I have been reading articles lately about how Bitcoin has little in the way of buying power outside of the internet. There's are plenty of good reasons for this: legitimate businesses have little to no use for money which is not backed by any banking institution (which Bitcoin isn't), the value of a bitcoin is to unstable right now, the currency is too new, and bitcoin is a purely digital currency. Sure, every well established money can be transferred digitally, but every American knows what a $1 bill in real life looks like. Nobody knows what a bitcoin in real life looks like, because they don't exist in real life outside of computer algorithms.
So what are Bitcoins and what are they good for? First, we we have to know about digital currencies and crypto currencies. They are related, but they are not exactly the same.
A digital currency is merely a currency which is found exclusively digitally. The current form of credit, even though it looks like a digital currency, is not one; it is merely an IOU based on currently established physical currency like the US Dollar, the UK Pound, or the European Euro. This ties credit to physical money, leaving it outside the realm of digital currency.
A crypto currency is a currency which is not traceable or trackable. This means that there can't be any mechanism of standardized numbering bills for tracking like there is on American bills, because those numbers are a method of tracking where that particular bill has been. That means they can't be backed by a banking institution, either private (U.S. Bank, Bank of America, etc.) or public (The Central Bank). The reason is that banks need to be able to track and trace all of their money in order to know where it is, thereby leaving it outside the realm of crypto currency.
Now, a lack of inherit serial numbers on the money is a necessity for making a currency crypto, but it is also insufficient; there must also be a method of preventing someone from coming along and making it trackable. Without safeguards against tampering, someone can come along and I'm bed their own tracking device on the money. So crypto currency must be both untrackable and secure against attempts to make it trackable.
Bitcoin is both untrackable and secure against current methods of tampering. That's what makes it a crypto currency. It also takes no physical form, so it also happens to be a digital currency.
So what's the purpose of Bitcoin as a crypto currency? It is good if you actively want your purchases untracked. This makes it a great currency for criminals, but they're not the only ones who would be interested in it. There are conspiracy theorists who don't want to be tracked by principal. There are also people who are paranoid about companies and governments wanting to track them, regardless of whether or not they live in a legitimate fascist state or dictatorship. These individuals believe that not only are they worth tracking, but they are actively being tracked personally with individual intent.
Just as an aside, those of us who use the internet are being tracked, but not by humans with individual interest, but rather by algorithms for advertisers to sell us stuff. There are those who believe they are being tracked for reasons beyond advertising, reasons including the fact that they perceive themselves as threats to company and government. These individuals would be very interested in crypto currencies such as Bitcoin.
So that's three groups of people who are most interested in Bitcoin; the criminal, the paranoid, and the delusional. And these people have varying likelihoods of sacrificing choice in product for security of purchase, depending on which of the three groups they lead to and to what degree with which they fall into that group.
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