Money unites a society and serves as the measure of what its members value. By accepting something as money, each of us support the values implied by its protocol and the power of the individuals (if any) who have special control over it. Accepting U.S. dollars empowers the U.S. government and Federal Reserve. Accepting Bitcoin empowers miners. Accepting Steem empowers the Steem stakeholders and community.
With this principle in mind, the foundation of a system of government should be a clearly defined currency protocol. Just as Bitcoin and Steem provide for funding public services (transaction processing and security) by introducing new units into circulation, any desired set of public services could be funded by direct issuance of currency. The only limit is the people's support for the system and willingness to tolerate the inflation that will result from high levels of government spending under this system.
Funding spending through direct issuance of new currency involves dramatically lower overhead costs than an income tax, property tax, or sales tax. There is no paperwork to fill out, no complex code, and no enforcement expense. As an added benefit there is no artificial limit to the number of competing 'governments' that could exist following this pattern. Each has only to define its protocol, issue its currency, and begin attracting users who will accept its currency in payment and thereby support its promised programs. Consent of the governed could become the true path to influence rather than the tired excuse for dominance it is today.
The United States may (optimistically) already be on a path toward this system. As government spending is increasingly funded through additional debt rather than taxation, and with the Federal Reserve positioned as the lender of last resort, we could reach a point at which taxation is so unpopular that politicians have no interest in continuing it. Government spending could then be funded entirely through new currency brought into circulation through the Federal Reserve System. This could either be the beginning of the dollars hyper-inflationary death spiral, or the point at which U.S. politicians finally have the necessary incentives to spend responsibly. If the people have feasible alternatives to the dollar the odds of the latter case will be greatly increased. In a competitive government/currency market, governments will be required to limit spending to near the rate of economic growth so that issuance of new currency does not result in excessive price inflation. Excessive spending will result in their currency being replaced and their power stripped from them.
For such a system to work, it will be important that a strong consensus develop among the people that all should be free to accept or reject their chosen currencies free of violent coercion. As currencies develop network effect, there will be economic pressure to integrate with the mainstream. This pressure should be sufficient to allay concerns about free riders, but if large scale attempts are sustained to coerce conformity violently then the entire accountability system will be undermined.