This is one of them.
Every currency is based on the credibility of the underlying guarantor, whether it's the value of precious metals, the full faith and credit of a government, or the long-term viability of an organization.
The underlying guarantor here is the belief that an open, distributed system like bitcoins will grow and thrive. Given the nature of distributed systems, the main risks to its survival are lack of interest by participants, a security flaw in the bitcoin system, or the complete collapse of the internet as we currently know it.
The latter isn't likely to happen - even if the US became like China in trying to regulate activity (not likely), it will just open up elsewhere. Short of the kind of global social catastrophe that would invalidate every other currency as well, it's not a realistic risk.
Lack of interest and security flaws are the only real risks. They're significant enough that I wouldn't invest money I couldn't afford, or base a business model around bitcoins - but acceptable enough that I will definitely spend some disposable income on bitcoins.
Much like prior "alternative currencies" like Pogs and Beanie Babies and tulip bulbs and Second Life real estate?
Stepping away from the idealism of "ooh wouldn't it be nice to have a distributed currency", what we have is a bunch of people trying to create a bubble. Unlike many bubbles there's not even an attempt to claim that the asset has some intrinsic value; instead it's just a bunch of people collectively deciding to fool themselves into thinking that a random scarce commodity has value in the hopes that they'll be able to fool more people into it later.
Of course, for new bubbles it's all about creating buzz. And how is buzz created? Well, upon getting fooled into paying money for a bunch of bitcoins the rational next move is to start talking up bitcoins to everybody as loudly as possible, to pull more people into the bubble and inflate the value of your own assets. Thus, I predict we'll be hearing more and more about bitcoins over the next year or so as the process accelerates.
The bubble almost certainly ends at some point; basically when it runs out of new suckers. I don't hold out much hope for this bubble lasting long enough to bring in significant numbers of mainstream suckers, though, since you pretty much need a degree in mathematics to even understand what the hell a "bitcoin" actually is.
In summary, if I'm going to be part of a pyramid scheme I think I'll start it myself instead of getting in at the fifth floor.
That said, how many people will try to pay you with them?
The Ripple project is creating a system where each node can issue their own unique money, and where transactions occur over paths of mutual trust: http://ripple-project.org/
I just released Rivulet, an alternative Ripple server that should be useful for website owners who want to let their users engage in user-to-user transactions without having to centrally distribute currency to them: https://github.com/jplewicke/rivulet
Pelle Braendgaard has proposed OpenTransact, a standard for RESTful digital transactions, so that we can escape from this mess of incompatible APIs and help people transact in their choice of currency: http://www.opentransact.org/
Another point is there is a limited supply, unlike other currencies where the possible supply is unlimited.
There's also some discussion on the bitcoin forum about this issue: http://www.bitcoin.org/smf/index.php?topic=286.0
Anyway, all of this is just implementation problem which, I believe, could be solved.
It's written in C++ with hardly any comments / comments like this:
// Get cursor
Dbc* pcursor = GetCursor();
No. There's a constant average rate of new Bitcoins created, and that amount
is divided among the nodes by the CPU power they use. When Bitcoins start
having real exchange value, the competition for coin creation will drive the
price of electricity needed for generating a coin close to the value of the
coin, so the profit margin won't be that huge. The easier way to gain a lot
of wealth would be trading goods.
At the moment, though, you can generate new coins quite profitably, if you
expect them to have real value in the future. If you choose to, be aware that
Bitcoin is still experimental software.
It seems like it would be a lot easier to simply trade for bitcoins.
That depends on who you are, and what kind of value you can get out of bitcoins. ;)
It's using digital signatures to transfer coins. The prior owner will sign a coin and the new owner's public key. The new owner will verify the prior signature before accepting the coin. This is a longstanding idea going back to the 80's.
The rest of the details are to prevent double-spending without having a centrally trusted authority. I haven't spent time looking at this and can't say whether it works as advertised.
Edit: a teaser: an anonymous coin is one which you can withdraw from the bank, but which the bank can't link to you when you spend it.
This also began to happen with QQ coins, in China people began accepting them for goods and services until the government cracked down. And the funny thing is that this was never meant to happen with QQ coins, they were meant simply as a way for QQ to make more money. But once people accepted them they became a form of currency.
One can only wonder where the seed money came from (and whether the current price of 50BTC x $0.25 = $12.5 per newly found value is self-sustainable in the system or still seed-funded) and
whether the NSA have a listening node in the system (as all the transactions are broadcast to all nodes).
So there is no centralized place where all wallets or coins stored. In fact, there is no coins - there is amounts assigned to each address (public key). And the whole bitcoin network is huge transactions book.
Doesn't sound like a huge benefit to taking time to generate a lot of bitcoins now, as there isn't a stable commodity to index it to.
Very interesting idea, nonetheless.