Frankly that's a couple depressing responses.
Oh dear.
I haven't given up hope in BTC completely, but there are some fundamental issues that need to be overcome that aren't built into the bitcoins system by its designer. For example: how do you convince people that they only need 0.2BTC to live comfortably for the rest of their lives (which is true in a world used currency of btc)? How do you convince them to spend everything above this amount if they want their BTC to be worth *anything* (especially when I know that if others spend
their money first, I benefit). If you can do that through persuasion, there's no reason to be depressed at all.
I'm not completely sure what santoshi's intention was with bitcoins - a store of wealth, or an actual currency. He's designed a store of wealth first, and currency second with the way it's limited (21M max) and mined (like gold).
The two things he addressed are: A digital transaction record that is difficult to control/shut down, and p2p hashing to create currencies and manage networks, which both excellently lend to stores of wealth.
Those are what bitcoins have given us, which are two stellar things imo, but because there is no inconvenience storing them (other than wallet security), their value is too high to trade. "I will get rid of my other stuff before I get rid of this" would be a common utterance in the minds of many, both now and in the future. The interesting thing about the Keysian way of thought is that it actually achieves greater economic activity (I don't want to hold onto $$), but the problem is it too easily disguises the tax on trade made by the controllers of currency, which is why everyone not in control hates it.
Fundamentally, a currency for
trade will represent the underlying exchange of good, or promise to pay. Bitcoins are a gold bar, when trade without direct exchange of goods (barter) requires nothing more than an IOU. They are completely different things, and money is an IOU which can be traded in lieu of a good of value, but everyone agrees they can use them in the future ("backed by govt"). Everyone with bitcoins now, has essentially earned them without earning them in the traditional sense (working for them). Why would anyone pay them their own work for that?
PS Does anyone else find it ironic that this forum considers the word bitcoin to be incorrectly spelt?
The idea is that Bitcoin as a currency is just a medium barter good that is commonly used to barter. For example: if you trade gold for a bike, it is a lot easier to sell that bike for gold and then buy bread, than it is to trade a bike for bread. For someone who doesn't want Bitcoins for instance and only wants a bike for bread, it is worth nothing, but as long as it is widely used, is now worth something to the person who wants a bike for bread because it allows him to get it easier though a medium of exchange. The acceptance of medium of exchange is just based on the widely accepted use of that medium. The value of the medium is based on the number of people who agree to use it and other infrastructure such as the estimates worth of the economy.
And about the idea that people won't spend Bitcoins because if other people spend it, its value increases: it's just a social contract that people inherently make with any system. Otherwise no one would sell Bitcoins on exchanges and people would just hoard US dollars and never spend them. The issue is if no one spent anything then the value would never increase, in the worst case scenario someone breaks. And if anything if you start using the medium of exchange to start a business that makes money, it generates increase in value buy spending medium.
For something to have value it either has to be rare (gold) or almost universal (US Dollar). Gold was used to as money once because it is accepted as the "best" method for exchange, then the supply couldn't meet the amount to allow it to be more widespread method of exchange. Bitcoin on the other hand can be divided, although maybe at .0000000000000000000001 Bitcoins per square mile of land will not be the best currency because it would be just as hard to use as a single gold atom. Either it gets replaced by another currency as paper money replaced gold or Bitcoin increases the number of coins sooner or later. But that is just how goods work.