Earlier quoted context omitted.
And still no discussion on the value of pissing away our planets energy reserves, just to create imaginary points in a paranoid game. In one view, all the electricity burned to make bitcoins is a crime against the planet.
You're correct. The problem is that bitcoin exists due to holes in the regulatory structure. People mine because people need anonymous value transfers. If you allow people to purchase drugs/gamble/capital-flight/etc with credit cards, then this externality cost will go away :)
No, people mine because a global contest was the only way to create a self synchronized global database. Why a global database? To avoid the problem of double spending that all other electronic money initiatives had. But this is a distributed instead of a centralized database.
The process of mining is a way to make all miners maintain the blockchain in working order. Every miner has a copy of the full blockchain DB and all these copies are in sync. In fact, a mined block is a list of transactions between accounts, with their corresponding digital signatures.
The incentive of giving a token size of bitcoins to the first miner that finds the correct hash signature was to make mining something that people would like to do, instead of a burden for everyone.
If you can find another way to make a group of very diverse people, with possibly diverse interests in the game, to maintain a distributed networked database in sync, welcome to the community.
In fact, some groups are starting to test one alternative to mining, called Proof of Stake. If it is better for everyone, then another currency instead of Bitcoin will take the crown.