Fears and warnings about the consequences of a single entity obtaining majority network power have been known for some time, but have generally been dismissed as not conveying enough control to be worthwhile. For the first time, and for several extended periods, the GHash mining pool delivered 51% of the bitcoin network hashing power, despite promises that they would never cross the 50% threshold. Although GHash did not take advantage of its monopoly power during these times, it does seem that we have crossed a threshold. How do you trust the blockchain to an anonymous monopoly?
The problem is not whether they are backed by a government or not.The problem is with trust. As long enough people trust a currency to hold value it will be used.
The US dollar is regarded as a relatively good currency because the US government has proven that they can keep it from collapsing over a long time period. (On could argue that the US government has become so dead-locked that they are no longer able to destroy it...)
The Zimbabwean dollar is also backed by a government, but I don't think many would advice you to ditch your bitcoins and invest in them.
As long enough people trust a currency to hold value it will be used.
Great, so how do you manage that?
Any claims of "intrinsic value automatically prevent collapse" don't hold much water. For example, in approximately 1000 BCE, the dominant currency in Britain was bronze ax-heads, which were absolutely intrinsically useful items to have at the time. In around 800 BCE, the bronze ax-head collapsed in value in Britain, and the dominant trading token became quantities of grain. A similar transition occurred in what is now France between 300 and 600 CE, when Roman coinage went from being valuable to being worthless, leading to land and grain as the currency and the development of manorialism. So just because a currency is intrinsically useful today doesn't mean it's intrinsically useful in the future.
So that means that an organization will have to exist that does what the US government does with the dollar or the EU does with the Euro, namely ensure that the currency remains valuable and stable. We can, from that, determine a couple of requirements for such an organization:- Whoever is making the decisions of the organization must be accountable to people who use the currency, because otherwise the currency will be managed for the benefit of the organization and its managers rather than the benefit of all those who use the currency (e.g. transferring assets to another type, inflating the currency, buying a bunch of the now-cheaper currency, and then deflating it again).- The organization must be able to impose penalties severe enough for engaging in disruptive frauds that make it too risky to try. They must have enough enforcers looking at how the currency is being used that disruptive fraudsters are likely to get caught.
Those two requirements point to a democratically elected government being the least-bad choice for running the currency show, because that gives you the possibility at least of accountability and enforcement.