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Tax season is almost over in the U.S., and it got me thinking. Out of curiosity, I had joined a local chapter of the Libertarian party in the past. Many of them loved cryptocurrency. And many, but not all, have the belief "Tax is theft." The primary motto is also NAP, the non-aggression principle where initiating force or coercion unprovoked is forbidden. And in most tax systems, if a person were to evade taxes they are liable to be forced to pay up in the future.

So, I was curious about having a way to have a tax without 'theft' as many put it. My thought is that there can be a cryptocurrency based off of radioactive decay. Each coin in circulation among the population has a coin is encrypted with an internal time at which it will expire after that time has passed by deleting itself.

The government has a single 'source coin' that creates the exact number of coins that are self-deleting. The government would set the tax rate by choosing the $\lambda$ that gives the effective rate. The internal times for each coin created would follow a random distribution.

This tax would be regressive because the rate is the same for everyone. I think it would also mean that individuals would not be required to file an income tax form which seems efficient.

What would be some unintended consequences of said system?

Here is a decay simulation up until half is gone:

Coins decaying in a a circular disk.

This was generated based off of the code from my Mathematica answer for Illustrating half life. Clearly the rate would be much slower in real-life.

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  • $\begingroup$ I am okay with a down vote, but I would like an explanation of why. I am not proposing this as a policy like I would on Meta. I am just curious how this would play out in society. $\endgroup$ Commented Mar 20, 2025 at 16:11
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    $\begingroup$ This is not a reply to your comment, but mapping a particular decay detection event to a particular atom in a sample (in order that it should be mapped to a particular coin) is impossible. $\endgroup$ Commented Mar 20, 2025 at 16:14
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    $\begingroup$ The example you provided is a simulation, not an implementation. This reads as "inflation but worse", because of the lack of granularity. If there were a billion coins in circulation, given wealth distribution, a non-zero number of people would have one or fewer coins. If their coin decays, they lose everything. This is a terrible currency. $\endgroup$ Commented Mar 20, 2025 at 18:07
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    $\begingroup$ Also, (and the reason for the downvote) why on earth is this a cryptocurrency at all? You've said that the government holds the 'source coin', and controls lambda. If that's the case, distributed chains are totally unnecessary, just centralize the whole thing. $\endgroup$ Commented Mar 20, 2025 at 18:08
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    $\begingroup$ Cryptocurrencies have an illusion of security based on distributed mining equipment. In reality, both crypto wallets and the block chains can be hacked. The block chain hack might require the resources of a hostile nation state to overwhelm the existing chain security, but it can be done. Why would a country put their trust in something like that? $\endgroup$ Commented Mar 21, 2025 at 14:46

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This is very similar to how inflation works in reality.

The central bank has what you call the "source coin" -- the authority to issue new money. They can choose the rate at which they issue money, including issuing no money or even taking some out of circulation (effectively issuing negative money).

Although real-world money does not experience radioactive decay, its value diminishes over time due to inflation. If you stuffed 100 U.S. Dollars under your mattress in 1975, you would still have 100 U.S. Dollars today -- but you'd be able to buy between four and seven times less stuff with it, because things are four to seven times more expensive now. (Very rough estimate for the purposes of illustration.) Even though the physical bill hasn't changed, the purchasing power of the dollar has diminished. All dollars, everywhere -- how egalitarian! So this is very similar to your proposal, as if the dollars were radioactive and some fraction of them had decayed.

Printing money is an important part of setting monetary policy and managing the rate of inflation, but it cannot be the only part. The central bank can control how much money is in circulation, but they don't directly control what it's worth to people. This can be a problem if the government needs a lot of money, say for some infrastructure project. (Your libertarian colleagues would say that this shouldn't happen because the government shouldn't need a lot of money.) Assuming they decide to get this money by issuing new money instead of increasing taxes or borrowing it, then that will naturally devalue the existing money as the supply increases. In particular, it devalues the money they just printed, so if the amount printed was too great then they can no longer afford the project they issued it to pay for! So they issue more money to fix the problem... and I think you can see where this is going. Compounding the effect, people will see that their money is devaluing fast, and will sell it to buy a more stable currency or commodity (e.g. gold). So demand for this currency will drop as the supply massively increases. The process is called hyperinflation, and it effectively wipes out the value of the currency entirely.

So that's the most likely consequence.

Another point: If the government doesn't collect taxes at all, there's little to no reason for people to keep using this radioactive money. They would be able to sell it and do all their transactions in gold or Euros or bitcoins or goats or what-have-you, in some form that's better because it won't randomly decay. In reality, even if you get paid in goats you pay your taxes in U.S. dollars, so as an American citizen you legally have to interact with the dollar at some point (or go to prison I guess) and the grocery shop has an incentive to accept the dollars you're buying groceries with.

One of the comments asks why this would cause inflation, since the total amount of money in existence remains constant.

Consider redenomination: changing the face value of a currency in circulation. For example, in 1922 Germany was going through a period of hyperinflation, and redenominated their currency from the Papiermark to the Rentenmark. One Rentenmark was worth 1000000000000 Papiermarks. During the changeover period, you could use both interchangeably at this rate, but no new Papiermarks were printed and the existing ones could be exchanged at the bank.

Redenomination doesn't change the money supply, it doesn't create new value or destroy any, nor make anyone rich or poor who wasn't already. It can be of great symbolic value, but the practical effect is that people won't lose count of the number of zeroes in the price of bread.

Radioactive money is basically a continuous process of redenomination. A wad of a thousand radiodollars today will be redenominated in a half-life into a wad of five hundred radiodollars. The actual decay process is purely psychological. If the decayed coins were destroyed entirely, this would be a pure redenomination and wouldn't have any monetary impact. (I don't know what would be the psychological impact of knowing that for every radiodollar in your bank account now there would have been 1024 radiodollars ten half-lives ago.)

But the decayed coins aren't being destroyed, they're going to the central bank.

So that's why I think this is exactly equivalent to printing money. If the central bank decided to have 10% of all coins decay, this would be like redenominating the currency to have 10% less value (basically meaningless)... and then printing a large sum of money, which is where the real monetary impact comes from.

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  • $\begingroup$ The assumption in the OP is that the decay rate = creation rate. The government decides the numerical value of that rate. But the number of coins in circulation doesn't change. $\endgroup$ Commented Mar 20, 2025 at 15:47
  • $\begingroup$ But I don't know if a government would accept such a currency that they couldn't control how many coins are minted. Just curious how it would play out. I am not expert. $\endgroup$ Commented Mar 20, 2025 at 15:53
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    $\begingroup$ @TegLouis A distinction without a difference. Whether they are printing new money or teleporting existing money to themselves, they reduce the purchasing power that everyone else has by a constant multiplier. $\endgroup$ Commented Mar 20, 2025 at 15:56
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    $\begingroup$ @TegLouis It's entirely up to the government whether they'll accept taxes in any particular currency - historically, many countries accepted "taxes in kind", in the form of food or animals or hours of work. It's also up to individual people whether they accept a payment (salary etc) in any given currency. $\endgroup$ Commented Mar 20, 2025 at 16:02
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Inflation

Congratulations, you've developed a currency that mimics high inflation. The unexpected side effects will be... all the things that come with high inflation.

Generally, people will try to convert their money into something with a more stable value - eg, go buy US dollars with it - or they will try to be paid in some other currency - eg either barter for other goods or services, or be paid directly in USD.

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    $\begingroup$ Not high inflation necessarily - the inflation rate is directly controlled by the lambda parameter. A currency half life of 30 years would be a slower decay than fairly typical 3% inflation, in which money loses half its value in only 24 years. $\endgroup$ Commented Mar 20, 2025 at 15:54
  • $\begingroup$ @NuclearHoagie Mathematically you are correct. But would the government set a low lambda or would they be unreasonably set a high amount because there might less resistance from the public? I am not in favor of or against the proposed currency. But am curious how it would play out. $\endgroup$ Commented Mar 20, 2025 at 16:06
  • $\begingroup$ @codeMonkey, I still don't understand how inflation would be caused. The number of coins in circulation would be constant in the system. But I have read some theories that money velocity can affect inflation. $\endgroup$ Commented Mar 20, 2025 at 16:14
  • $\begingroup$ @TegLouis - it doesn't cause inflation, it mimics inflation. If I have 100 coins, and an object costs 100 coins, I can buy it. But if there's 2% inflation, a year from now I'll have 100 coins, and the object will cost 102 coins - I cannot afford it! It is functionally equivalent if 2% of my coins decay every year, and so a year from now I have 98 coins and the object still costs 100 coins and therefore I cannot afford it. $\endgroup$ Commented Mar 20, 2025 at 16:34
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    $\begingroup$ @TegLouis - which is a long way of saying that this is basically the same as not collecting taxes and just printing more money every year, but with extra steps. $\endgroup$ Commented Mar 20, 2025 at 16:36
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This was actually an idea floated by the United Nations in the seventies. I can't find a reference, but the idea was to make a currency with a built-in inflation. This would be good for doing short-term deals when the losses would be tiny, but it cannot be hoarded. If you rob a bank and lie low for 20 years, your money will have disappeared. It is effectively a way of taxing cash reserves, because the powers can print more money to replace the devaluation.

It never happened. There is too much regular currency. At the time, many deals were done in dollars because they were stable. I remember going to Russia during Perestroika when the prices in supermarkets were quoted in dollars and converted to roubles at the tills, so they did not have to re-label all their products on the shelf.

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everyone approached this question from inflation angle, but let me approach from another angle, assuming the powers in question finds a way to deal with inflation effects.

  1. fairness: using a random distribution of monetary loss seems to be fair when viewed as a whole, but it does not have any guarantee of equal participation per individual. In theory, it could delete all money of a poor person while not taking any from a rich person. While this is a low probability, it will eventually happen given the number of people involved. then these type of unjust deletions could possibly cause some riots. anti-goverment powers could use these as justification for their causes and it could cause more chaos.

  2. savings: if this would cause all money to be potentially erased, then it would prevent savings in the currency, which in turn would cause devaluation of the currency in addition to inherent deletion. since the currency cannot be saved, it must be spent as soon as possible which reduces the value of the currency.

  3. alternatives: if money saved in banks are exempted from this deletion, then people would directly deposit all their money to banks and use credit cards and similar other means for purchasing things effectively bypassing the deletion thus making the taxing ineffective.

  4. trust: another issue would be the trust. even if goverment declares it is bound to atomic decay which cannot be falsified, at the end people will not see it happening with their own eyes, which is a potential cause for civil unrest where people can accuse government for deleting money of opposition etc.

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