However bad government "backed" currency is, there is some hope of getting the government involved if theft occurs. If I use my money or credit card to purchase an item, and I don't receive that item, then I can declare a theft and the government could theoretically help me to either get the item I paid for or help me get my money back.
If I'm using a decentralized currency, however, then why should the government help me? I pay for a Rolex and the Rolex doesn't arrive or it's a fake. What is my recourse if I used Bitcoin? I can point to the fact that the transaction is indelibly tracked in the blockchain, but where is the Rolex? Did I actually receive it and am lying about receiving it, or did it never arrive? Why should the government get involved?
Also, right now it appears I really can't use Bitcoin to buy things. Transactions take a long time to complete with all of the mining and checks required to add it to all of the relevant copies of the blockchain. I can pay a higher fee to speed up my transaction, but now I might be better off using cash or credit.
If Bitcoin weren't currently subjected to speculation, then its value would be tied to a specific algorithm that has no relation to the increase in global wealth. It could be inflationary or deflationary just like fiat currency if the growth of Bitcoin doesn't keep pace with the supply/demand.
So who in the government will give me back the value stolen via inflation over my lifetime? They’re not going to, and the inflation will only continue to erode the value of savings denominated in USD.
If I use my money or credit card to purchase an item, and I don't receive that item, then I can declare a theft and the government could theoretically help me to either get the item I paid for or help me get my money back.
You’re conflating a service provided by credit cards companies to encourage you to use their medium of exchange with the government. The credit card companies write off fraud as a business expense, they don’t use the government to make you whole.
If I'm using a decentralized currency, however, then why should the government help me? I pay for a Rolex and the Rolex doesn't arrive or it's a fake. What is my recourse if I used Bitcoin? I can point to the fact that the transaction is indelibly tracked in the blockchain, but where is the Rolex? Did I actually receive it and am lying about receiving it, or did it never arrive? Why should the government get involved?
Not bad questions, and the same questions apply to cash, but without the block chain record of money changing custody. Turns out Silk Road solved these concerns - without the government.