Cryptocurrencies don't make sense as general currencies because they're deflationary. Currencies need a lot of liquidity to be the grease for the wheels of commerce. It doesn't make sense to pay salaries in a deflationary currency, as people are more inclined to horde than spend. You need a currency with slight inflation but we all know how easy they can be corrupted by printing too much and triggering higher inflation, or printing even more to finance government debt, leading to even higher inflation (wink, wink Federal Reserve).
If "deflation" for you is the increase of purchasing power of a monetary unit (as opposed to the decrease of the supply of those units), you might want to consider that such "deflation" was pretty normal in the US before the FED started it`s management:
http://en.wikipedia.org/wiki/File:US_Historical_Inflation_Ancient.svgSource:
http://en.wikipedia.org/wiki/Deflation#In_the_United_StatesI would not agree that we necessarily need a currency with "slight inflation". The finance industry (where I work) needs it, because they want to sell products for people who want do defeat inflation. It`s funny that buying such products is called "saving", whereas simply putting aside a monetary unit for later because it is gaining buying power is called hording.
That's no surprise. Currencies only started being floated in the late 20th century. It doesn't mean the gold standard worked well - it was just the prevailing system before Bretton Woods.
Slight inflation works well because there is an incentive to provide savings as credit for economic growth. Hoarding to me are savings removed from credit or economic investment. If you can expect considerable returns by removing monetary units from supply without risk, it becomes problematic for commerce.
I still believe cryptocurrencies have a role to play as a secondary currency but I can't see them replacing fiat long-term in their current form. I think they'll be useful as an inflation hedge. Until relatively recently gold was still used to consummate large contracts but now it's chiefly an inflation hedge.
