> To start off, I'm really enjoying this conversation!

Thank you, it is interesting.

> But then you are just using fiat currency with an extra step

That is for me and my counterparty to decide separately, the actual transaciton is still made with bitcoin. You can also argue that as long as you use fiat to determine the value of the transaction (10 USD for a pizza converted to whatever is current exchange rate instead of 0.0xxxx bitcoin) you still are using fiat in the transaction, even if only in a secondary role.

> That's the secret, you wouldn't need a "proper bitcoin transaction". You'd open a channel with someone like coinbase, and then use that forever.

It seems I have missed now something. I open a channel and allocate a certain amount of bitcoin there for me to spend. After a while, I have bought loads of pizza, and my channel has no more "credit". How do I top up my channel if there is no single blockchain transaction to be used?

> You can use a custodial service if you want (AKA a bank which will insure your money in the event of a hack or fraud),

Interesting. How much does such bank charge for these services and what are the "banks" allowed to do with the coins thay have under custody? Can they e.g. lend them or use them in any other way? Who does insure these "banks"?

> volatility will begin to level out.

Unfortunately not. There really is no mechanism to do that. You can have a look at a historical price charts of gold [1], and you see that once there have been no central bank enforcing nominal gold price stability, the volatility has been massive (compared to what I would like to have with my savings). And gold has had much more time (and much more "market cap") for the price to stabilize. And it has not.

As a side note, I actually think that we would need additional currencies/monies (sorry, as a non-native english speaker I have never quite grasped the distinction) to the "official" ones. But the main source of my scepticism towards current cryptocurrencies is that as a proper currency, they are really bad. And almost antithetical to what I think a good alternative currency should be. (I am thinking mostly from macroeconomic perspective here) I am thinking that modern money is credit and postoned consumption (I will buy you a pizza today instrad of buying a beer and you promise to buy me a pizza tomorrow, that one pizza tomorrow is basically money that I can use when I agree with someone that actually, buy me a beer, you are going to buy a pizza to that someone instead of me. That's credit (i.e. trust). But bitcoin does not have that. Nobody is guaranteed to buy me a pizza tomorrow if I have a bitcoin. I only can hope that I find tomorrow someone that will buy my bitcoin. Another thing is that this postponed consupmtion needs to have a price (i.e. interest rate). And the biggest fault with the current monetary system is that the price has a(n approximately) zero floor due to cash. We would need to be able to set the interest rate below zero in certain circumstances to facilitate consumption to keep the economy running. But negative interest rates are as close to heresy as there is for a typical cryptocoiner - as far as I understand. And there is no way to do this, anyway, in bitcoin. And adjusting the interest rate would require the ability to adust the money supply, which, again, is antithetical to bitcoin. (Somehow it would be cool if money could be created by anyone that needs it, but I have no good ideas how that kind of money would have any value. After all, it is a bit of stupid restriction that we can't make a real world value creating transaction just because one of us does not have money)

[1]http://www.macrotrends.net/1333/historical-gold-prices-100-y...