We will use micro-BTC or kilo-Satoshi, or whatever is appropriate. It's a trivial issue.

The real problem with micro-transactions is that they clog up the block-chain. Fixing that will probably involve something layered on top of Bitcoin, such that not every micro-transaction is a Bitcoin transaction.

The state can also seize bitcoin. That is what has happened with funds the Feds claim were profits from drug dealing on the Silk Road. Depending on your jurisdiction, they may be able to compel you to give up the passphrase to your wallet. If someone installs a keylogger on your machine, they may be able to seize it too. Nothing is perfectly safe.

If a consortium of Google, Microsoft, Amazon and other big names decided that crypto-currencies were a good idea and that Litecoin was their crypto-currency of choice, then I suspect Bitcoin's value would evaporate quite quickly. I mention those guys because they have big server farms that could use spare capacity for mining, there-by preventing anyone else mounting a 51% attack and also making themselves some money. Litecoin's hashing algorithm would probably suit those server farms better than Bitcoin's would. Even if they choose not to follow this route, you know they are thinking about it.

I don't see why. They could still pass laws requiring companies to declare their income and pay tax on it. They could require records kept, and audit the books. The companies would also be required to declare how much they paid their employees and that would be taxed too. This would still be enforced by threat of force.

The main difference is that the monetary policy would be fixed. They couldn't print more bitcoin as a sneaky way to default on government debt. That would probably be a mixed blessing.

They would need to find something to use for notes and coins.

You should have got a smaller coin. You can get, for example, 50g gold bars that are scored so they can be broken into 50 1g bars. 1g of gold is currently worth about £25, so it's a reasonably small amount to spend. More generally, one of the reasons gold has been a successful currency in the past is that it is ductile. It can be thinly divided; you can beat it down to gold foil if you want to. It's not as divisible as bitcoin, but it's as close as a durable, physical substance gets. Alternatively, if you are using it as a store of value, you can sell it to a broker in large chunks and get fiat currency - or bitcoin - back. It doesn't have to be spendable at a supermarket to have value.

I like both gold and bitcoin. Gold is especially a hedge against civilisation collapsing. Bitcoin kinda relies on having electricity and a working internet. Personally I still see bitcoin as high risk. I wouldn't put money in it I couldn't afford to lose. I'm more confident about gold.

Also, if physical gold were widely used as a currency, instead of dollar bills or whatever, I imagine demand for it would be higher and its value would increase. If Bitcoin succeeds, demand for it may become higher than demand for gold is now, so that's another reason 1 BTC may be worth more than 10 kg of gold is worth now.