Bitcoin Is an Existential Threat to the Modern Liberal State

The anonymity that every mainstream article claims Bitcoin has is not nearly as strong as it's made out to be[1][2][3].

The built-in deflationary aspect of Bitcoin seems to prevent it from being used as a "serious" currency. Hiding money under your mattress should never be the optimal approach to making more money. (It might not prevent people from using the currency, but it's highly sub-optimal.)

The fragility of the currency concerns me (by which I mean the way it's possible to lose massive amounts of money by losing a file or forgetting a password). Maybe this is a technical problem that will be solved with a more mature ecosystem, but I like the way that a real bank always has ways to access money when bad things happen (at least in a functioning banking system). This thread[4] documents the loss of about 70,000 Bitcoins, which is worth about ten million dollars today. Related to this, if somebody hacked the EFF's Twitter account and posted that they were accepting Bitcoin donations on some address, a lot of Bitcoins would disappear into somebodies wallet. You could argue that Bitcoin is a more perfect sort of system, but it's not without downsides.

Maybe another crypto-currency will come along and solve these problems. I think I hope it does. But I don't see Bitcoin supplanting modern state-backed currencies. I find it hard to see Bitcoin being used more widely than by the idealogues, the speculators, and those who find utility in it (like Silk Road, but not just that).

1. http://arxiv.org/pdf/1107.4524.pdf

2. http://eprint.iacr.org/2012/584.pdf

3. https://en.bitcoin.it/wiki/Anonymity

4. https://bitcointalk.org/index.php?topic=7253.0

Bitcoin is only a currency, not an entire financial system. It is a replacement for pieces of paper or shiny metal with doodles of George Washington stamped on them. It is not a replacement for banks, or credit cards, most other ephemera that people have constructed on top of currency. In point of fact, people are having to re-invent financial institutions in order to make Bitcoin more useful. And it's those institutions, not the underlying currency, where government attaches taxation.

It may become more feasible in the Bitcoin era to run a financial institution that plays entirely outside the US's jurisdiction. Nonetheless, there would be a large market for legitimized (and taxed) financial institutions, to provide services to the large number of entities that the government would take a hard look at anyways. My gut is that two parallel economies is an unstable situation, and the shadow-economy would not receive must traction compared to the legitimized one.

Now that it's been linked to Cyprus there's an increased probability of Bitcoin being discussed in reference to future Eurozone economic events. Which means more mainstream awareness & more potential adopters.

I have a hard time seeing Bitcoin going away in the near future. Even if it's a bubble, and I have my doubts about that, odds are we have yet to reach the peak.

It's political nature also holds a lot of potential. There are some very, very discontent people all over the world, both Western and non-Western. Segments of the Greek population have latched onto neo-nazism -- is it really that unrealistic that another desperate population might latch onto Bitcoin?

your math is not good.

one provider having a large percent increase does not imply that the total market had a larger percentage increase. its entirely possible that BitPay gained a larger share of bitcoin transactions to achieve these numbers.

your argument is like saying: people using Google Chrome have increased by 1.2x over the past year, therefore, people using the internet must have increased by a lot more, maybe 5x or 10x, who knows.