I was thinking today that even if the goldbugs are right about Bitcoin, then surely Namecoin (or perhaps something more mature) can emerge as a successful currency and fill the same role. Because if the criticism of Bitcoin is right (i.e. that unlike gold, you can't do anything with a bitcoin), and this inevitably means that its value will fizzle out over time and that there will always be a bagholder left at the end (which I don't necessarily accept), then Namecoin doesn't suffer from this problem. The argument is that because gold and silver can always be used in electronic equipment and other industries, it will always have some demand in the economy, so there's never a bagholder. A red herring I suspect, but oh hum... they might be right. At the very least Bitcoin will be a nice empirical test of that, because it effectively controls for the centralized nature of other fiduciary currencies (I won't call Bitcoin a fiat currency, because that term relates to the force of government).
The argument from the Mises' Regression Theorem and Menger goes that a money good must have demand for some non-monetary utility, at least initially in history, in order to even become money. Then it will be used in barter trades and the very first prices will be set. From then on, it is only the most divisible, fungible, etc, goods that are being traded that will emerge to become de-facto standard currencies. People will accept gold as payment because they know it stores value well, and they can always sell it on (i.e. purchase other goods with it, and divide it up for change if necessary) because there is always some demand for it in the economy, because somewhere down the line it has non-monetary utility for someone.
But if money naturally emerges from a state of barter between goods that provide utility, then Namecoin can work as a currency by this logic. Namecoins are identical to bitcoins in the way that the are mined, and in the way transactions occur, but you can do something with a namecoin: register and hold a .bit domain name. This is like land in the sense that no two people can own the same parcel of land, and no two people can own google.com, but it has utility. You enjoy a monopoly over the land you own, and over the domains you own. They are especially useful to poker sites and bittorrent sites, who could potentially have their domain names seized by the government (because they have control over the root DNS servers), but they will be safe with a .bit name. The only person who can control it is the one who owns the private key for the namecoin, which will be stored and backed up somewhere in Sweden or something, where the US government has no jurisdiction to launch a raid even if came down to that.
So if they're right, Bitcoin will eventually die (once all the hype settles down), but Namecoin could potentially live on because it does provide non-monetary utility. I think it satisfies what these guys want to see in a currency. Because of this, it could eventually emerge as a competing currency in the same way that gold is purported to have arisen as money: naturally and spontaneously. It could fill the role of Bitcoin, even if Bitcoin can't. So who cares? Any way you shake it, distributed peer-to-peer cryptocurrencies could very well be revolutionary
Just a thought.
