very few built the bit coin mining network. it was all just hackers throwing cpu power at it. however it is to the point where it is no longer cost effective to throw CPU power at it as the # of coins you get is worth less than the power to run them.
You should take a look at the Mining Dasboard (it's a great resource in general, with the best mining profit calculator I've seen). You'll note that the total compute thrown at mining continues to grow, and just hit 35 petahashes per second (that is, 35,000,000,000,000,000 hashes per second). Clearly a lot of folk think there's value in mining bitcoins, and the increasing rate shows no sign of slowing down. On January 1, the rate was only 11 PH/s, so it's more than tripled in 3.5 months. Why are they doing it when for almost all of them it's not profitable now? Clearly they think the value of BTC will rise - a lot!
The problem of bit coin isn't whether or not it is useful but of it breaking down.
There are 44 quadrillion potential bit coins(21 million to the 8th power), but at the rate at which they are being permanently lost is just as staggering. every time someone loses 1 coin due to a lost password, bad hard drive etc, you really lose 8 potential coins.
You're conflating two different things. A "coin" is one bitcoin. Each coin may be subdivided into 100,000,000 "satoshis" currently. The Bitcoin Foundation could allow further subdivision in the future. So, the supply of BTC is not of any concern in the long run.
Real world currencies don't have to deal with "bit rot" (pun unintentional) You lose the combo to a physical vault there are other ways of opening it. even if the physical cash is destroyed you can always print more to replace.
Once a bit coin is gone. it is gone forever.
True, it's more like having gold destroyed (say in an explosion) than burning paper money. BTC was designed to have a limited amount, to prevent inflation. Given its divisible nature, that's not really a problem, although it will tend to drive up the value of integral BTC over time (thus the allure to investors).
Lastly we are already having to do transactions in milibits. what do we call .0000001 of a bit coin?
As mentioned above, a "satoshi".
Bit coin value has to go up in order to compensate for the inflation of number of coins and % of coins . however that means today's laptop at 1 BTC is worth .5 BTC tomorrow. People are already getting annoyed by such things.
What people? Certainly not investors.
Why is that a problem? Gold is currently worth four times (400%) what is was just fourteen years ago, and that's after taking a big hit a while back. Does that mean nobody wants to buy and hold gold now? When they need to buy something, they exchange some gold for dollars (or bitcoins) and make a transaction. BTC has nice attributes of both commodities and currencies.
Purchase a product for 1 bit coin and two months later that one bit coin is worth 10 times what it was. Bitcoin might be a transactional currency, but it won't ever be a stable one. it's very design prevents such a situation from lasting more than a couple of years.
There are a couple of factors that affect BTC price. The first, and the main cause of extreme volatility, is its newness and novelty. There have been giant "buyins", as when the Chinese became aware of it. Those things drive prices up. In the longer term, I expect it will stabilize quite a bit...but of course it will be worth more and more dollars over time if for no other reason than dollars are constantly inflating by design.
I expect BTC will do fine in the long run as long as the protocol remains secure.