2. To use as a transactional currency. This is the real appeal of the bitcoin. But there is no reason for someone to convert dollars to bitcoins and buy something unless it is illegal. It is inconvenient and provides zero protection against theft or fraud.
You've clearly never purchased anything using bitcoins. It beats the crap out of paypal or credit card purchases in the convenience department.
Yes but it offers zero protection against scam sellers. And paypal is super convenient for the buyer, just sucks for the seller.
That's another HUGE issue. If I pay someone in Bitcoins, I have zero recourse once they're sent. I can't even prove I sent the money to the seller because it's all anonymous.
If you can prove the merchant showed you a certain address, you can easily prove you sent money to that address by showing the transaction id.
The first part might be a problem, though, maybe a good merchant should sign a bill including the payment address so customers have proof?