I don't think Bitcoin will work in the long run. The main reason is that it's designed to be limited to a fixed amount. This leads to three problems:
1) And financial transaction that requires interest is a problem. Anything from a business loan to a mortgage is basically impossible in a fixed money supply.
Interest on loans does not require an inflationary money system. The money that a person pays as interest either reduces his future spending or will require him to sell more of the future goods/services he produces.
2) Assuming the economy grows, there would be deflation, which will mean people try to hoard their bitcoins instead of spending them. This in turn increases the deflation.
Bitcoin will always have a value less than infinity, and therefore there will always be some fraction of Bitcoin you can take to represent any value to send to someone, and thus Bitcoin will still "work." A deflationary money system does mean that people ought to adjust their prices accordingly, but this is easier than in the past due to fast modern communications and a liquid exchange market.
3) Related to the first two points: One person can over time become the owner of all bitcoins if this person has a sizeable initial stack of bitcoins, and lends them out at interest, and keeps spending well below the gained interest, you end up gaining a larger and larger share of the total bitcoin supply.
How does that work with real estate? Say someone owns a lot of properties, and charges people rent for people to live there, and keeps spending less than he takes in from rent, and buys more land with the difference. Will he then someday own all the land in the world? And thus can we say that the system of land ownership and rent is doomed to fail? No, because first, he won't live that long, and second, the value of the remaining land will increase as its supply decreases. (And third, a human being will find things to spend his money on sometime before he owns all the land in the world.) In the same way, if one person's Bitcoin wealth is great and increasing, it becomes asymptotically hard for him to gain all the Bitcoins in the world, because the value of remaining Bitcoins will approach infinity.
Duct tape is like the force. It has a light side, and a dark side, and it holds the universe together ... -- Carl Zwanzig