Bitcoin is a possible revolution in the making. Bitcoin is not just about convenient money, or avoiding government inflation, or all the other problems inherent with central banks and fiat money. What if a substantial number of transactions are conducted in Bitcoins themselves, without first buying them with dollars? What if sellers do not convert the proceeds of their Bitcoin sales into dollars, but instead buy their supplies and labor with those Bitcoins, and the recipients likewise buy what they need in Bitcoin? That is, what if an economy were created in which buyers and sellers transact only with Bitcoins—untraceable, anonymous, and secure. For sellers, the Bitcoin economy would leave no records of sales with the State. No reportable income, and, if not reported, no taxes to pay on sales or profits. This would be equivalent to a cash underground economy, but one that is far more vast.
Bitcoin makes a worldwide underground economy feasible, does it not? In such a scenario, once a critical mass is reached, tax revenue would start to noticeably decline. And when word gets out, when it reaches a point of popular acceptance, it would begin to snowball. The State would gradually shrink to a much smaller entity, deprived of a major source of its financing—and all without voting or any social turmoil.