Money is similar: it does not exist, except in our imaginations. We invented the idea, along with ideas like "fairness", "justice" and "ownership". They are not perfect inventions, and they are illusory and ephemeral, but they nonetheless shape human behavior.
"You're not allowed to take what's mine" is every bit a product of an illusory code of behavior as taxation, laws, etc. It does not exist in nature intrinsically. If you honor other people's ownership and expect them to honor yours, you are participating in following these unwritten rules.
With so called social contract everything falls apart rather fast when you remove force from the picture. How many people, do you think, would keep paying taxes if they knew no IRS agent is ever going to show up on their doorstep?
You see, you confuse what's really a universal behavior and codes with something that's imposed upon us by a threat of force. No one forces people to use Bitcoin or Gold. But people are forced to use USD. No one us forced to donate to charities, but people are forced to pay taxes. Every time you look at something that you think is a product of society, please ask yourself: would this thing exist if no central force, like government, was applied? For instance, would property exist if no government was enforcing it? Some would say no, but of course it's not true, since territorial behavior is present even in animals.
This doesn't follow intrinsically. The threat of violence is absolutely present in line-standing scenarios (imagine starving people in a bread-line; the biggest reason not to cheat is that fellow line-standers would kick your ass).
> But people are forced to use USD.
Sort of, in the same sense that one is "forced" to engage in voluntary labor in order to survive. If one were to go live in the woods, they could hunt and forage without ever touching a greenback. However, to nearly everybody, the benefits of USD (and labor) outweigh the costs, or at least they act that way.
Obviously, many of our existing social structures are backed by centralized violence, both at the nation-state and community levels. But my point is that this is just as true of gold or BitCoin as it is of USD and taxes. While common decency will prevent most people from taking your stuff, at the end of the day, the threat of violence is what keeps someone from stealing your gold, or beating you with a wrench until you give up your BTC encryption key. There is no reality in which there is not an incentive to use violence, even if only to stop other violence.
Clearly, "social contract" is a broken metaphor: none of us signed a goddamn thing simply from being born. It bothers me as well that I effectively have no say in the matter, and that I am tacitly complicit in the various injustices of the state. I would vastly prefer opt-in distributed nation-tribes, such as Neal Stephenson's "phyles".
But at the same time, there is a strong possibility that if governments were to evaporate tomorrow, we would revert first to "nature red in tooth and claw", eventually giving way to networks of feudalistic allegiances, in both cases, backed by extreme violence. Should we invent new post-national social structures (perhaps with actual social contracts that people choose voluntarily)? Of course, the sooner the better! But in the meantime, we all get 30% (or whatever) stolen in order to not have to worry about 100% getting stolen. It sucks, but it could be a lot, lot worse.
Civilization is a non-trivial problem.
Protecting Bitcoin by splitting the password via 7-of-12 SSSS and sending the keys to 12 of your friends around the globe costs almost zero. The amount of security does not depend on how much you are willing to spend on it. It only depends on your paranoia. Most of the people are safe enough with cheap offline computer. Fugitives can use more complex schemes.
There are more advantages when you look outside the narrow view of utility in modern western society. Now anyone in the world can explore entrepreneurship and all they need is a computer. Computers are becoming more and more accessible (Raspery Pi's, $100 laptops etc).
Now people in poverty stricken countries can establish their own businesses and trade on a world wide scale. No bank accounts needed. Ability to accept micro payments without abhorent fees.
> Bitcoin seems to be a very good way of creating a new "club" of a small number of bitcoin-wealthy at the expense of everyone else
Currently we live in a society where wealth disparity has reached sickening levels.
Bitcoin will significantly reward those who take the risk from an early stage if it does take off. The difference being that Bitcoin is not a fundamentally rigged system.
In a country (Peru) where formal legal systems functioned extremely badly, there was a huge extralegal economy: houses, businesses, transport, etc all of which didn't officially exist and had no legal protection. Providing a route into the legitimate system provided a huge economic benefit for a lot of people and reduced Maoist terrorism.
Bad legal system < Lawlessness / Extralegality < Good legal system.
A fundamentally rigged system is any system which doesn't reward merit. That's BitCoin - it doesn't reward merit. Those who got in first, benefit if they convince everyone else to use it.
But those they convince do not benefit the same.