Here is a short list of weaknesses:
* Wallet Vulnerable To Theft: malware searching and downloading wallets
* No authentication for IP transfers: you can send transactions to IP addresses, this is vulnerable to MITM attacks and someone can re-route transactions to a different IP address
* Energy Consumption: electricity has a variable and external cost, which can be manipulated
* Illegal content in the block chain: arbitrary data can be included transactions, including binary data (eg: child pornography)
* Breaking the cryptography: Bitcoin uses SHA-256 and ECDSA, this isn't vulnerable now but it could be in the future
* Double-spending[2]
* Coin destruction: if your wallet file is deleted, your coins are gone forever
Obviously wallet theft is the biggest issue, especially with using third-party wallet services and running insecure operating systems (ie: old versions of OSes). There are a variety of reliable learning resources for managing your wallet files securely.
Not real issues:
- "No authentication for IP transfers" - not an issue, no one uses it. If you need to authenticate payment address, either get it over HTTPS, or use upcoming (in 0.9) payment API (same principle as with HTTPS, but without HTTP) or any other way that reduces risks of spoofing payment address.
- "Energy Consumption" - not an issue. Miners spend as much energy as profitable for them, just like anyone else on the planet. Visa datacenters also consume energy. Who decides how much energy spending is "too much" if everyone spends what they can afford?
- "Illegal content in the block chain" - not an issue with Bitcoin, but an external arbitrary threat created by feds. Same applies to unencrypted WiFi connection or someone sending a well-hidden picture in email attachment to you. Also: users are not required to store the blockchain. If you don't like a threat of "illegal content", use lightweight client to keep your keys only.
- "Breaking the cryptography" - does not uniquely apply to Bitcoin comparing to, say, PayPal or bank wires. If some algorithm becomes weak, Bitcoin can be upgraded just like your bank's SSL certificate can be.
- "Double-spending with 51% attack" is getting less economically viable with every single day as more people mine, use or simply know about Bitcoin. Also, it does not affect all the users, but only those with whom attacker transacts. And if that happens once, people would start sending expensive transactions directly to miners they trust to mitigate the issue.
- "Coin destruction" is not a problem for society. Everyone's money gets more valuable when you lose yours. Divisibility is enough for a long time to come and can be increased on many levels, inside and outside Bitcoin core protocol. Lost/stolen wallet issue is covered above already.
And of course there's nothing different between a compromised computer contained BTC and a cash mattress fire. Yes, in both situations you lose all your money. You're missing the point.
And yes, of course, fiat and bitcoin share the same fundamental weirdness of faith values, the comparison was to gold and silver, not fiat. So the point you're making is moot.
The difference is that I can use USD and mitigate the risk of a cash mattress fire by using a bank, savings-and-loan, or credit union, and mitigate the risk of using such an institution by using an FDIC-/FSLIC-/NCUA-insured institution.
I think we have to face the fact that digital currency (fiat terms) and Bitcoin are essentially the same except for the means of generation. "Money" is printed when physically present, but once stored in the bank, that's converted to bits and the physical notes (depending on wear) are destroyed.
Also the fact that there's no equivalent for FDIC et al. for Bitcoin losses.
Do you mean your computer could be compromised? If so, then is that any different than a house going up in flames with money under mattress?
Article mentions "Unlike gold or silver, Bitcoins have no intrinsic uses" which is true, but then fiat money has value not because the paper/fabric/plastic blended note and ink add up to what's printed on the face. In that regard Bitcoin has value on faith as well.