Actually the Bureau of Engraving and Printing will replace damaged or destroyed US currency if they can determine to their satisfaction how much has been destroyed. They replace over $30 million of currency yearly. The most common causes of mutilation are are fire, water, chemicals, explosives; animal, insect or rodent damage; and petrification or deterioration by burying.

See http://moneyfactory.gov/uscurrency/damagedcurrency.html There's also an article with some interesting stories: http://usatoday30.usatoday.com/news/nation/2001/06/2001-06-0...

[I'm not intending this as an argument about Bitcoin, but as something people might find interesting.]