This is why Bitcoin, Litecoin, Ether are on top, but other coins will rise as well. This is what we're seeing today - Crypto scaling horizontally to deal with scaling issues and transaction fees.
I don't see any government making a crypto the 'default transaction mechanism' as it would work against the government itself. Being able to control your currency, and print more when need be is what allows a country to manage their long term debt and fund things like large infrastructure projects (or wars etc..)
Crypto is just like gold, just better at storing value than gold in every way - so people are moving over to it. Just as gold doesn't replace cash and credit cards - don't expect crypto to either.
You're right that governments need to be able to deflate their currency, but I don't think that's insurmountable. There are lots of ways to design a manipulateable currency. That would make it less attractive to the people who want a gold standard, but as I said, I'm skeptical about that. While a crypto is like gold, all the cryptos are like the Zimbwean dollars.
Maybe Bitcoin will sweep those away eventually, but for the moment, the imbalance between BTC and the other cryptos makes me wary.
Maybe the system will stabilize on those top 10 coins, and the others will fade out or become irrelevant. But I don't see any particular reason why they would. Most of those 10 ten coins were created in the last three years, and could easily be displaced.
BTC is the granddaddy and could yet be the foundation of a stable basis. But it has enough problems that competitors keep arising, and that makes me skeptical.
You mean Blockstream and Adam Back in particular? Yikes, if that's what you call a good team I'd hate to be on a software project with you. They have severely diviated from the design layed out in the White Paper and Satoshi's intensions of having a cheap, Peer-to-Peer digital currency. The failure to raise the block size alone has been, at best, a massive misstep, at worst, a deliberat sabotage of the Bitcoin project.
To justify Bitcoin specifically you'd need to explain why it in particular should be the one-and-only (or at least, one of a fixed and finite set). A government could do it by fiat, and it wouldn't surprise me to see a government bless some cryptocurrency as its default transaction mechanism. A stablecoin could do it by piggybacking off a government fiat.
It's not impossible that the population as a whole could simply land on Bitcoin, much the way a government exists by the collective consensus of the people living there. But I don't see that as being very likely, since there are too many alternatives. It has the first-mover advantage and might just succeed, but I consider other cryptocurrencies more likely.