I agree that if a small country started to use bitcoins then this would make a big difference. What stops that right now?
Well many small countries with serious money problems also have dire political situations that would prevent this. Lets put those aside.
Next many governments would not want to cede their currency to one they had no control over. After all you can always print more pound notes, or green backs if the economic situation gets bad, but what can you do with bitcoin? Nothing. So A country that already had any control over its finances could not or would not do this.
Lets imagine we have a country wanting to do this. HOW would they do it? First thing is how does the man in the street get coins? Normally introduction of a new currency is go to the bank and exchange iold currency for new one. That could work, but for many people lack of a physical embodiment would be an obstacle. I mean, for us netizens, its great we never look at a piece of paper, and want our money to be the same, but for your average sheep farmer who doesnt have a computer, much less understand the difference between hash and a random number how can it work?
Perhaps we need a physical currency built on bitcoin, as was discussed in these forums some while back. The idea here was that the actual coin contained a sealed hash that could be broken open and redeemed or could be exchanged still sealed. This is, of course exactly the same as a fiat currency, you are relying on the promise on the coin/note that there is a bitcoin behind it. Just like a Uk £5 note which has a promise to pay the bearer on demand the sum of five pounds, once upon a time this was five pounds weight of silver. Its a bit better than this because the promise can be verified and and "expert" could check if the coins really exist in the bitcoin chain. I'd say your average sheet farmer would be happy with that. But the problem here is that the cost of making the money would be high, would involve new, possibly unproven and unfamiliar technologies. I mean look at the notes circulating in turkey, libiya or malasia. Some of these are so old and worn to be hardly reconisable. The physical bitcoin must be tough!!
Is this possible? I do not know.
the best way would be to make a physical currency backed by bitcoin..
the government prints bills, no sealed hash none of that shit ... the bill only comes with a promise, that it can be exchanged at their local public bank for bitcoins.
the bills are cheep to produce
the bills have value because they are backed by bitcoin
more bills are printed only if the country buys more bitcoins.
removing the private bank and replacing it with a public bank.
money controlled by its government, not by greedy poeple who do not give a F%^K