I don't have statistics in front of me, but over history the tendency is to stay loyal.
If you look at how companies try to evade paying taxes, that's a bad assumptions. Companies usually try to whatever they can do to legally avoid paying taxes instead of paying more taxes then necessary out of loyalty to the government.
As far as your current setup seems to work, all the "pref" seems to go back to from N1 to N2 in cases of decay payed. The person who owns N2 can create a N3 and transfer all the money from N2 to N3. That way N2 never pays any decay fees and N2 get's part of the decay fees that N3 pays and can refunnel them to N3.
As far as the fees go, Bitcoin's fees are non-zero but very close to zero
There are people who argue that bitcoin fees should be $0.41 per transaction (http://www.coindesk.com/new-study-low-bitcoin-transaction-fees-unsustainable/). Even the 4 cents that currently exist can still matter.
While fees might be less than the average CC transactions they are not zero. Claiming that they are zero suggests that you are not clear about how bitcoin works on that level.
many alternate payment schemes can be constructed
Yes, Ripple manages to work with much less fees but you seem to want to use a blockchain based model.
I've tried to set up a system where tax avoidance is reduced or eliminated. Because the transaction system will reject transactions that don't pay the fee when they use their cash, they are stuck with the decision to participate in the system or not. Once the cash is in the system, they must pay the tax or the tax will be taken from them(using btc multi-sig where the decay charging authority is held accountable to only charge the fee on delinquent accounts.
N2 can certainly set up Nx and move all cash over there. Lets use a real example.
N1 spends $100 wi...
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