It leaves a solution where my 'savings' are widely distributed all over the world on a system which is trustable because it is tight enough to be operated by a myriad of small players and enthusiasts. (That would be Bitcoin.)
Your savings would be locked in a p2p network that can't be withdrawn from without a $20 transaction fee. They would be safe from governments but not from competition that threatens to take over BTC's role as currency used for trade because of a myriad of reasons: lower transaction fees, status as 'coin of the realm' of a country in the case of fiat currencies, more merchants accepting the currency, etc.
I would distribute out my spending money to various off-chain solutions which seemed the most promising to me. Some might be attacked successfully and buried, and I might mis-judge some and they might rip me off. Even if all of them failed, I would still have the bulk of my value in BTC. I would probably only make several Bitcoin transactions per year.
This is just my opinion, but I think the vast majority of people would prefer a fully automated p2p network that's made up of thousands of nodes operated by enterprises, than a fully automated p2p network with hundreds of thousands of nodes operated by hobbyists, but with the disadvantage that you need to trust third party payment processors for any kind of real world use of currency.
If we're going to use proprietary networks (and they have to be networks to avoid expensive on-chain transactions) to transfer bitcoin credit, instead of bitcoin itself around, we can just use banks, or some successor to e-gold or something.
A bitcoin economy where you are reliant on using bitcoin-credit controlled by third parties is very similar to modern banking, and would probably have almost all of the same shortcomings.
This contrasts sharply with the vision of Bitcoin as a monolithic one-world currency solution which only large and well connected entities can profitably operate. In that case a failure means the loss of all of my value*.
Your vision requires large payment processors that are connected, in the classical banking sense of having trust-based credit relationships amongst each other, to form a proprietary network that allows you to actually use bitcoin in every day trade.
Bitcoin as a global scale network allowing millions of on-chain transactions per day, or as you put it, a 'monolithic one-world currency solution', was in fact the goal Satoshi Nakamoto set out for it:
http://www.mail-archive.com/[email protected]/msg09964.htmlAt first, most users would run network nodes, but as the network grows beyond a certain point, it would be left more and more to specialists with server farms of specialized hardware. A server farm would only need to have one node on the network and the rest of the LAN connects with that one node.
The bandwidth might not be as prohibitive as you think. A typical transaction would be about 400 bytes (ECC is nicely compact). Each transaction has to be broadcast twice, so lets say 1KB per transaction. Visa processed 37 billion transactions in FY2008, or an average of 100 million transactions per day. That many transactions would take 100GB of bandwidth, or the size of 12 DVD or 2 HD quality movies, or about $18 worth of bandwidth at current prices.
If the network were to get that big, it would take several years, and by then, sending 2 HD movies over the Internet would probably not seem like a big deal.
Limiting Bitcoin to 7 tps in my opinion virtually guarantees it will never have significant impact, because I believe people will opt for government-regulated networks, or alternative blockchains, if Bitcoin, as a p2p network, loses its transaction fee advantage.
The 1 MB cap was put in place as a temporary measure, until a better way to control transaction spam was found. Trying to make the limit permanent is trying to change the vision of Bitcoin as originally conceived.
