You're close, but there's one thing you're missing: the whole point of real bills is to cover the non-existence or unavailability of the hard coin until it arrives (and the structure of the bill is such that everyone can be sure it'll arrive).

Let's take your oil example. You sell oil to people in London, but it's manufactured in Russia. There are plenty of people in London who want to buy oil, so even to someone on the opposite side of the world, it's pretty clear that if only you had some oil you could sell it right away. So you call someone in Russia and ask them how long it'd take for them to ship you some oil, and how much it'd cost. Now, let's say they say "okay, it's 1BTC a barrel and it'll take a week to get to you", but you don't want to dip into your cold wallet just to buy a barrel of oil that you'll immediately resell anyway. So instead, you write them a real bill for 1BTC "from sale of a barrel of oil" payable eight days hence. They receive the bill, and send the oil, which arrives in one week as scheduled, and you sell it all in a day, earning the 1BTC promised on the bill (plus whatever your profit might be). Meanwhile, as the barrel of oil makes its way to London, your real bill might be circulating who-knows-where. On the eighth day, as you sit in your shop with all the oil sold and your profits taken, someone in Brazil cashes in your real bill and you pay them the promised 1BTC.

The problem with cryptographically "proving" real bills is that their whole point is to keep people from having to tie up hard coin (gold in Fekete's examples, bitcoins in this discussion) to fund each step of bringing a fast-selling good to market. The ancient example he gave was a clothier - someone grows the cotton, someone spins it into thread, someone weaves it into fabric, someone tailors it into pants. If the pants cost 250 miniBTC, you'd need to tie up nearly a whole bitcoin to pay for the production of each pair of pants - the spinner pays the farmer for the cotton, then the weaver pays the spinner for the fabric, then the tailor pays the weaver for the cloth, and finally the customer pays the tailor for the pants. Without a way to give everyone in the supply chain an explicit cut of the final store price, goods in an industrialized economy (which tread many, many steps on the way to market) put an undue burden on the money supply as they travel down the path of production.

There's more to it than government prohibition, I think. Fear of illegitimacy would include anything that would fundamentally get in the way of using coins you have bought. This includes bugs and market problems, whether people in the future will actually be taking BTC for things you care about, whether you'll be able to transfer two dollars without waiting two days for it to get confirmed...

The idea is that real goods are moving through the chain from production to the consumer, and instead of each link in the chain needing to pay the previous link in hard coin (which is strictly limited in supply and can't expand/contract according to the current behavior of the marketplace), the person who will sell at the end passes a "real bill" denominated in hard coin up the chain, so that the increasingly ready-for-market good can then pass down the chain to the final buyer. Then, once the sale has occurred, everyone can cash in their real bills in exchange for their share of the hard coin that the buyer paid.

Obviously, in most cases, a real bill would be issued for a period other than 90 days - typically, just the amount of time needed to bring the good to market. But it's important that the period be short - at the very most one season - because real bills are only real bills if they represent the final steps to bringing a good to market, and furthermore they're only real bills if it's the kind of good which is certain to sell basically as soon as it gets there. It's too hard to have that kind of certainty when looking more than a couple months out (especially given that many of the goods financed by real bills are seasonal goods, which means if they don't sell in a couple months you'll have a whole year's worth of changing consumer sentiment before they get another chance).

(In case you couldn't tell, rpietila, I've had a chance to read some more of Fekete's "lecture notes" )

No doubt. This is a new thing - a truly new thing. People haven't felt out the price yet; everyone has a different idea and is voting with their money. It'll be volatile.

The thing is, I read nobby's post as meaning "Bitcoin is inherently volatile", which I think would be a problem; if I come back in 5-10-15-20 years and it's still jumping around like this, it'd be hard to use it as current money.

That would be a troublesome trait for a currency!

I don't understand what they're proposing they do. Using Western Union to transfer BTC would be like using a team of horses to deliver a car.

Nah. There were a couple misconceptions in the OP, but that's not one of them.

You're missing a couple essential concepts.

First: valuing "geekiness" is counterproductive. The point, the whole point, the sole point of mining is to outvote the computing power of an attacker trying to disrupt the economy via double-spend attacks. ASICs provide hashpower that cannot be matched with any more custom solution. But for a theoretical attacker with millions of dollars to spend, they were an option from the beginning. Until we adopt ASICs, we are vulnerable. As long as mining is mostly a custom garage hobbyist thing, capital can crush us.

Second: you seem to expect that if we mined the first half of the bitcoins in four years, we'll mine the second half in another four years. What you seem to misunderstand here is that the block reward drops every time you mine half of the remaining coins. Coins are being created half as fast now (25BTC/block) compared to how fast they were being created at the beginning (50BTC/block). We cannot run out until a number of blocks have been created equal to perhaps twenty or thirty times the number of blocks that exist today. There's no danger of somehow killing the golden goose in anything approaching the near future.

Let me tell you why I don't give a fig about "drawing in thousands of new people to dump money into the market".

To me, the goal is this: Bitcoin becomes functional as a currency. I don't care about it replacing greenbacks or transforming me into a millionaire via Austrian alchemy, just that it become a currency that works.

The path that I see to reach that goal goes something like this:
1) People barter with BTC in an over-the-counter way.
2) Big services and companies accept BTC and cash out into fiat immediately.
3) Some people who accept BTC and can pay their expenses in BTC stop cashing out into fiat, and just pay with the BTC instead.
4) BTC->BTC becomes more common, until it becomes possible and natural to pay all your regular expenses with the currency, and exchanges become nice-to-haves rather than necessary for normal use.

Now. The price per bitcoin is falling. The centralized exchanges have proven themselves unworthy and insufficient. And yet, (2) has not been slowed. The OKCupid announcement came after the crash was well underway. OKCupid doesn't care about whether BTC is going up or down! They just care that it'll make it easier for people to give them money!

There's no sign that the current price action will do anything to change (2), because the infrastructure is in place to allow businesses to accept bitcoins without having to worry about the price, and they seem to still be arriving.

If there comes a day when I can get my salary in BTC, and pay my utility bill in BTC, I will not care how many people are "buying in", because the important part is that thenceforth, anyone who chooses to can divorce themselves from the banking system, save the fees they would have otherwise paid, and transact online without a middleman.

At that point, Bitcoin will have accomplished its purpose. Everything else will be gravy.

In a few cases, when the lag got really pronounced, I experienced API problems where I'd cancel a trade, and the trade would disappear from my list of open trades significantly before it actually became inactive. The trades would execute or partially execute minutes later.

Lag is okay. If lag is going on, not being able to cancel in time is okay. Inconsistent reads are not okay. If it's going to take time to cancel my trade, it should stay listed in my list of active trades until the matching engine catches up to the point at which the cancel was issued and actually cancels it.

(Of course, there's also the issues of "Gox is centralized" and "Gox calls counterproductive market stoppages", but those are pragmatic and management issues rather than technical ones.)

If they're manipulating the price action, they're either getting fleeced by arbitrageurs or by market makers.

It's no way to run a profitable exchange.

I can't select enough options to truthfully answer this poll.

All of these are true.

I use bitcoins.

I don't use them as much as I'd like, mainly because there's not enough stuff being sold that I care enough about to buy. That's slowly changing, though.

The short answer is that I'm buying to replace the BTC that I sold at a higher price.

If you want the long answer, I'd be happy to give it.

The $13-10 range is the floor in my mind - we might stop declining earlier, but I'd be very surprised if we broke through it.

What do you think happened in 2011? Look up "The Rise and Fall of Bitcoin".

There's some significant engineering to be done, and it won't fulfill every function of a centralized exchange, but it's feasible. I've been working on the details of one possible design for the last month or so.

Nah.

I've been selling - net, at least - for the last few months. Right now is the best time to buy back what I sold! 

Eh, I wouldn't bet on it. Confidence needs time to heal.

Isn't there something a little screwed up about that metaphor?