Re: This isn't money
RE:By the very inflationary nature of it this is just currency rather than money. Money is something with intrinsic value whereas currency is just a number. If we took away the need to mine for bitcoin currency then anyone could do what governments do and print more money, this just puts in a process to slow that down and control the inevitable inflation.
It was intended to be non-inflationary. The system is only going to allow so many divisible bit coins to be made. The bitcoins themselves are not infinitely divisible. According to what I have read a bitcoin may only be divided into 1 x 10^-8 fragments. So, if you look at the bitcoins in terms of total (eventually) fragments you get (2.1 x 10^7) * (1 x 10^9) = 2.1 x 10^63 fragments. Because the currency is limited by its very design, it is little different from platinum, gold or silver. There is only so much of it, as much of it as there is, and those tiny fragments will all be worth something some day in distant future.
Alas! Bitcoin is not the only crypto-currency system in existence. It has competition; there is Ripple, Litecoin, Namecoin, Dogecoin, Peercoin and Primcoin, all of which compete with Bitcoin. They all have roughly the same limits as Bitcoin. At least one of these competing "crypto-currencies," Peercoin, is designed to be inflationary at the rate of 1% per annum.
What I see happening is that as soon as the crypto-currency becomes credible with enough people, they will all want to become miners, rather than the producers of other goods. This will lead to more amd more competiing crypto-currencies. This will create as much inflation as we are seeing with our fiat currencies now in common use.
There are advantages to these currencies despite their flaws. They are not heavy, in that you do not have to carry them around with you in your wallet or purse. They are not mined in the classic sense, because they are not made of any physical substance. They are created on specialized computers that jump trhough special hoops to make the creation of the currencies very difficult. So this type of currency does not contribute to the impacts made by mining metals or making paper or plastic currencies. They are "earned" by computers owned by the people that own said specialized computers.
The chief disadvantage of these currencies that they are not inflation proof; they can be lost without any hope of recovery should something happen to one's machine that is the maintainer of one's digital wallet; there is a total lack of anonymity in their use. There is no way to spend them without someone somewhere being able to identify you.