I'm curious how people see the future with regards to how Bitcoins are actually used in day to day life.  Looking at the system from a high level it obviously has a number of unique properties that clearly differentiate it from existing currencies and payment systems, but I question how many of those properties are actually positive when it comes to trading currency for goods and services.

For example, lets look at legitimate (in this case I mean legal) retail trade which is probably the most common way that currency changes hands (at least in the number of transactions if not in the total value amount of transactions).  Right now if I want to buy something I'm either going to pay cash or use a credit card.  For myself, both of these options are working out pretty well.  Cash is easy to come across, is usable virtually everywhere that I will physically purchase goods and is generally a pretty speedy way of making a transaction.  A decent credit card is going to come with a number of benefits (for the sake of this argument I'll ignore the "credit" part of it and assume it's paid off immediately) including automatic tracking of my spending, insurance on my purchased items, rewards, ability to make purchases over the internet, ability to reverse a transaction in the case of fraud, losing a credit card is no big deal, etc.

When it comes to legitimate retail trade, Bitcoin doesn't have most of the properties that make these two payment methods convenient.  It's not fast (you have to wait for enough confirmations), there's no recourse if I get scammed by a retailer, it puts the potential for loss or theft entirely into the hands of the user, and doesn't come with any of the rewards of a credit card.  Even if Amazon started accepting Bitcoin, why would I ever want to pay with Bitcoin over just using my American Express?  As a merchant I can see the desire to accept Bitcoin as it becomes somewhat equivalent to accepting cash via the internet and it lets you avoid credit card merchant fees, but as a customer I'm going to balk at making a large-value transaction without some sort of protection (credit card company, paypal, etc).

I'm not saying that Bitcoin is useless.  From a usage point of view, the primary area in which Bitcoin excels compared to current payment methods is in illegal trade.  Despite the fact that it's not currently quite as anonymous as some would probably like, I struggle to see how a government entity could completely shut it down.  Even if operating or using an exchange were made illegal, I have no doubts that if the black market continued to find a use for it (and I think that it would), there would just be black market exchanges.  The existing network of drug dealers could probably slip into this role quite easily.

From an investment point of view, the fixed currency supply and decentralization means that Bitcoin has some positive properties as an investment vehicle to hedge against devaluation of government-backed currencies.  I'm not sure how much value Bitcoin would have if there was little trade outside of investment, but either way it has a number of properties that make it unique among investment options.


Is Bitcoin "doomed" to the black market and/or investment?  Can it actually take off and compete with current payment methods?  One scenario I can imagine is Bitcoin becomes just another currency (minus the cash aspect) where your average user never actually touches the Bitcoin network and makes purchases using their Bitcoin-based credit cards, however is that actually an improvement on the current system?  Will a more mature Bitcoin ecosystem open up currently unavailable possibilities?  I would like to see Bitcoin succeed, however I struggle to see how it actually becomes useful to your average person.