I wrote the article this thread is based on. Although I've taken my website down, you can see a copy of the article here:
http://themonetaryfuture.blogspot.com/2011/06/bitcoin-is-economic-singularity.htmlI was obviously wrong about some of the predictions, particularly the timing. The exponential growth of bitcoin stopped shortly after I wrote the article. At this point, I'd say it is very unlikely bitcoin is going to be the world's money in a mere two years.
I was also wrong to suggest that people should take out loans to buy bitcoin. Although I think the long-term trend in the price of bitcoin is still up, I clearly underestimated the probability of a significant crash before it reaches new highs. Shortly after I wrote the article, bitcoin shot up to $30, but then eventually dropped down to $2. I felt a lot of pain at the $2 mark.
However, I still stand by some of the basic predictions of my article, although have learned to be a lot more cautious about predicting timing. Consider the following facts:
* Bitcoin is what it claims to be. A secure, open-source, decentralized digital currency with a limited supply.
* The economic properties of bitcoin are ideal. (In particular, the limited supply, pseudonymity, divisibility, and market-based transaction fee price setting.)
* The technical properties of bitcoin are either ideal or good enough to be a world currency, with two possible exceptions. 1) The cryptographic tools that bitcoin uses (especially SHA256 and RSA) may be found to have weaknesses, which would enable attacks on bitcoin that would depend on the nature of the weaknesses. 2) Quantum computers may be able to crack RSA (but this problem is easily solved, even without changing the cryptography of bitcoin at all, by keeping balances in each address low enough that the effort to crack the key, even with a quantum computer, is not worth it).
* There are no other players in bitcoin's domain, and there probably won't be, because they would have to compete with the momentum that bitcoin has.
* Bitcoin fills niche markets, like online gambling, porn, drugs, and speculation that support its growth from zero to something sizeable.
* Bitcoin is economically superior to all commodity moneys because it is virtual. (Don't give me the "intrinsic value" argument... the intrinsic value of gold is merely what got it off the ground. Today, the price of gold, like the price of bitcoin, has almost nothing to do with its "intrinsic value".)
* Bitcoin is superior to all fiat currencies because your value is not constantly snatched by the central bank and well-connected elites.
Because bitcoin is superior to all other moneys, and because it cannot be competed with, the market will eventually choose it as the world's one money. Exactly when will it be that your grandmother buys her groceries with bitcoin? I don't know. But it will happen. My only reservation about this is the hypothetical weaknesses in bitcoin's cryptography. My position here is that by the time any weaknesses are found (should that ever happen), bitcoin will be so popular, and so many people will have an incentive to keep it going, that everything will be done to convert bitcoin to a new protocol while preserving existing balances. Once we convert to quantum bitcoin, there will no longer be any question over whether it is possible to break the cryptography. It will be cryptographically perfect.