user1573: Question is in the title. Anyone who's toyed sufficiently long enough on the foreign exchange understands that currencies are largely driven by sentiment or manipulated on the odd occasion. Plus, there's the fact that money has no intrinsic value. Has bitcoin overcome any shortfalls and risks of conventional currencies ?

user153: Bitcoin as a currency is being inflated, currently, at a rate of 28% per year.  That alone would disqualify it as being one of the "hard" currencies (i.e., United States dollar, Euro, Swiss franc, British pound sterling, Japanese yen) for a long time to come.
Bitcoin most definitely is driven by sentiment and with the aggregate of all order books being slim, it can likely be manipulated up or down with simply a six figure budget. 
Where bitcoin's primary advantage comes into play is that the currency inflation rate a year out, two years out and ten years out is already known, today.
Additionally, when trading currency there is no T+2 settlement.  Most Bitcoin exchanges settle trades instantly, and deliver bitcoin withdrawals in seconds.  Thus the funds can then be used for spending or further transfer just minutes after the trade executes.
Unfortunately, the bitcoin exchanges are not as great with the flow of fiat used for trading.  Arbitrage would keep the exchange rates about even (less trading costs) however because fiat funds don't flow cheaply or quickly in and out of the Bitcoin exchanges, exchange rates between exchanges will not be consistent.
This presents an opportunity to some, but serves as a hurdle to others. Because bitcoins are not traded yet alongside other currencies for forex or are yet considered by established financial trading firms, there are first-mover advantages being enjoyed by entrepreneurial endeavors writing custom trading bots.
One other benefit is that Bitcoin is just a protocol and data, which means it is universal.  Central banks don't need foreign exchange reserves with bitcoin nor swap agreements to trade against bitcoin.  There is simply self-interested individuals and companies doing the buying and selling (for both commerce and speculation).
Here are some other benefits:

http://bitcoinmedia.com/bulleted-advantages


user575: The value of money is that it makes exchanging and storing value more efficient. Your assumption that it should somehow have other value besides that is wrong.
Bitcoin improves over traditional currencies in several ways, for example:

Easy to send payments internationally without fees.
No chargebacks.
International, no need to make currency conversion.
Easy to get started with receiving bitcoins.
Possibility of microtransactions.
No inflation.
No single point of failure.
Payment is done via digital signatures rather than giving away your password.
Objective public record of payments made in case of disputes.
An option for small countries without a viable currency of their own.
No need to rely on financial institutes with poor service.
A powerful scripting language that allows more advanced transactions than "A is paying X to B", and derivatives of the technology such as Namecoin.
Privacy.
No restrictions on whom you can pay.


user516: There are some important shortfalls of traditional currency that Bitcoin addresses:

There can never be more than 21m bitcoins in existence. Bitcoin will never be vulnerable to the quantitative easing or printing of additional currency which devalues the existing funds of holders of traditional currency.
There is no central authority. A collapse of any particular corporation or govt will not cause Bitcoin to fail. There's no need to participate in a run on a bank.
Bitcoins are very difficult to steal without coercion when protected in the right way. Security features for Bitcoin are still maturing, but it is possible to encrypt a Bitcoin wallet on an offline computer and do transactions from there. This heavily reduces the change of bitcoins being stolen through malware or physical theft of hardware.
Bitcoins can be spent over the internet with very low transaction fees (a fraction of a percent compared with 3-4% with a credit card). When you know an internet retailer is trustworthy, Bitcoin is a great way to make payment.
Transactions are essentially irreversible.
Bitcoins cannot be counterfeited.

Though Bitcoin is obviously subject to manipulation through trading on exchanges, this has little effect on its usefulness as an online payment method as they can readily be converted to another currency before fluctuations have much effect.

user1574: There are huge differences between FIAT and Bitcoin.
Fiat is created out of thin air "with fractional reserve banking" and other mechanisms, there is no stop on how many will be created.
Another problem is that every country is FORCED to create more of it.
Since otherwise the value of their money would increase to much, ending all export industry and tourism in that country. 
So when the US prints an extreme amounts of FIAT they know that China must follow, which means that Japan must follow and the US must print more, and so it goes on.
Bitcoin can not be created out of thin air, and it takes an ever increasing energy cost to create one.
And since no country base their economy on it, its free from having to be endlessly printed. (It can´t even if it would be.)
Another very important difference is that Bitcoin is the only digital money you can own yourself with no one else having any access, and thus keep on your own computer or in your own cellphone or store on a USB the key to your money.
All other digital money, is money that is stuck in a bank and thus they might play around with it and go bankrupt. 
But a Bitcoin is a Bitcoin and not simply a promise in their system.
This also means that you can send them any time of the day instantly to anyone you like now even on Facebook or in emails.
The limited amount also gives it a longterm backing in that if it picks up in any market, it cant stay this low and will have to go much much higher, a value of something like $50-$5000 would not be strange in 10-20 years IMO.

1573: <p>Question is in the title. Anyone who's toyed sufficiently long enough on the foreign exchange understands that currencies are largely driven by sentiment or manipulated on the odd occasion. Plus, there's the fact that money has no intrinsic value. Has bitcoin overcome any shortfalls and risks of conventional currencies ?</p>
 153: <p>Bitcoin as a currency is being inflated, currently, at a rate of 28% per year.  That alone would disqualify it as being one of the "hard" currencies (i.e., United States dollar, Euro, Swiss franc, British pound sterling, Japanese yen) for a long time to come.</p>

<p>Bitcoin most definitely is driven by sentiment and with the aggregate of all order books being slim, it can likely be manipulated up or down with simply a six figure budget. </p>

<p>Where bitcoin's primary advantage comes into play is that the currency inflation rate a year out, two years out and ten years out is already known, today.</p>

<p>Additionally, when trading currency there is no T+2 settlement.  Most Bitcoin exchanges settle trades instantly, and deliver bitcoin withdrawals in seconds.  Thus the funds can then be used for spending or further transfer just minutes after the trade executes.</p>

<p>Unfortunately, the bitcoin exchanges are not as great with the flow of fiat used for trading.  Arbitrage would keep the exchange rates about even (less trading costs) however because fiat funds don't flow cheaply or quickly in and out of the Bitcoin exchanges, exchange rates between exchanges will not be consistent.</p>

<p>This presents an opportunity to some, but serves as a hurdle to others. Because bitcoins are not traded yet alongside other currencies for forex or are yet considered by established financial trading firms, there are first-mover advantages being enjoyed by entrepreneurial endeavors writing custom trading bots.</p>

<p>One other benefit is that Bitcoin is just a protocol and data, which means it is universal.  Central banks don't need foreign exchange reserves with bitcoin nor swap agreements to trade against bitcoin.  There is simply self-interested individuals and companies doing the buying and selling (for both commerce and speculation).</p>

<p>Here are some other benefits:</p>

<ul>
<li><a href="http://bitcoinmedia.com/bulleted-advantages" rel="nofollow">http://bitcoinmedia.com/bulleted-advantages</a></li>
</ul>
 575: <p>The value of money is that it makes exchanging and storing value more efficient. Your assumption that it should somehow have other value besides that is wrong.</p>

<p>Bitcoin improves over traditional currencies in several ways, for example:</p>

<ol>
<li>Easy to send payments internationally without fees.</li>
<li>No chargebacks.</li>
<li>International, no need to make currency conversion.</li>
<li>Easy to get started with receiving bitcoins.</li>
<li>Possibility of microtransactions.</li>
<li>No inflation.</li>
<li>No single point of failure.</li>
<li>Payment is done via digital signatures rather than giving away your password.</li>
<li>Objective public record of payments made in case of disputes.</li>
<li>An option for small countries without a viable currency of their own.</li>
<li>No need to rely on financial institutes with poor service.</li>
<li>A powerful scripting language that allows more advanced transactions than "A is paying X to B", and derivatives of the technology such as Namecoin.</li>
<li>Privacy.</li>
<li>No restrictions on whom you can pay.</li>
</ol>
 516: <p>There are some important shortfalls of traditional currency that Bitcoin addresses:</p>

<ol>
<li>There can <a href="https://bitcoin.stackexchange.com/q/161/516">never be more than 21m</a> bitcoins in existence. Bitcoin will never be vulnerable to the quantitative easing or printing of additional currency which devalues the existing funds of holders of traditional currency.</li>
<li>There is no central authority. A collapse of any particular corporation or govt will not cause Bitcoin to fail. There's no need to participate in a run on a bank.</li>
<li>Bitcoins are very difficult to steal without coercion when protected in the right way. Security features for Bitcoin are still maturing, but it is possible to <a href="http://bitcoinarmory.com/index.php/using-offline-wallets-in-armory" rel="nofollow noreferrer">encrypt a Bitcoin wallet</a> on an offline computer and do transactions from there. This heavily reduces the change of bitcoins being stolen through malware or physical theft of hardware.</li>
<li>Bitcoins can be spent over the internet with very low transaction fees (a fraction of a percent compared with 3-4% with a credit card). When you know an internet retailer is trustworthy, Bitcoin is a great way to make payment.</li>
<li>Transactions are <a href="https://bitcoin.stackexchange.com/q/197/516">essentially irreversible</a>.</li>
<li>Bitcoins cannot be counterfeited.</li>
</ol>

<p>Though Bitcoin is obviously subject to manipulation through trading on exchanges, this has little effect on its usefulness as an online payment method as they can readily be converted to another currency before fluctuations have much effect.</p>
 1574: <p>There are huge differences between FIAT and Bitcoin.</p>

<p>Fiat is created out of thin air "with fractional reserve banking" and other mechanisms, there is no stop on how many will be created.</p>

<p>Another problem is that every country is FORCED to create more of it.
Since otherwise the value of their money would increase to much, ending all export industry and tourism in that country. </p>

<p>So when the US prints an extreme amounts of FIAT they know that China must follow, which means that Japan must follow and the US must print more, and so it goes on.</p>

<p>Bitcoin can not be created out of thin air, and it takes an ever increasing energy cost to create one.</p>

<p>And since no country base their economy on it, its free from having to be endlessly printed. (It can´t even if it would be.)</p>

<p>Another very important difference is that Bitcoin is the only digital money you can own yourself with no one else having any access, and thus keep on your own computer or in your own cellphone or store on a USB the key to your money.</p>

<p>All other digital money, is money that is stuck in a bank and thus they might play around with it and go bankrupt. </p>

<p>But a Bitcoin is a Bitcoin and not simply a promise in their system.
This also means that you can send them any time of the day instantly to anyone you like now even on Facebook or in emails.</p>

<p>The limited amount also gives it a longterm backing in that if it picks up in any market, it cant stay this low and will have to go much much higher, a value of something like $50-$5000 would not be strange in 10-20 years IMO.</p>
