The future of public finance

Power has historically shifted from governments to people. Democracy is the product of revolution and disruptive innovation by those who abhor the elitism of aristocracy and monarchy, who fear the single-mindedness of theocracy, and see the impracticability of communism. More than ever, governments stand for fairer and more trustless social contracts. How do we merge rule of law with code is law, and can we have both?

As we see the unstoppable force of decentralization, we must acknowledge: mass communications, intercontinental travel, widespread literacy, proliferation of the internet, pro-democracy movements, and the emergence of gig economies.

Liquid taxation: Individual control, instant reward, real-time impact

The problem with taxation is the hostile tensions that arise once a year between governments and voters. We end up funding senior officials whose judgment we trust less than our own. The solution is that we control our societal contributions in real time, on the streets we walk, with other community members as co-creators at the local level. Web3 is a chance to make taxes meaningful, build community through economic power, and enjoy paying our taxes instead of dreading the act. Liquidity taxation works as follows.

Imagine receiving an estimated tax return at the beginning of the year based on your income and net worth. This assessment will be uploaded to your municipal crypto wallet. Throughout the year, if you see problems to solve and causes to support, send whatever amount of money you deem appropriate. If you wish, recruit friends to contribute with you from their tax pools. If you see something that needs attention, create a funding pool for that issue, like a crowdfunding platform.

Because people determine the problems and corresponding solutions of their own neighborhoods where they raise families and go to work, the impact is easily measurable and immediately gratifying. It builds a sense of community when local issues are dealt with so quickly and efficiently that they don’t have to be trifled with at the national level. At the end of the year, each individual receives a summary of how they’ve contributed to their own economy, how much of their tax assessment has been used, and the types of community benefits they deserve. Thus, taxation occurs in real time as a tool of fluid democracy. Locals are isolated from time lag, human error, asymmetric information and the bureaucracy of higher governments.

If you don’t spend your tax bill, the difference goes to your local government to use at its discretion. If you spend more than you actually owe in taxes, you’ll get a refund. If you feel like it, you can delegate your tax authority to a friend or family member whose judgment you trust. If this all sounds like a Decentralized Autonomous Organization (DAO), that’s because it’s a possible instantiation of cash taxation.

Related: Decentralized Autonomous Organizations: Fiscal Considerations

Smart Contract Procurement: Automation, Scaling, Efficiency

Government spending is inefficient due to bureaucratic silos. By automating the negotiation of procurement contracts between vendors and government organizations, we can save public finances and help great companies make more money.


It helps everyone spread effective products and services from city to city, state to state, and department to department. Smart Contract Procurement can also automate and adjust cancellation and refund policies when something goes wrong. In the world of Web3, procurement will not be handled by legal, political, and bureaucratic teams that are both redundant and inefficient.


Smart contract procurement is more meritocratic and competitive than what we have today. It is also a tool of resilience for public sector workers, who often receive less than they earn from the private sector. In addition to this system, we can introduce smart contract microbonds and tokens for municipal utilities that raise discretionary funds for local issues.

Related: What are smart contracts on the blockchain and how do they work?

Multi-currency monetary system: from physical to digital, national to local

The problems with physical currency are well known. Digital currencies offer excellent traceability, security, privacy and ease of administration. The problem is that central banks issue a single currency for different jurisdictions. Just as it makes sense for the world not to have a planetary currency, it makes sense for a nation to have a diversified set of currencies that work together between the federal, state, and city levels.

Related: From Cash to Crypto: The Cantillon Effect vs. the Nakamoto Effect

Decentralization does not mean crypto anarchy. It means shifting power and responsibility to places, from abstractions like federal governments to frontline actors like city governments. “Power to the people” means power for the cities. Local authorities and neighborhood communities should solve their own problems instead of having to negotiate with higher levels of government and their hands tied.


Multi-currency monetary systems have the following advantages: 1) Preservation of values ​​created and shared within local communities; 2) reducing the administrative burden of higher governments; 3) enabling a nation’s microcosms to autonomously problem-solve with each other in real-time using North Star metrics; 4) Shield city and state economies from the adverse effects raining down from national and international economies. With a physical coin, this model would be a total mess. However, with a digital coin and smart contracts, this model is possible for the first time in history.

Civic engagement, social resilience and economic performance are the basis of the social contract in liberal democracies around the world. With the unstoppable power of Web3, for the first time in history, we have the opportunity to make public governance and finance fair and fun through Liquid Raxation, smart contract procurement, and multi-currency monetary systems.

This article does not contain any investment advice or recommendation. Every investment and trading move involves risk and readers should do their own research when making a decision.

The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Luke Kim, originally from Tokyo and Seoul, is co-founder of Berkeley Blockchain Xcelerator, co-inventor of two blockchain-based public finance models in partnership with a US mayor’s office, partner at Truth Cartel and co-founder of startup Grind Berkeley . He is an investor and advisor to changemakers in the world of Web3.