With government bans on online gambling bitcoin could really take over(that market). And, of course, there is the illegal drug trade.
When people say that "it's not backed by anything" all they need to do is fire up tor and take a peak at silkroad. It's backed by one of the most in-demand products ever.
The best part about this is that neither the buyer nor the seller needs to have the slightest interest in BitCoin and it doesn't matter at all if the value of the currency is reasonable so long as it's reasonably stable. Even better, neither side needs to know the other's bank details, just a throw-away BitCoin account number. This isn't just an IMT-killer, it's a PayPal killer as well.
Assuming the BitCoin market is more or less efficient relative to currency markets, and assuming those transactions could be cleared within ~1 day, you could absolutely kill the international transfer market (known for high fees, long delays and shitty exchange rates).
Example exchanging 500 GBP to EUR (via intersango at current rates):
Buy 104.6 BTC @ 4.76GBP Fees for instant trade: 0.95% = ~1 BTC. Balance: 103.6BTC
Sell 103.6BTC @ 5.8EUR = 600.88 eur Fees for instant trade: 0.95% = ~5.71. Balance: 595.17EUR
500 GBP went to 595.17EUR. Exchange rate: 1.19. (google tells me the exchange rate is about 1.26 at the moment, so this is quite poor)
Until then, there are a couple of mitigating factors:
- You may not get the market rate from anyone. The UK post office is only giving me a rate of 1.2260 to the Euro.
- If you need to pay a fee for a transfer it could be worthwhile for small amounts. The UK post office doesn't charge a fee, but it has a min transfer of £250. www.tranzfers.com charges £7 or $15AU. I've paid more elsewhere.
(btw. drugs & weapons are the second and third biggest international markets, food is the first.)
And yeah, it's backed by the Silk Road :)
It's actually quite curious that Bitcoin was able to take off the way it did despite this lack of initial forced demand. I wonder which was more important: the fact that there are so many anti-government ideologues out there, the fact that Bitcoin can help with illegal transactions, or simply the fact that it's a neat technology. I'm certain all three played a role, perhaps to a different extent at different times.
I doubt that the 'neat technology' aspect contributes much to the exchange rate; or little more impact than coin and banknote collectors have on mainstream currencies. You don't need to put much money in, or participate in many transactions, in order to examine the technology itself.