Bitcoin Forum

The basic concept of bitcoin was (and still, to some extent, is) sound. The only flaw in the system was that storing the bitcoins on traditional PCs and online servers left the currency open for crime. Plus, bitcoin's value is not backed by any government. Money, even the dollar or euro, depends on a lot of collective belief in its value -- and also that, at the end of the day, there's a government somewhere that will back it up. This is something that bitcoins don't have.

And merchants may not mind, either. Yes, they may have to incur more fees with centralized cashless systems (debit swipe fees alone were estimated at $16.2 billion in 2009), but a 2004 joint study from AEI and the Brookings Institute estimates that a nation would save about one percent of GDP shifting from cash to cashless. In the U.S., that would be in the neighborhood of $146 billion a year, based on the 2010 GDP.

The savings would be realized in costs required to handle currency: physically transporting it around alone costs a lot for merchants, once you take into account staffing costs and insurance fees for moving cash. Without cash, stores could shift to self-service checkout lanes, thus reducing personnel costs.