TLDR:
2. Under more reasonable assumptions, power users and small businesses should be able to store the UTXO set even if 10 billion people each had 4 unspent outputs.
The more limiting factor is probably the transaction rate and the bandwidth of the connection.
An 8 Mbps connection only gets you to perhaps Visa-scale (at best[1]) and no where near the micropayments scale. Do you really think Visa-scale comprises all the transactions occurring daily in the world today (not even within an order-of-magnitude I bet!), not to mention the 100X growth that will occur with internet transactions in real-time (which will open huge new markets).
Even a 1 Gbps connection won't be enough in the current crypto-currency designs.
All current crypto-currency is fundamentally flawed. Can't scale. Checkmate.
If mining isn't decentralized, then you've lost control over Bitcoin to the financial elite.
...
Blockchain size is not the main issue with micropayments (no amount of pruning is scalable if the unpruned chain isn't scalable, i.e. scalability is a different complexity class from bounded compression). Rather as I discussed with thezerg upthread, at some scale micropayments force centralization of full nodes due to processing and bandwidth requirements. I argued that renting a hosting server is not decentralization, because the authorities can regulate the ISPs. Anonymity derives from mixing targeted activity (monopolization of mining by the cartel that runs our world) with untargeted activity (users surfing the net from a home ISP connection).
...
[1] That assumes the overhead for P2P and anonymity networks is 0, which won't be the case.