It's not a question of legitimacy, isn't about demand. Currency is a token. You need tokens to play the game. The difference with taxes is that you don't choose to participate. You must play, so there is always demand for tokens.
Re:What Is a Bitcoin, Really?
by nickpinkston on Friday July 11, 2014 @02:28PM
(#8021641)
Yea, but demand isn't all created equal right? I'm trying to capture more than raw demand - unless we're just defining terms differently (which I suspect)
I'd rather have bitcoin than Zimbabwe's fiat currency.
Taxation definitely gives legitimacy, but so does the ability to pay for things anonymously. If enough people are willing to take a currency, than it gain value - period. The gov't wanting it in taxes is just a really big provider of liquidity providing those network effects.