Many smart folks whom I like and respect are enormous proponents of this digital currency. Some of them go so far as to say that Bitcoin will fundamentally break the power of the State by undermining its ability to control money. This a laudable goal indeed. Bitcoin is also the first exposure that many people have had to the idea of competing currencies, which is a welcome development.
Nevertheless, I have some serious reservations and concerns about Bitcoin.
While digital currencies like Bitcoin may play a role in a future monetary system, I still tend to believe that gold and silver will reemerge as the dominate forms of money, and it is the precious metals which will eventually overwhelm and supplant government issued fiat currencies.
First of all, as the hard money camp points out, money, i.e. a society's medium of exchange, emerges on the market. It is not introduced from the top-down, but comes forth from the bottom-up. No one "invents" money, not even governments. Throughout history, governments have taken control of the currency, and then gradually weaned them off of their precious metal backing.