For a little background please read Bitcoin: A New Commodity Created To Serve Market Demand. In this post I take it a little further.
In short, Mises’ Regression Theorem is wrong – I know this is heresy to the Austrian Religionists but think through this a little:
Bitcoin was primarily created to be used (100% DIRECT USE) as money (a store of value, medium of exchange, unit of account) not to mention its many other potential uses such as smart property and smart contracts. There was never the intent for it to have a prior use.
It was created to serve the market demand for a better medium of exchange specifically in the hampered market. I believe Mises’ Regression Theorem assumed an unhampered market. [updated for emphasis & clarification]
Another way to look at the bitcoin protocol is that it is a publicly auditable accounting mechanism which works extremely well for hawala-type transactions.
Two trading partners can voluntarily agree on an exchange rate (price discovery) and then trade using the trusted bitcoin accounting mechanism as a medium of exchange.
In another sense, you can look at bitcoin as an “opt-in” community currency (much like Ithaca Hours or any other community currency) where trading partners can opt-in or out at any time. People are “opting in” because it is trusted, decentralized, and better than gold in many respects (you can smuggle bitcoin across borders much easier than you can gold).