[figglesonrails]

Agreed, trust and confidence //that it can be spent//. I don't think "trust and confidence" against terrible scenarios was a requirement 1,000 years ago, (FDIC formed 1933) yet people still had currency that was centrally issued and sometimes even based on gold/silver.

What you're really saying is "A currecy requires a central authority to absorb losses like the FDIC because it makes consumers want to use banks." I mean clearly, you aren't saying the FDIC should insure cash under peoples' mattresses in case they have a house fire that literally burns their wealth, right? The "backing" you're referring to only counts if you put it in a bank that complies with the FDIC, not by mere merit of owning the currency itself. In fact, there is absolutely no reason a person couldn't create a bitcoin bank and offer THE SAME PROTECTION. But who wants to do that when there is no Uncle Sam to pick up the tab for you?

EDIT: TL;DR: Bitcoin and keeping all your money as cash are effectively equivalent risk. In both cases, if you lose your wallet, you're screwed with no recourse. Hence, it is not by merely being centrally issued that risk automagically disappears.