to fill the void in the hollowed out monetary system. Only through cataclysmic collapse of the fiat currency markets can Bitcoin emerge as the global leader…and even then it’s not a sure thing.
What I’m really trying to get at here is that if Bitcoin is ever to become anything other than the “currency of the internet” ruling bodies will need to accept it as tax revenue which probably won’t happen until confidence in the current fiat system completely implodes. And if you think government’s accepting Bitcoin for revenue and an apocalyptic fiat armageddon is in the future, a “when” not “if” question, just remember that the market can stay irrational much longer than you can stay solvent.
Choose your sides wisely and hedge accordingly. We have no idea what’s going to happen but the next 5 – 10 years will bring radical change to our lives and the lives of people the world over. Money represents the biggest market and the core social contract government has with it’s citizens…through taxes and social stability the world continues to operate in a somewhat sane and predictable manner. If either taxes of fiat legitimacy changes, this will be the opportunity for new ideas and innovation. That will be Bitcoin’s opportunity to shine.