I would like to thank reddit user BCLaraby for pushing me down this train of thought and crystallizing these ideas with his post (http://www.reddit.com/r/Bitcoin/comments/1r20ts). He claims that Bitcoin is truly the first world currency. It is a currency that absolutely anyone can participate in and nothing in the bitcoin protocol can keep others out. In a way it is the grown up version of Euro experiment and the way bitcoin is set up it should be obvious why bitcoin is leagues better than the Euro at the very thing the Euro was designed to do. I will attempt to explain.
The Euro was put in place to grease the wheels of commerce. It is a single currency that could cross sovereign borders and would be accepted everywhere. It removed the clog of currency conversion which was either placed on the visitor (waste of time and additional expense) or the retailer (stockpile, risk, clearinghouse, additional expense) and these effects were only magnified in large commerce. Suddenly the European countries worked a little more like the United States where you were technically crossing governing borders, but the people and commerce became much more homogenized. Where the Euro idea breaks down and why it works in the United States is that unlike countries in Europe, states are not sovereign.
Sovereign nations are allowed to make unilateral decisions and typically what keeps them in check from making really bad decisions is the fact that they are held culpable for the decisions that they make. This is true in monetary policy. If a government borrows more than they can pay back or fractional reserve banking and government policy creates states of hyperinflation then the nation has to deal with their destroyed currency. But when that currency is the same as the currency of your sovereign neighbors, you will drag them down with your problems. Being a sovereign nation the other countries cannot tell you what to do. You can declare bankruptcy, but your status still hurts your neighbors in very meaningful ways. It is in their best interest to help you out and you have learned that you can be irresponsible and in the end get away with it. Whether they are helped or not, irresponsible nations will destroy the Euro. One way to get around this is to violate and remove the sovereignty of troubled nations stating that they can't be trusted so you must be allowed to govern them. You can effectively use the monetary system to conquer your neighbors. Some people believe this was the intent of the Euro all along.
Bitcoin allows all nations to participate in a global currency without risking their own sovereignty. The system is simple enough to be self governing and the governing body (the miners) are distributed without regulation as to who can participate. Because there is no method to expand money supply you can't use the tried and true "create more" method to destroy money value. Because the entire process is opt in you can simply state what you are willing to trade it for or trade for it. Markets will be less prone to manipulation because there isn't anything convoluted or hidden to manipulate. Complicated instruments based on bitcoin will undoubtedly be made, but they will be exterior to the bitcoin protocol. And finally, bitcoin will not replace any other currency. I have never believed that a country would switch to just use bitcoin. It facilitates transactions and can be (relatively) universally accepted, but fiat currencies should still be used for local business and credit markets. This is decidedly unlike the Euro that usurped local currencies and made them go away.
Bitcoin can serve to grease the wheels of commerce by being a universally accepted "reserve" currency that anyone down to individuals can participate in without exposing participants to the risks of irresponsible neighbor behavior.
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