Of course there is alot of wishful thinking in the OP, as I said this is hypothetical only.


Here is something to consider though. The majority of Bitcoin transactions are currently to exchange illegal goods/services, most of which are totally untraceable because the websites are only available through the TOR network. A significant number of Bitcoin purchases are done through cash in person, and is actually still a very strong network.

The services which you are concerned the government may attack could only scratch the surface and likely remove the only investors who aren't participating in organized crime(Minus Counterfitting of course, lol). Drug dealers continue business as usual, but now you can't buy DVDs online with Bitcoins. I hope that isn't what qualifies as a win for the US government.

Everytime the government tries to suppress freedom it backfires. Decentralized websites already exist and perhaps that will be the future. They remain forever out of reach from authorities.

The final play the government could make would be shutting down the internet. How likely is that to happen?

-brutus

I'm not so sure..., The people could adopt it en masse and how is that not a threat? Just because there is a certain low total number of bitcoins to be 'minted' does not mean the economy of the world is not divisible by that number. Each bitcoin would just be worth a helluva lot and people would be buying houses and cars with fractional amounts of btc.

I just got this real crazy idea.

What if Bitcoin encourages people to stop spending more than they need to buy?  Since by holding BTC you're likely to become wealthier, thereby decreasing the need to spend frivolously, people would hold onto their coins and spend them only when they had to, such as for food, shelter, and the recurring payments of entertainment--and everything else would be only if they really mean to spend, as on their business ventures or schooling or whatever else.  On the other hand, with fiat, you're encouraged to get rid of it ASAP on whatever it is you need or want.  Capitalism seems to favor an inflating currency, as people are more likely to get rid of their cash by either buying or investing in something else (but average Joe seems to prefer to buy.)  Therefor, more money runs around, the economy (is supposed to) keep moving, la-de-da.

I think a society that's more focused on conserving their cash (and thus, their resources) is much better off than the society that must eternally spend and expand.  Maybe people won't waste their hard-earned money so quickly then, and won't be so easy to coerce into giving a bank for gambling purposes--I mean, investing.  This system seemed to work well when we needed to spend and expand, but now that phase is over, and the cup keeps spilling over.

Although a rapidly rising commodity brings smiles to all faces who are holding it, it also discourages people holding it for exchanging it for goods, services, and indeed Fiat currency. Now, this is when things are on the way up. On the way down, the volatility will destroy people using Bitcoin for real world economic transactions. Either way, the volatility cannibalises that which underpins the basis of the whole 'value' of Bitcoins.

Seems like there are a lot of smug types around here who think the whole Bitcoin universe's behaviour is running in accordance with their own personal simple world paradigm of how things should work. My word of warning to such people is that they should perhaps consider the possibility that perhaps they are not as smart as they think, and that perhaps they have merely got lucky, inadvertently hitching a ride on a dragons tail wings. True, that dragon may soar and spiral ever higher into the heavens, taking everyone with it along for the ride. But when that dragon dives, it will nose down right into the flames below, revealing to everyone, their false illusions regarding what is driving Bitcoins.

Do people forget what happens when market value far exceeds the underlying assets supporting it? Housing crash 2008 anyone? One thing that I could safely bet my own house on, would be that the market value of Bitcoins, is exceeding the underlying economy which supports it, by an order of several magnitude at the moment. For anyone to 'invest' in Bitcoin now for purposes of speculation, they would be doing so on the premises of 'greater fool theory' (a bigger fool than themselves will come along and pay even more than they did at some point in the future). As for the posts I have seen where people are discussing putting their pension funds into Bitcoin...OYF!