...or really, the fatal flaw for any cryptocurrency (as opposed to crypto payment systems)?
I've said elsewhere that I'm not fully up to speed on Bitcoin, so I'm not writing with any authority or expertise here, but it seems to me that even if we assume a) flawless protection against counterfeiting and b) genuine anonymity, there is still this fundamental problem: Because Bitcoin (or Litecoin, or any other digital currency) does not represent anything "real" - that is, any commodity or product or "thing" that people value - the scarcity that is imposed by the creator of any digital currency becomes meaningless.
Why do I think this is so? I don't think it is true of gold or silver, for example (even if they had no industrial or decorative value, I still believe they would be used successfully as mediums of exchange, if only because of convention and - more importantly - because of their genuine scarcity.) So why are Bitcoin, Litecoin, etc. different? If we assume that their scarcity is genuine - that they cannot be counterfeited any more successfully than say, gold or silver can, then why could they not also become successful media of exchange?
The answer seems pretty obvious: Because anyone else can ALSO establish a competing digital currency (and in fact, ARE doing so.) If none of these currencies are based on anything "real" (and "real" could in principle include things like page views or other "non-tangible" goods) then by creating new digital currencies, they are, in effect, diluting the value of Bitcoin, Litecoin and any other competing digital currencies. They may not be "counterfeiting" in the strict sense of the word, but the effect is the same.
I am posing this as a question, not an assertion. Again, I am no expert on cryptocurrencies and I'm sure there are many many people who know much more about this topic than I do. So I am asking them (especially those who believe Bitcoin will be "the" currency of the future): Is what I've said above correct? And if not, why not?
I do believe that some form of crypto exchange would be monumental in the fight for liberty. However I am doubtful that the current model of cryptocurrency (specifically, those not backed by anything "real") can work in the long run, for the reason I give above. I am eager to be proven wrong.
(And no, cryptocurrencies are NOT "fiat money." Look up the definition of "fiat" if you don't understand why.)