Bitcoin will never replace fiat. Bitcoin have their own target and it's digital currencies. If bitcoin have physical unit like fiat, maybe bitcoin can replace it.
I don't think we will ever see bitcoin in physical shape, its digital so cannot expect but if it gets physical shape then it can give tough competition to fiat for sure.
Its true, its better to be digital as it is more safer from thief, the blockchain is secure and we can do business with it, the only thing we need to remember is to keep our personal passwords and information safe so that others cannot access our wallet.