The magic of public key crypto is that you can give somebody your public key, some data, and a signature, and they can be certain that:

a) that particular signature could only have been created by somebody that has the private key that corresponds to the public key
b) the data hasn't been changed in any way

They don't need to know the private key-- you keep it secret.

The "hash over..." bit is the way digital signatures work-- you sign a hash of the data, and not the data itself, because the hash is much smaller.

The "...simplified version of the transaction" bit is complicated. The data signed is the transaction minus all it's scriptSig signatures, plus (almost always) the previous transaction's scriptPubKey. See the OP_CHECKSIG page on the wiki for all the gory details.

A vocal minority around these parts will tell you that it's a flaw, not a feature.

I tend to believe that reality is something like this (not limited to Bitcoin either):

Security <---------------|-----------------> Convenience

The further you move towards one, the less you have of the other.

If people had a sure way to protect their bitcoins the price would by up *5 by now, maybe we should look at the idea of hardware wallets.

Those "problems" you've listed are only problems because people ignore one simple rule: If you aren't the sole controller of your private keys, you don't have any bitcoins.

so if the dollar is stable for having just a 10% variation over 2 years of the many decades it has been around. then so is bitcoin for having a same 10% variation for the couple months of just 5 years being around

No it's not. Platinum is close in value and usage to gold.

Gold is just used as currency because it's shiny, hard to mine, and easy to verify that it's actually pure. Sounds like something you know?

PS: Gold is not even the most expensive metal. That honor goes to platinum-190, at around $1 billion per ounce.

i take your quote and rebuttle with:
http://goldprice.org/images/monthly_dollar.gif

It's a question of acceptance.  The only thing fiat has going for it is wide acceptance.  We each decide what we want to accept in exchange for the goods and services that we provide.  Today, most people let the bankers and politicians make that decision for them.  The bankers and politicians are very grateful for that, but in the future I think most people are going to prefer a medium of exchange that has a fixed, finite, inelastic total supply that isn't centrally controlled and manipulated by bankers, politicians, or anyone else.

Precious metals were the best alternative before Bitcoin came along, but now the market has to choose between not just fiat and precious metals, but cryptocurrencies as well.  When it comes to precious metals vs cryptocurrencies they each have their own pros and cons which I think will lead to both of them increasingly being used as money for the foreseeable future.  Fiat currencies, on the other hand, offer tremendous advantages to some, but tremendous disadvantages to everyone else, which will make them unsustainable over the long term.

People trust on gold as it is time tested. Those who have faith in BTC are the ones who understands the protocol and hence know it's value in long term. I wont tell u why as that would unnecessarily lead to sudden price rise. It is buy time

you can check these faucets www.ltc4you.com,litecoiner.net both are good and recomended for free litecoins and bitcoiner.net for btc