I am not sure blockchain will replace governments. But, I do think blockchain will add a lot of transparency to governments and government processes. A scenario I was thinking about yesterday is in my own backyard. Oil and Gas companies lease land from farmers and ranchers for access to their land to drill. When times are good, the O&G companies pay their bills. When times are tough...this happens http://calgaryherald.com/business/energy/record-numbers-of-farmers-seeking-lapsed-payments-from-oil-and-gas-industry what would happen if we had blockchain and smartcontracts? I am willing to bet we would have a fair, transparent process.