So, I've been researching this BitCoin phenomenon now for a few days. I've posted most of what I've learned, but not everything.
The only thing that I haven't posted is this: how do you spend your BitCoins? The answer is: not very easily. There simply isn't many places that accept BitCoins, as far as I've been able to find. Mostly, its for stuff that you can do without. You can't buy food, clothing, gasoline, or many consumables with these BitCoins unless I'm missing something.
That's one thing. Then there's the value problem, which is what I've posted about. Therefore, I'd say that you really don't want to have a lot of BitCoins in your possession if the value of your BitCoins goes to zero very suddenly. That's a real possibility. The only thing holding up the value of BitCoins right now is that people seem to be willing to buy them. They buy them and then what?
That brings up the question of why are people buying these things? The answer is that it may be in support of an underground economy of sorts. The price that you see for BitCoins could represent the interface between the demand for cash in place of the BitCoins, which are being traded in the underground economy.
You need cash to buy everyday items. You can trade BitCoins for illegal stuff. BitCoins could be useful for evading authorities because of the anonymity of the transactions. To give an example, what if a prostitute sells her services for BitCoins? She can't be busted if the authorities can't prove she accepted money for sex. If they can't prove a transaction, they can't prove a crime.
It may support the drug trade, but mere possession of drugs is illegal. Sex between consenting adults isn't illegal, as far as I know. But it may help the drug trade move money around, or hide it from authorities.
Another thing holding up the price could be something akin to a Tulip Craze. In other words, an asset bubble. Unless there's some way to establish values for BitCoins, they can't ever go mainstream.
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