Now that the "cat is out of the bag" regarding how Bitcoin works, and with relatively low barriers to entry in the market, there will soon be many competitors.
If you think of these currencies as individual electronic "nations", the only thing that will differentiate the currencies will be marketing and faith in the currency itself.
Now, you can talk about how the dollar is a fiat currency, but in the end there is nothing standing behind Bitcoin in and of itself. There is no economy based on Bitcoin. No goods and services that originate in Bitcoin denominated transactions.
It's value will only be based on wild volatile trading market swings.
If a country based currency's price drops, that may hurt my ability to exchange internationally, but domestically, there's an economy that supports a reasonable exchange for the currency. With Bitcoin, if the price drops, my ability to exchange will be hurt universally.
I think this volatility will ultimately be Bitcoin's undoing. Enjoy the ride while it lasts.
Not marketing, but utility, will be how various crypto currencies are valued. The faith part is where bitcoin is so interesting as a medium of exchange. It is limited by the protocol itself to a fixed limit, rendering it beyond the simple counterfeiting that a reserve system and political borrowing create in actual national fiat currencies. It's for this reason above any other I'd expect crypto currencies to take hold. You don't have to be in Venezuela to see the government devalue your currency. The Federal Reserve acknowledges knocking over 98% off the value of the dollar since they were instituted.
Now, you can talk about how the dollar is a fiat currency, but in the end there is nothing standing behind Bitcoin in and of itself.
Actually, math is what stands behind bitcoin. Faith in 1+1=2, or faith in our political class? Which one do you really want to place your trust in?
There is no economy based on Bitcoin. No goods and services that originate in Bitcoin denominated transactions.
Economies are based in production and transaction, and bitcoin is used currently in commerce. In market economies prices are measures, and bitcoin serves as a medium of exchange that is of a known and fixed pool at all times. The only thing that expands the pool is the actual process of managing the blockchain ledger additions. This processing earns newly created coins, thus there are no 'welfare' bitcoins plucked from thin air and guaranteed with someone else's future debt obligation.
It's value will only be based on wild volatile trading market swings.
Its value derives from its utility as an uncounterfietable unit of exchange. Price swings don't impart value, but are in my opinion a glimpse at how incredibly nascent this market remains.
I think this volatility will ultimately be Bitcoin's undoing. Enjoy the ride while it lasts.
If bitcoin's relative fixed pool of units continues to be priced in an ever growing pile of (pick favorite national fiat currency), where does the ride go but up? Faith in math, or politicians and their promises?
"We can guarantee cash payments from here on out, what we cannot guarantee is the purchasing power of that cash." -Alan Greenspan during remarks on Social Security, Feb 16, 2005
I hope you take the opportunity to watch more than 45 seconds of that video I linked earlier. It really does a good job of explaining how the protocol functions. This technology has all kinds of future promise (title, automated escrow, etc). Billions of people on the planet with a smart phone and no access to a bank. This stuff isn't going away, it's worth learning about.