I'm a believer that fiat state controlled currency is fundamentally flawed and destructive for societies and economies. And bitcoin is a global phenomenon - China can do all it wants to block it, and the market rebounds just fine. It can work without the US as well, albeit there will always be black markets.
But bitcoin is a step towards approaching the ultimate forms of value exchange. It eclipses its predecessors in every regard, especially considering anything one might find "lacking" in btc can be solved by businesses built on top of it (chargebacks and instant confirms at coinbase, etc).
But centralized currency will always have the implicit inefficiencies of central planning. I don't think bitcoin is necessarily the right algorithm for a money meant to replace the day to day currency of an economy (peercoin or doge are much better equipped to do so, with either reduced blockchain maintenance / size, or increased monetary base expansion without a finite limit) but the concept, money backed by cryptography, is the best solution we have to provide universal exchange semantics between human beings. Nothing else even comes close, and like others have said, that is no more apparent than trying to buy or sell goods or transfer funds outside your fenced in economy running in some local state currency.
It's uninformative to conflate monetary policy with the underlying material/technology used for currency. The two are totally and entirely unrelated. It's like claiming that changing from paper to (still fiat) coins is good because this would cause a fundamental shift in the nation's purportedly destructive monetary policy and also paper rips which is a bummer. So coins > paper, clearly.
Which is to say, you are really making two totally independent claims. One is at least plausible and the other isn't.
The first is that bitcoin provides a viable alternative to current methods for exchanging fiat currency. This is probably the most sensible argument for cryptographic currency, and I think is worth discussing. The discussion below delves into some specific arguments on this issue.
Your second claim is that decentralized cryptographic currency will or ever could/should replace state-backed fiat currency. I don't think this is a particularly useful point to discuss, since informed prediction is impossible and the prescription mostly amounts to political persuasion.
edit: but also, the US could switch to a cryptographic currency with all of the practical benefits of bitcoin, and still retain basically the same amount of control over its currency. Technology can never solve big political problems.
I'm not conflating them, they go together. Digital money is better than dead trees, or metal discs. Cryptographically secure algorithms are better than goons with a printing press. Bitcoin and other crytocurrencies enable both.
I also recognize the vast majority of fiat is now tied up in digital forms. The actual amount of physical paper money is negligible. But the overhead induced by the entire system being based upon dead tree leaflets, is that it is irrevocably slow and the discretization makes no sense in a digital medium.
> Cryptographically secure algorithms are better than goons with a printing press.
Again, technology cannot solve political problems.
There are two scenarios: the government provides a cypto-currency to provide its practical advantages, or a private currency overtakes usd.
If the government proves a crypto-currency (not terribly likely, but the more likely of the two alternatives), then probably it would retain the same amount of control it has now. Technology cannot solve political problems.
The latter presupposes the government wouldn't shut down the currency and that there's political will for your preferred monetary policy anyways. In which case technology didn't solve a political problem, politics solves a political problem.
Anyways, I prefer my democratically elected "goons" to an algorithm chosen by a small group of people.
But bitcoin is a step towards approaching the ultimate forms of value exchange. It eclipses its predecessors in every regard, especially considering anything one might find "lacking" in btc can be solved by businesses built on top of it (chargebacks and instant confirms at coinbase, etc).
But centralized currency will always have the implicit inefficiencies of central planning. I don't think bitcoin is necessarily the right algorithm for a money meant to replace the day to day currency of an economy (peercoin or doge are much better equipped to do so, with either reduced blockchain maintenance / size, or increased monetary base expansion without a finite limit) but the concept, money backed by cryptography, is the best solution we have to provide universal exchange semantics between human beings. Nothing else even comes close, and like others have said, that is no more apparent than trying to buy or sell goods or transfer funds outside your fenced in economy running in some local state currency.