So, what's the difference between bitcoin and, say, shells on the beach?
Really, look here: I've got a pocketful of pretty shells. I say they're worth something, you agree, we have adopted this as a currency, I give you shells, you give me bread. You give me shells, I give you milk.
Fine.
It's the same with paper dollars. I work at my desk doing "useful things," my boss signs my paper paycheck, and some electrons are transferred to a harddrive at my bank, I take my plastic card to the grocery store to buy bread and milk, I transfer some of the electrons sitting at my bank into the grocers harddrive sitting in his bank. I eat, he eats, we're happy.
So, what's wrong with the currency we already have? I have 200,000-300,000 CPUs at my disposal (I work for the government so really, I do). What's to stop me (or any government agency or OMG, GOOGLE!!) from "mining" BC, flooding the system by giving them away, and devaluating the currency?
My work here is done.
I'm going to go collect some shells on the beach.