I'm sorry but this is silly. What you are suggesting has been already tried in prohibition of alcohol, in war on drugs and now in a more civilized way in a "war on car downloaders".
The main outcome was that black markets flourished. If people want what Bitcoin provides, they will get it in one way or another.
Bitcoin is pseudo anonymous. Everyone knows about all the transactions - they are kept in the block chain that all the clients have, you can only try to hide the real identities of the persons involved in transactions, and that is still quite hard, and anonymity could be attacked using different techniques (see Tor anonymity problems)
It was a bit harder(more costly) before Bitcoin to send small sums "anonymously", but if you have millions or billions there is a whole industry of lawyers/accountants/bankers to help you out. So in that perspective Bitcoin brings anonymity to the common people, lowers the barriers to entry, or you can also say that it brings the era of financial democracy upon us :)
By new insurance products you probably meant something like CDS? Or credit rating agencies using those improvements in risk analysis to rate those CDO's as AAA+++ would buy again?
What you failed to mention is that Bitcoin actually allows virtual currency without a central authority, and the main value is not storage, but in value transfers and lowering barriers of entry. It's actually cheaper and faster(3 days vs 15 mins) already for me to use bitcoin to transfer value inside EU, even with high currency/bitcoin exchange rates.
Did political risk stop torrents from being usefull and disrupting?
The article is more about the entrepreneur and less about bitcoin.
Also you could make the same argument about Twitter/Apple/Facebook/Google/Android/Node.js before that there was RoR. Are those news(or even PR releases) more valuable than news about Bitcoin?
I'm sorry for the rant above, those type of comments get me quite emotional.
I would like to point out some things why Bitcoin and especially Gavin Andresen is so interesting:
1. Gavin is a real forward thinking entrepreneur/hacker who is actually not just trying to make headlines to get venture funded, but is actually quietly building infrastructure for his own startup.
2. If his startup fails, we still get the infrastructure (Bitcoin), public gets enormous value even when/if his startup is dead. Thats quite alot of differrence from startups like cuil or colour, where they burn money (value) and almost nothing is left after the failure, except for cautionary tale how not to do things.
3. Bitcoin (if successfull) brings alot competition to financial sector, and if it gains any significant traction it could change the monopolistic practices of currencies issued by nation states.
Yes, it's enough to talk about probably the biggest invention in financial sector in last 20 years. Let's forget all about those calls for entrepreneurs to focus on something more world changing than iphone widgets.
If Bitcoin isn't just a definition of a word "hack", and the most ingenious hack i have ever seen in financial sector which is in serious need of disruption.
Lets better read and talk about Steve Jobs'es new book and the how new ipad is better than older and Ipad.
Totally agree with you on possibility of governmental attacks on bitcoin, thats why i added the war on drugs analogy, and it doesn't quite matter what political moral high ground excuse will be used to attack bitcoin, be it terrorism or money laundering. That's not the point.
My point is that Bitcoin has backing that is even more powerful than men with guns or physical assets. That backing is subjective value of Bitcoin in people's minds. Think Apple or Luis vutton, it's valuable because people think it is, and if the ideas on which Bitcoin is based are a solid foundation, the value of Bitcoins will only grow.
So for your third option of backing i'm thinking in terms of http://en.wikipedia.org/wiki/Subjective_theory_of_value the "men with guns", or "gold in storage" has the same value as "men who combined great ideas(PGP P2P Crypto Currency) and produced value (Bitcoin)".
So your argument is basically that government comes to tax bitcoin, or make it a part of a legal currencies, bitcoin will suddenly drop it's value?
You could argue the opposite just as successfully - bitcoin will increase it's value even more because it will become a de facto legal currency (adoption will increase massivelly).
And the "bitcoin = domestic terrorism" attack is quite hilarious (in it's futility) if you compare it to war on drugs. Demand won. You can't make war on something large part of populations want and win.
From your comment it seems that your are advocating an "intellectual life". Isn't this the same old consumerism, just a changing real goods for virtual ones (aka information)?