I also think that Bitcoin will suffer from the same problems that plagued Flooz: the chief advantage of underground currencies is that they better support a black market, and this limits their potential to break out into the mainstream economy. As I see it, there's three reasons why I would want to use bitcoin:
1. Price speculation
2. Purchasing illegal goods (which currently dominate the bitcoin economy, per my understanding)
3. Money laundering
The first does nothing to support the bitcoin economy, while the second and third expose it to risk from government action (and also make it icky: if bitcoin is mainly used to buy drugs, guns, and child pornography, then I don't really want to use it to buy dinner).
On the other hand, a reputable company may take a chance by simultaneously investing in bitcoin, and then attempting to drive adoption, e.g. by subsidizing purchases made through bitcoin. That might help it shed its black market pedigree and break out into the mainstream.
If you'd mentioned Flooz as counterexample to the claim that WoW gold has bright future as currency and store of value then I'd wholeheartedly agree.
MtGox is just biggest place where people trade bitcoins but there are many alternative markets. Talented developer can set up new market within few months. Of course fall of MtGox would anger and put off many people but end of MtGox is not the end of bitcoin.
Price speculation and money laundering increase value of bitcoin which attracts more investors to it and draws public interest to bitcoin. Purchasing illegal goods with bitcoin is also good because it provides immediate utility as more and more things nowadays are illegal.
> if bitcoin is mainly used to buy drugs, guns, and child pornography, then I don't really want to use it to buy dinner
Does financing manufacturing of military grade weapons that are constantly used to kill lots of people not bother you? Does financing dictatorships by purchasing of their oil with dollars not bother you? Does participating in global casino where whole banks play (calling it "investment") that artificially raises cost of such basic things as food for millions of impoverished people not bother you over your dinner bought with dollars? I think this last thing is what dollars are "mainly" used for nowadays.
When megaupload was raided, it wasn't the only one that was effected. Almost all of the other file lockers shuttered/closed immediately. Its foolish to think other exchanges would not follow suit if one was taken down. If there is no way to turn your bitcoins into another currency, you would be silly to think you could still buy goods that cost someone else money with them. Whos going to spend money to lose money?
I agree. I just don't think it would kill bitcoin. Because killing one exchange would just make others more popular. That's what happened when most popular bitcoin exchange in my country lost their wallet. :-)
World consists of many countries with many laws. I just don't see all of them cooperating in killing bitcoin.
Besides how well megaupload raid worked for Hollywood people?
I hate when people use word 'intrinsic' when criticizing bitcoin. Anything that is in limited supply, transferable and durable becomes valuable or forgotten. There's no way that bitcoin will be forgotten and bitcoin is as durable as any P2P network. Whether you can legally buy and sell bitcoins is irrelevant. Of course I'd much prefer if bitcoin was mainstream than black market but being black market only still places price of bitcoin higher that it is today, I believe.