For now, I don't see why I would use BTC to do groceries when I have fiat. But when fiat blows up it would be good to have something ready by then if BTC wants to replace fiat too. The question is: Can BTC be both digital gold and digital day-to-day cash?
I don't think it can be. And we don't actually need to live up to that to find out. The very existence of altcoins reveals that we won't have to. I'm not going to say that altcoins were created specifically to be more like a regular currency unlike Bitcoin which came to be kind of digital gold, but this is how things turned out. So if fiat blows up one day, Bitcoin will most likely remain a store of value while some altcoin or a group of them will be used for regular transactions and payments like groceries.
In fact, the functions you mentioned (store of value and means of payment) are mutually exclusive to a great degree. That's why fiat is not good as a store of value since this function is sacrificed in favor of its currency aspect.
The holy grail would be to be both a store of value and a viable currency, but so far it seems like it's impossible, I mean second layers are a decent effort but you are giving away too much decentralization as I understand it.
Yeah, it's impossible unless the whole paradigm shifts, and money then is very different from what it is now.
Gold can be bought and stored for the average individual, whereas if what some predict is true, it will be impossible for the average joe to do that with bitcoin. Of course big sized transactions will be cheaper in bitcoin compared to moving tons of gold, but for the average guy wanting to save his 50k savings, for less than 1.5 kg at current prices you can move it. So at some point getting 1.5 kg of gold delivered in your house will be cheaper than the transaction of 50k in BTC.
It is a whole lot easier to ban gold (and actually enforce this ban) than to ban crypto. See, it is not just about declaring Bitcoin illegal, it is real actions that could and should be taken to punish its possession. And that would be a big pain in the ass. On the other hand, possession of physical gold can be prohibited, and the ban can be enforced in real life. In fact, it has already been done in one big country once upon a time, so there's no reason to think that it can't be done again, this time globally.
As far as alts as cash goes, im not really sure if they are any better than LN. If alts were to be used at scale, they would end up with massive problems which LN already are catering for.
There are other similar technologies that many altcoins boast. And Litecoin has LN already activated (though not used).