Right now, bitcoin is like a country with a minuscule GDP ( * ) and absolutely no currency controls (and no possibility of such, ever). As many small countries have learned the hard way, the worst thing for your economy's and currency's stability is US and Euro-based foreign currency traders deciding that your currency is a "hot" one to trade in.
When history looks back on why bitcoin failed, I suspect a big part of it will be the SEC's decision to allow large Wall Street firms to speculate in BTC as much as they wanted to.
Now, a robustly anonymous exchange network with value pegged to something external - say, a cryptocurrency backed by EUR, USD, or actual grams of gold - that would be something different. That would likely be made illegal, either explicitly or by having nearly every transaction run the risk of a federal money laundering charge.
( * ) The GDP of bitcoin-land would be the sum total of all goods and services bought and sold with bitcoins in the course of a year.
This statement demonstrates that you have no idea how cryptocurrency works. As such everything else you say on the subject is pretty suspect.
Also, complaining about speculation-caused instability and then claiming that pegging the value of Bitcoin to gold would solve it is hilarious. You do realize that people speculate with gold, right?
And finally, cryptocurrency isn't currency. Making assertions by analogy is at best an educated guess.
You were describing an idea for minimizing the role of speculation on the value of cryptocurrency, and your proposal was to peg the value of cryptocurrency to something which is valued largely on speculation. If you wanted to say that tying the value of cryptocurrency to gold would stabilize it, then you should have said that instead of saying the stupid thing you actually said.
If you're comparing cryptocurrencies and currencies issued by nations you're comparing apples to oranges. You can't make realistic assertions about bitcoins based on currency--they're just too different.
But most nations use electronic currency with digital ledgers and new currency is generated whenever a certain cryptographic function is made - namely, a messaged signed with the key of the central bank.
Can you show me any graph of the value of a nationally-issued currency that behaves like Bitcoin's? The most stable currencies show <10% volatility, while Bitcoin shows volatility of >100% over a given year. The most volatile currencies are almost entirely inflationary, while Bitcoin can be deflationary a great deal of the time (even counting the drop from $1000+/coin, I'd be still up more than 1000% from when I originally bought Bitcoins). Not a single government-issued currency in the world behaves like Bitcoin.
If you want to talk about the technical implementation details, fine, there are some vague similarities, but those are not by any means the defining characteristics of a currency. Currencies predate computers, so computer implementation arguments about what a currency is are pretty obviously bunk.
I don't buy the idea that it would flourish without them.
...and much like the other things they make illegal, use of it will continue and the abuse will grow.
It is already (somewhat) difficult to have untraceable property, which is sort of a prerequisite for the dark economy to be interesting. For example, money laundering exists because people with, roughly speaking, dark money, want to use it to purchase legitimate goods.