Being a store of value is a goal if you want people to hold a currency. For example, when I was an exchange student in Ecuador long ago, the Ecuadorian sucre was not seen as a good store of value. Better-off people would, as much as possible, not hold sucres; they'd buy dollars. Poorer or less connected people couldn't do that as easily, so they just got screwed. Eventually, the currency collapsed entirely and now they just use the dollar: http://en.wikipedia.org/wiki/Ecuadorian_sucre

I don't think BitCoin can survive purely as a medium of exchange. There's the obvious reason: why pay two sets of transaction costs when you can pay just one? But I think the bigger problem is that there's a period when someone is holding BitCoins. If those are a stable store of value, then you're ok with that. But if not, you're in the land of currency risk, and the only people who like currency risk are currency traders; everybody else hates it.

But to play devil's advocate because it's fun: to the degree to which it is useful to hold onto the currency you also use as a medium of exchange, then perhaps that does provide a value floor. In other words--assuming it is successful as a means of exchange--the fact that you have to pay a transaction cost to get out of a BTC position means you'd rather hold onto BTCs so you can use them later at no penalty. So then they would have intrinsic value, based on your aversion to trading them for something else; anything that makes you want to hold BTC other than their market price counts. The question there because which is the chicken and which the egg: being a successful means of exchange or being a good store of value? And of course, whether that transaction fee provides a meaningful enough floor.

I'm not convinced of that either, and it's especially weird to have the thing enforcing the floor to be falling, but it's fun to think about.

I think that experiment has been done with paper currencies where people stop trusting the backing. It would still have the same cost-to-get-out value (indeed, I'd think that value would go up as the currency fails). I know the Ecuadorian sucre went from something like 500 to the dollar to 25,000 at the end, so it would seem that the cost-to-get-out value is small even with traditional currencies; given BTC's theoretically low transaction costs, I presume it would be even smaller.

You're absolutely correct. People forget that bitcoin functioned just fine as a black market currency back before it became a rite of passage to opine on its future. Barring prohibition by governments, the cryptocoin ecosystem is here to stay and will likely continue to grow.

It seems to me that the shared fiction of the dollar is based on the shared fiction of America. The fiction of America creates a real American government that has a strong interest in maintaining the fiction of the dollar.

From what I can tell, Bitcoin does have a similar pair of shared fictions, the idea and the currency. But I'm not seeing the thing that America has between the two fictions: a powerful organization with a strong interest in keeping the money useful as money.