Disadvantages

Like any currency, there are disadvantages associated with using Bitcoin:

    Bitcoins Are Not Widely Accepted

Bitcoins are still only accepted by a very small group of online merchants. This makes it unfeasible to completely rely on Bitcoins as a currency. There is also a possibility that governments might force merchants to not use Bitcoins to ensure that users’ transactions can be tracked.

- Welcome to 'free' money, if you like it you use it, if you don't... don't. It's a currency by and for the people, an idea with great potential was invented, of course it has to start somewhere.

    Wallets Can Be Lost

If a hard drive crashes, or a virus corrupts data , and the wallet file is corrupted, Bitcoins have essentially been “lost”. There is nothing that can done to recover it. These coins will be forever orphaned in the system. This can bankrupt a wealthy Bitcoin investor within seconds with no way form of recovery. The coins the investor owned will also be permanently orphaned.

- User stupidity? Your wallet can be lost/stolen too, then it's really gone. Bitcoins however can be backed up many times!

    Bitcoin Valuation Fluctuates

The value of Bitcoins is constantly fluctuating according to demand. As of June 2nd 2011, one Bitcoins was valued at $9.9 on a popular bitcoin exchange site. It was valued to be less than $1 just 6 months ago. This constant fluctuation will cause Bitcoin accepting sites to continually change prices. It will also cause a lot of confusion if a refund for a product is being made. For example, if a t shirt was initially bought for 1.5 BTC, and returned a week later, should 1.5 BTC be returned, even though the valuation has gone up, or should the new amount (calculated according to current valuation) be sent? Which currency should BTC tied to when comparing valuation? These are still important questions that the Bitcoin community still has no consensus over.

- Welcome to a truly free market. As more people use it and the economy overall grows, the price will also stabilize more.

    No Buyer Protection

When goods are bought using Bitcoins, and the seller doesn’t send the promised goods, nothing can be done to reverse the transaction. This problem can be solved using a third party escrow service like ClearCoin, but then, escrow services would assume the role of banks, which would cause Bitcoins to be similar to a more traditional currency.

- Bitcoins are like cash, make sure you make use of services that you trust. Some sites allow users to give feedback. Also, whoever wrote this thinks an escrow service is the same as a bank... Seriously..?!

    Risk of Unknown Technical Flaws

The Bitcoin system could contain unexploited flaws. As this is a fairly new system, if Bitcoins were adopted widely, and a flaw was found, it could give tremendous wealth to the exploiter at the expense of destroying the Bitcoin economy.

- I would suggest anyone to read up on how bitcoin works on a more technical level, if bitcoin was to get 'hacked' we have an even bigger problem with current systems like online banking.

    Built in Deflation

Since the total number of bitcoins is capped at 21 million, it will cause deflation. Each bitcoin will be worth more and more as the total number of Bitcoins maxes out. This system is designed to reward early adopters. Since each bitcoin will be valued higher with each passing day, the question of when to spend becomes important. This might cause spending surges which will cause the Bitcoin economy to fluctuate very rapidly, and unpredictably.

- Maybe a hand full of early adopters who trusted this system works and hoarded their coins for many years would get really wealthy yes. Then again, from experience i know many 'early adopters' sold bitcoins at prices under 0,05 USD. Also, if bitcoin were to ever take off on a massive scale, the people who brought it up, spread the word, improved up on it, etc deserve it imho.

    No Physical Form

Since Bitcoins do not have a physical form, it cannot be used in physical stores. It would always have to be converted to other currencies. Cards with Bitcoin wallet information stored in them have been proposed, but there is no consensus on a particular system. Since there would be multiple competing systems, merchants would find it unfeasible to support all Bitcoin cards, and therefore users would be forced to convert Bitcoins anyway, unless a universal system is proposed and implemented.

- I can pay with my phone, no problem. The named cards all use the same fundemental system, namely bitcoin, the only reason not to accept a variation of cards is if it's not a card from a well known trusted party.

    No Valuation Guarantee

Since there is no central authority governing Bitcoins, no one can guarantee its minimum valuation. If a large group of merchants decide to “dump” Bitcoins and leave the system, its valuation will decrease greatly which will immensely hurt users who have a large amount of wealth invested in Bitcoins. The decentralized nature of bitcoin is both a curse and blessing.

- Again, free market. Also, as the economy and usercount steadily grows, 'dumping' of coins has less effect over time.