I actually think it's a mediocre medium of exchange, due to the fact that transactions are not immediate, but rather can take as long as an hour or more for a reasonable level of confidence in the integrity of a transaction. There are competing cryptocurrencies being developed now that are much better media of exchange since transactions are both secure and immediate.
I think Bitcoin's real promise is as a store of value. Yes, it's extremely volatile now, and people are getting used to the fact that if you lose your Bitcoins, they're gone for good. But compare Bitcoins to cash (tends to lose its value over time) and gold (expensive to store, hard to exchange). It's also incredibly easy to exchange Bitcoins for other digital currencies, like the ones I refer to above.
I think that once Bitcoin reaches a large market cap, like the size of gold, it will be much less volatile, and less risky. At that point, all the advantages above will become apparent. So Bitcoin's future may well be as a digital reserve currency.
Perhaps, but historically, once a currency gains a foothold it is usually extremely durable.
I think it's far more likely that a successful new cryptocurrency will integrate Bitcoin into its design, thereby increasing the utility of both currencies (this is what Ripple is aiming toward, for example).
Lot's of currency's have died in my lifetime, consider just what the introduction of the euro did. But also a lot of things like game near currency's like bitcoin have also gone the way of the dodo. Limiting things to just national currency's and going back say 500 years you find well over 90% of all currency's that existed back then or where introduced in the meantime have died.
I think Bitcoin's real promise is as a store of value. Yes, it's extremely volatile now, and people are getting used to the fact that if you lose your Bitcoins, they're gone for good. But compare Bitcoins to cash (tends to lose its value over time) and gold (expensive to store, hard to exchange). It's also incredibly easy to exchange Bitcoins for other digital currencies, like the ones I refer to above.
I think that once Bitcoin reaches a large market cap, like the size of gold, it will be much less volatile, and less risky. At that point, all the advantages above will become apparent. So Bitcoin's future may well be as a digital reserve currency.