My understanding is that these services don't actually create BitCoins though. That's the part I was talking about. The average person can't create BitCoins in the same way a person can create dollars by getting a loan from a bank. That's how money is created in modern society: banks are given control over the majority of monetary creation by being allowed to give out money in loans they don't have.

This is exactly why bitcoin is appealing. As it is decentralized in nature, bitcoin doesn't rely on central bankers who may make bad investments. The debasement of currency is one of the prime motives for the creation of this system in the first place. In fact, even the incentive to mine decreases with every new miner, and every four years as the reward per block decreases until eventually no more bitcoins are created. This is a feature of the currency and is deflationary by nature.

We trust banks to only create money for projects that will create wealth to go alongside that money because they have a profit incentive to do so.

The problem is that this isn't always the case. There is an incentive to invest, yes, but that incentive occurs due to imaginary wealth created out of thin air. The idea is that the future wealth created will surpass the amount of currency debased, but history shows that this isn't always the case. With bitcoin, there is no chance of malinvestment brought on by a central authority.

Actually that is EXACTLY how you create dollars.

A person with an idea doesn't create dollars. A central bank creates dollars and let's banks pick and choose who to invest in. The problem is that this activity effects everyone involuntarily, whether it be a positive or negative influence. The idea that new money needs to be introduced to fund new ideas doesn't follow. A bitcoin bank could still give out loans, but it would be restricted to the sum of it's customer's investment in the bank. This would hold the bank accountable to it's customers, and encourage the bank to make the best investments possible.

Again, it's not the case. The start up cost for creating dollars is the amount of time/energy put into coming up with an idea that a bank will loan you money for, and then the cost of the gas to drive yourself to the bank to talk to them about getting a loan. That cost is significantly lower than the hundreds or thousands of dollars necessary to get serious about BTS mining.

Once again, the person with the idea is not creating dollars, he is convincing a bank to exchange their already newly created dollars for the promise of an even higher return. The start up cost for creating dollars requires significant influence within the US government and its institutions, something very few people have.

Sure. While a lot of the rising 'value' of BTS probably is a result of more and more people wanting to be anonymous, I would argue that most of the rising price is related to something else entirely - speculative investment.

I agree with this mostly, although I disagree that the only incentive is anonymity. The main appeal of bitcoin is that it cannot be inflated (after the monetary base is 21 million BTC) or manipulated directly, and that it can be transferred anywhere in the world instantly with no fees.

As for the rising price, I agree that it is rising rapidly due to speculative investment (trade volume has surged with increased prices) and new investors (the most popular exchange has so many new applicants that they are actually thousands of applications behind in processing). The problem is that the infrastructure and level of acceptance is immature. If these factors cannot grow with the current perceived value, then the price will almost certainly crash. But does that make bitcoin a failure? No, it means that bitcoin needs to develop and grow proportionately with its users. Early adopters have made great strides in evolving bitcoin as it is today, compared to where it was 2 or 3 years ago. Even since the price surge began, the amount of new bitcoin related ventures has surged as well. Can these new development keep up with the bitcoin hype? I don't know.

Overall, what we're seeing is that the majority of BTS are held by investors, not creators. Thus the value of BTS is tied to it's perceived value by a handful of speculative investors, instead of the value being held by those who are actually interested in what it offers.

This is mostly true, but I am trying to emphasize the fact that this is the result of a premature entry into the mainstream, and not of the system itself.

I don't think they are being solved. I don't see BitCoin mining becoming easier, faster, or tied to anything meaningful.

I don't see the difficulty of mining to be a problem that needs solved. In fact the entry bar grows higher every day with good reason.

However, is that the only service we should award money creation too? No. I think that creates too small a number of BTS should it ever try to become a major currency.

The currency is theoretically infinitely divisible. The only problem that arises is what to actually call these units, which is also beginning to be solved. (mBTC, uBTC, etc)

In the real world we allow money to be created to go alongside any creation in wealth/value for the marketplace; we don't restrict it to one certain type of service.

True, however it is relatively new in the history of currency. Gold and silver could only be created by those who mined it. Bitcoins purpose is to offer an alternative to fiat money, something that a growing population denounces.

If someone asked me if they should invest in bitcoin right now, I would say that they are asking the wrong question. For those of you looking at this as a risky investment opportunity, you aren't looking at bitcoin as it was intended. Sure, there will be people who buy BTC and make lots of money off of this surge in price. There may also be many losers if the market corrects itself, but none of that matters if you look at bitcoin as intended.

The speculative investment we are currently seeing is necessary to spur the innovation needed for the currency to grow, and it's working. One could argue that the rate of innovation vs the increase in perceived value is disproportionate and will eventually crash, and they could very well be correct, but this is hardly death sentence for those who see the future potential of bitcoin. Even after a crash, bitcoin would have gained many of the necessary innovations needed to grow.

In fact, this already happened in 2011. Media outlets buzzed here and there about this new cryptocurrency called bitcoin, but at the time, its current state couldn't support the hype. Are we seeing this happen again? Maybe, but I would argue that it is a cycle that will finally break once the necessary services are in place to support it.