Here's a post I was reading by JR Willet (MasterCoin) which goes well
with some chapters I was reading earlier from a 90s book called 'The
Sovereign Individual' about the effects of cryptocurrency.

http://imgur.com/a/eV74v#0

The implications spelled out by that book and Willet's post are
incredible and mind blowing.

More than ever, I'm convinced that we need to use these new tools and
the increasing unstable situation to construct a new reality that
enables us all to persevere as free people and maintain our sovereignty.

---------------------------

I have seen the future of Bitcoin, and it is bleak.

======================
The Promise of Bitcoin
======================

If you were to peak into my bedroom at night (please don’t), there’s a
good chance you would see my wife sleeping soundly while I stare at the
ceiling, running thought experiments about where Bitcoin is going. Like
many other people, I have come to the conclusion that distributed
currencies like Bitcoin are going to eventually be recognized as the
most important technological innovation of the decade, if not the
century. It seems clear to me that the rise of distributed currencies
presents the biggest (and riskiest) investment opportunity I am likely
to see in my lifetime; perhaps in a thousand lifetimes. It is critically
important to understand where Bitcoin is going, and I am determined to
do so.

My hundreds of hours of thought experiments have been productive. I
published a whitepaper about the future of Bitcoin, and because of that
paper I’ll have the great privilege of sitting on the “Bitcoin in the
Future” panel at the 2013 Bitcoin Conference in San Jose. Through these
years of deliberation I have satisfied myself that the answer to the
“Trillion Dollar Question” of whether any form of distributed currency
can ever achieve a stable price, is “yes”. (There are three ways this
will happen, as I have written elsewhere).

I have been predicting for years that the world’s first trillionaire by
USD valuation will be an early investor in distributed currency — quite
possibly Satoshi Nakamoto, whoever he/she/it/they may be. I own a few
bitcoins, and I intend to keep them until I find a more attractive
investment (that is, I want to invest in whatever replaces bitcoin or
builds on top of it).

To many people, this sounds like an implausibly rosy future, and for
early adopters that is true — it feels like winning the lottery every
day. However, for most other people, the ascendancy of distributed
currency systems will feel like a disaster. If you are involved in
Bitcoin now, you should prepare to be almost universally hated someday.

In this article, we will examine a few simple thought experiments to
show how the rise of distributed currencies such as bitcoin could create
massive social upheaval due to governments’ rapidly degrading capability
to fulfill their core functions of taxation and regulation of commerce.
We’ll see how the end result could be extremely painful for common
citizens due to previously unimaginable wealth disparities,
hyperinflation of previously stable government-backed fiat currencies,
and a greatly empowered criminal class.

===================================
The Bleak Future of Fiat Currencies
===================================

Anarchists and hardcore libertarians love Bitcoin, but most people
outside those circles are not in favor of completely doing away with
their government. If you aren’t part of a fringe political movement,
chances are there is something the government does that you like,
whether it’s handing out entitlement money, killing enemies, putting
people in prison, building dams and roads, funding research, or any
number of other things. The government can do these things because the
government can collect taxes, which in turn they can do because the
flows of money are highly regulated and tracked at every level. Whether
you are collecting a paycheck, buying furniture, cashing out
investments, or simply dying and leaving an inheritance, the government
knows about it and takes a cut.

For our first thought experiment, let’s imagine a world where
distributed currencies like bitcoin have become wildly successful due to
technological advances which make them easy to use and completely
stable. In this world government-issued money is as good as dead. It may
take a few years for everyone to realize it, but there will come a point
when the ever-increasing outflows of money from fiat money into
untaxable, unseizable decentralized currency will reach a tipping point,
and we’ll have a financial panic like the world has never seen.
Frightened lawmakers and banks will try to stop people from cashing out,
but that will just increase the panic. Those who don’t get out before
the door closes will be in dire straits indeed. This is the ultimate
bank run — the run on the world’s central banks, and who could possibly
step in and restore order?

When people think of hyperinflation, they usually envision a Zimbabwean
printing press running around the clock in the dark corner of a mud hut,
putting ever more zeroes on cheap paper. Has it ever occurred to you
that hyperinflation can happen while the printing presses are off? The
value of the money in your pocket is not ultimately guaranteed by your
government, but by simple supply and demand. The government controls the
supply, and we control the demand. If demand falls precipitously, we
have hyperinflation without ever needing to print another dollar or
euro. If people start fleeing government currencies en masse,
hyperinflation is the inevitable result.

The good news is that you don’t need to worry about current government
debt in this scenario. If government currencies lose their value
rapidly, debts which previously seemed overwhelming suddenly become much
more manageable. Perhaps your debt-laden government will someday
completely pay off it’s national debt by simply selling a few gold bars
and a couple national parks.

==============================
The Bleak Future of Retirement
==============================

For our next thought experiment, let’s consider what will happen to
Grandma. For her whole life, she has carefully saved her money, and now
she is living in reasonable comfort. She gets money and health care from
the government, and she has her own savings to fall back on. Grandma has
done everything right, including taking her savings out of the stock
market; most of her savings are now invested in the safest asset known
to man: U.S. Treasury Bonds.

Rather suddenly, things start to go wrong. At the same time all her
expenses start skyrocketing, the government has a liquidity crisis; they
are having trouble collecting taxes and can no longer pay for her health
care. Her savings are still “safe” in the sense that she will get U.S.
Dollars out of them, but that is little comfort when those dollars which
should have lasted years can barely pay her weekly grocery bill.

Grandma’s retirement has been sabotaged by the rise of a new kind of
money that she can’t even begin to understand. All she knows is that she
did everything right, and now she has nothing.

===================================
The Bleak Future Wealth Disparities
===================================

All the world’s wealth has essentially been stolen, but by whom? By you,
dear reader.

We’ll be very lucky if we aren’t all rounded up and summarily executed.
Thankfully, you’ll be able to use some of that money to purchase
protection, but I’m not at all convinced that it will be enough. A
wrathful government backed by an enraged population is a fearful enemy.
Satoshi foresaw this long ago, and I doubt he/she/it/they will ever
voluntarily come into the light.

If there are enough of us, and we are very careful and charming, we may
be physically safe. However, the massive displacement of wealth will
still have some awful consequences. People argue all the time about the
societal benefits and drawbacks of wealth disparities, and the rise of
distributed currencies will create disparities that previously did not
seem possible. It seems clear that there will be a lot of jobs created
by the new wealthy, but whether the average person is better off or not,
one thing is sure to rise: resentment. What right do we have to take all
the wealth of the world and put it in our pockets? Sure, a nifty new
idea should pay off for early visionaries, but nobody ever expected a
new idea to suck all the wealth out of the world like a financial black
hole!

===================================
The Bleak Future of Law Enforcement
===================================

This is where things get really bleak. Currently distributed currencies
facilitate money laundering, black market commerce (the Silk Road), and
insider trading (TorBroker). These applications in their current form
are just a snowflake on the tip of the iceberg. Not only will they get
MUCH bigger, but we will see applications which are much less savory.
Historically, the “Dark Net” accessible by Tor and private networks has
been nothing more than a hidey-hole for illegal files and a hangout for
paranoid schizophrenics, but it is quickly becoming the platform of
choice for large-scale illegal commerce.

For this thought experiment, we will imagine that your child has been
kidnapped and put up for sale on “TorSlaver”. Their business plan is to
kidnap children and sell them to the highest bidder, whether parent or
pedophile. The winning bidder is sent the location of the child,
probably bound and gagged and dumped somewhere. As long as they don’t
get caught doing the kidnapping, the kidnappers can do this again and
again with complete impunity. Once someone proves it can be done,
copycats will come out of the woodwork, and it won’t matter if the first
mover gets caught.

As a parent of three small children, I cannot describe to you how awful
this makes me feel. I have always been a very reluctant bitcoin
investor, for this very reason. I don’t invest in bitcoin because I
think it will bring about a happy utopian world. Quite the opposite. I
invest in bitcoin because the rise of distributed currency is
inevitable, and owning some bitcoins seems to be the best way to prepare
for the chaos ahead. And just maybe, if I position myself correctly, I
can make things a little less awful.

===========================
The Government Strikes Back
===========================

Does anyone really expect the government to sit back quietly and watch
while their currency is debased, terrorism is funded, and children are
kidnapped? The only question is when and how they will strike back
against these forces. While the government does have a lot of options,
ultimately those options only slow things down. At some point, we
collectively with our governments face a difficult choice between trying
to survive this deadly storm or attempting to destroy all decentralized
computer networks (including the internet). The former seems
unthinkable, the latter, impossible.

I wouldn’t be surprised if this chaos gives rise to a strong,
centralized, one-world government which gets its revenues by tightly
reigning in freedom of commerce in order to collect taxes. For instance,
I will not be surprised to see a requirement someday that every person
buying or selling have an implant which tightly binds their identity to
the sale. Perhaps the implant will even be located on the back of the
right hand or the forehead! This may seem repugnant to you now, but wait
until you have lived in the storm for a while before you call it
impossible. The natural reaction to the deadly chaos of decentralized
currency is for the populace to embrace increasingly centralized
controls on commerce. The battle lines are only just starting to be
drawn, and your guess is as good as mine for how it will play out.

==================
What Should We Do?
==================

We need people thinking about this. I’ll admit that many of the things I
wrote about may not happen at all, or may happen very differently than I
imagine. However, there are lots of people touting the fantastic
benefits that bitcoin and its children can give us, and I don’t see
anybody talking about how bad things could potentially get.

We need solutions. When the government finally starts taking
decentralized currency seriously, it will probably be doing so in a
state of panic. We need to be advising governments now about how they
can survive the storm and protect their populace. We need to think of
ways the government can pay for its most critical operations, and what
legislation makes sense to mitigate these new risks while preserving as
much freedom as we can.

The Lifeboat Foundation is attempting to provide this thinking, advice,
and solutions. They are already getting ready for a new advisory board,
culled from computer scientists, economists, and bitcoin experts. If you
make a fortune from your investments in decentralized currency, I urge
you to consider how you can help all the people harmed by these rapid
changes. Many bitcoin enthusiasts seem to think they will get to retire
on a private island with a harem and a stable of Italian sports cars.
This is wrong. Bitcoin investors need to someday become bitcoin
philanthropists, and our giving needs to be targeted at helping all the
people we have harmed. The Lifeboat Foundation is one option, but I’m
sure there will be others.

I first published this article on the blog of the Lifeboat Foundation:
http://lifeboat.com/blog/2013/04/bitcoins-dystopian-future
Reddit version is here:
http://www.reddit.com/r/Bitcoin/comments/1cos8x/bitcoins_dystopian_future/

tl;dr: Wildly successful distributed currencies could hurt a lot of people.