Dystopian Ways Government Can Fund Wars in a Crypto Utopia

Last week undefined with the Dash account where we discussed whether or not mass adoption of cryptocurrencies could prevent governments from waging endless wars.

I briefly mentioned some possible bearish takes, but let’s dive deeper. Here are a few increasingly dystopian ways governments could actually leverage crypto to fund wars at a frightening scale. Note: this is not a prediction, but rather a fun exploration of how things could theoretically go horribly wrong.

1: Custodial Confiscation

The first is easy: tons of people, especially Bitcoiners lately, use custodial platforms to buy, store, and even use their crypto. If self-custody can be successfully discouraged, we then have massive amounts of money able to be accessed by governments with a snap of their fingers.

Yes, it would be very unpopular for western governments to start confiscating user funds to pay for wars, but it’s still possible. And, the likelihood of such a thing transpiring without much pushback increases if certain unpopular groups are targeted, such as alleged tax cheats, those under criminal investigations, etc.

2: Printing Paper Crypto

Earlier this year I published an article about the coming paper Bitcoin crisis, or a near future where the amount of Bitcoin claimed and traded will exceed the actual number of Bitcoin in existence.

https://inleo.io/@thedessertlinux/the-coming-paper-bitcoin-crisis-esg

Essentially, this involves fractional reserve crypto, where governments use custodians to pay war debts in representations of crypto without moving the actual crypto itself onchain. This is similar to fractional reserve banking, where the bank only holds a tiny fraction of customer funds, just enough to service deposits and withdrawals, while exchanges between institutions can happen without any actual money moving at all.

With the advent of government strategic reserves, we could easily see a situation where governments pay in crypto without actually drawing down their claimed reserve balances. At this point we’ve essentially reinvented the money printer.

3: Exchange Front-Running

Speculative markets, such as crypto, react dramatically to world events, such as announcements of war, tariffs, and more. If governments own crypto, they can easily sell before major geopolitical events are announced, then buy back lower, profiting from market manipulation they themselves cause.

Once again, if this is done on custodial platforms, the capacity for transparency is limited. This is much harder to do on DEXes; however, if we do get to an era of very liquid privacy DEXes, there could be undetected manipulative movements such as these.

4: Government Prediction Markets/”Sports Betting”

We have seen the runaway success of prediction markets such as Polymarket during the last election. What’s to stop a government from creating its own to profit off of predictions surrounding warfare? Either an exclusive government license, or a subsidy of sorts, behind a war prediction market, similar to state-run lotteries, could be used.

This would turn war into a sport, and prediction markets like sports betting, a highly profitable endeavor.

5: Token/NFT-Driven Front-Line Access

Finally, let’s get creepy. Imagine governments selectively released footage from troops, movements, even some key battles, and sell tokenized access to certain feeds and exclusive content. Sponsor tanks, bombs, drones, etc. There’s already some precedent for this.

War is one of the most horrific, yet universally captivating, human experiences. Cryptocurrency and blockchain technology offer unprecedented global access to the financialization of everything. The ultimate dark side of this tech is that it’s applied to our basest nature, turned to profit by the war machine.

I, of course, believe that cryptocurrency has limitless potential for good, and will make it harder to finance endless wars. But it’s worth doing a quick exploration of how things could hypothetically go horribly wrong.

Enjoy the black pill!

Posted Using INLEO