Quote from: rta on April 24, 2013, 07:23:37 AM

Since the of the value of bitcoins tend to go up, he ends up using dollars for most of his shopping and only use bitcoins when there is all but no choice. [Gresham's law; this is as far as I can tell, one of the main attacks mounted in articles worrying about the slow increase in bitcoin money supply].

This is actually based on a misinterpretation of Gresham's law, commonly abbreviated "bad money drives good money out of circulation". If you look at the full form of the law it's actually referring to money which is overvalued and undervalued, respectively, when compared to the market price. For example, under bimetallism in the U.S. there was a legally-fixed exchange rate between gold and silver coins, while the actual market values of the two metals fluctuated. When the law caused gold coins to become undervalued, people hoarded them and spent their silver, and vise-versa. The coins were legal tender, so merchants had no choice but to accept them in payment of debts at the fixed exchange rate, even if the coins were currently worth less than their face values.

In the case of Bitcoin there is no fixed exchange rate; if the value is generally expected to increase over time, that will affect the net present value to the merchant as well as the buyer. The increase or decrease will not cause bitcoins to be under- or over-valued with respect to other free-market currencies. Gresham's law would only apply if there was a fixed exchange rate between bitcoins and fiat currency. For example, if the U.S. government declared that USD $1000 was equivalent to 1 BTC for the purposes of legal tender, when the actual exchange rate was $1100/BTC, people would have an incentive to settle their debts with the overvalued USD rather than the undervalued BTC.