Deepbit is less than 10% of the network.

Bitcoin is A number 1 - OK!

Hey man! Awesome article! This is one of the best Bitcoin articles I've read.
Just wanted to point out one thing. For over the counter transactions, it wouldn't really be a problem because to do a double-spend attack, you would have to be the first node that the stores computer connected to. This could easily be mitigated. The transaction would be weeded out by all the other nodes it hits before it gets to the store. Any major attack would be rare and OTC transactions would be relatively small so it's well worth the risk especially if you know within 10 minutes if you were scammed. Maybe we all have to build a secure buyer/seller trust system to protect each other and build ratings.
Thanks!

Overall a good article, it got only a few minor points wrong. This is no shame as Bitcoin is a complex topic.
First, the article says "Bitcoins will never be any good for over-the-counter or face to face payments, because every time you make a transaction, there's a roughly 10 minute wait as the network validates the bitcoins' ownership. This wait will get longer in the future, too."
It is correct that a normal payment requires a number of confirmations which are issued in average every ten minutes. The frequency of confirmations will not decrease.
However, if you use sites like MtGox and send bitcoins from trusted addresses, the receiver could trust that address and accept the payment instantly. Look up the topic of "Green Addresses" in the bitcointalk.org forum. Maybe this is once useful to buy coffee or some magazine in Gare du Nord.
A second thing is that the mining pools do not allow a 50 % attack by their structure and the incentives Bitcoin gives. The miners own bitcoins and have invested a lot of time, money and hardware to profit from it. They do not have incentive to corrupt the block chain. It is also not easy to generate corrupt transactions, as all old transactions are confirmed constantly by the system, adding new layers of cryptographic security. Think of a bunch of notaries signing over and over a common ledger with the signatures of their fellows. This is what the bitcoin network does. To break the ledger, you would need to fake _all_ the signatures.
The third thing is the perceived power of the unknown holders of the large part of existing bitcoins. You can argue that the disparate distribution of wealth is unjust, and I would agree. But Bitcoin effectively dissociates wealth from power. The only power these people have is to sell their bitcoins. It is not the same thing to be a John D. Rockefeller, and to just own the amount of money as he.
The fourth point is the use of Bitcoin in the net. With sites like WordPress.com, Reddit, Mega, or companies like Memory Dealers, there are already many millions of users which can send bitcoins to pay their services. Also, it is possible to buy things like Amazon gift cards which are a kind if intermediate currency.
The fifth point is the thing with the Bitcoin shadow economy. While such things as Silk Road certainly to exist, they are greatly exaggerated and I feel the author couldn't resist the urge to add a fascinating dark note to the article. In the medium term, Bitcoin will be much more effective for migrant workers living abroad sending support to their family. An especially low point is mentioning of hit men which are supposed to work for bitcoins. These offers are certainly either scams or set up by the FBI. If you ever want to kill somebody, you need at least to be a bit more intelligent (but I guess your wish would be probably part of that latter problem, too).

I'm not familiar with Bitcoin but my first observation is that if Bitcoins were worth $3 a year ago and $30 now it seems to fluctuate by quite a lot (more than standard currencies and even significantly more than the stock market)
Doesn't this huge amount of fluctuation sort run counter to the principals that would typically be desired in a currency?
Sure normal currencies have inflation but bitcoin doesn't eliminate that fluctuation, it just reverses it and at least right now at an alarmingly more rapid pace. It was already almost $30 once around June 2011 before it dropped to around $3 in December of 2011 so it's certainly not immune to a rapid decline in value that surpasses inflation.

The article is relatively neutral, but there is a high number of fallacies. I will try to correct some of them.
"But the algorithms are designed to become progressively more difficult over time, until a point some time around 2040 when the supply will be capped forever at around 21 million bitcoins."
The algorithms in Bitcoin are not designed to become more difficult over time. The difficulty of Bitcoin "mining" is entirely dynamic, and it's based on how much computing power the network has at any given time. Mining has become more difficult over time due to increased competition.
It is true that the amount of new bitcoins awarded for participating in Bitcoin mining will halve every 4 years, which is almost the same as an increasing difficulty. It's not the same, however.
The article also misses on the fact that the main purpose of Bitcoin mining is to confirm Bitcoin transactions and to make it possible for a decentralized ledger to work at all. Creating new bitcoins is a secondary function which acts more as an incentive for people to help maintain the network.
Anyway, the overall difficulty of Bitcoin mining and the increased difficulty of earning coins that way has more to do with increased competition than it has with any inherent algorithmic rule.
"Of course, it also makes the Bitcoin system look a lot like a pump and dump scam as well – early adopters mined huge amounts of bitcoins early on for very little effort, and stood to gain huge amounts of cold, hard, non-virtual cash if they could convince other people the bitcoin was worth something."
It's quite important to note that every new technology has early adopters, it applies to any technology startup for example. There are also risks involved, most new technologies and companies fail.
Bitcoin hasn't failed, and this has obviously been good for the early adopters. They were the people who made it happen, so they deserve it.
When do you see Google founders blamed for orchestrating a pump & dump scheme? There is absolutely no difference between Google and Bitcoin. Early Google investors are now quite rich because they were early adopters.
Bitcoin is a highly useful monetary technology, it can only be misunderstood as a pump & dump if one does not understand its usefulness. That is not the fault of Bitcoin, it's the fault of the person who hasn't researched it enough.
"What can you buy with bitcoins?"
This whole section seems a bit 2011. That's when Silk Road was the centerpoint of Bitcoin.
These days Bitcoin is used increasingly for international money transfers, as an alternative to sensoring payment services such as PayPal. It's exploding in online gambling. Porn sites are starting to accept it.
Major online services such as WordPress, 4chan, Reddit, Mega are accepting it. Bitcoin Store was opened, which competes with Amazon. It sells over 500,000 products, often cheaper than Amazon. And only for bitcoins. Payment processor BitPay alone has 2,700 merchants these days, etc.
And as far as I know, you actually can't buy guns or hitman services from Silk Road and similar sites. Most or all of that are scams. Guns were sold at one point in a site called Armory but they closed it. Silk Road is mostly used for drugs and prescription medicine.
"Pros and cons of bitcoins" (this section had a high amount of fallacies)
"They will never devalue due to inflation - in fact, a slow process of deflation is built into the algorithm"
There is no deflation built into the algorithm. Deflation of the monetary base would mean a reduction in the amount of bitcoins. Bitcoins are inflating at a slowing rate until there is a fixed amount of them. The only deflation that will happen is due to lost coins, which is negligible.
If we're talking about price level deflation, that has nothing to do with the algorithm either. Bitcoin will experience deflation if there is growth because of the fixed amount of money, but only if there is growth. Deflation doesn't happen by itself, nor has the algorithm anything to do with that.
"Like U.S. dollars, they have no inherent value. If other people don't want them, they're worthless"
Bitcoins have no inherent value, true, but it's a common mistake to believe that any currency has any significant value besides the faith people base in it.
Even gold has only very limited inherent value, it's shiny and used in jewelry, it has properties that are useful in electronics. How much of gold's current value is based on that? 10% at most. Everything else is based on gold's monetary properties, which are excellent.
Fact is, Bitcoin has those same properties, and other properties that far exceed gold's capabilities.
"Bitcoins will never be any good for over-the-counter or face to face payments, because every time you make a transaction, there's a roughly 10 minute wait as the network validates the bitcoins' ownership. This wait will get longer in the future, too."
This is false. First of all, the wait to validate Bitcoin transactions is never getting longer. It's fixed at 10 minutes per confirmation. The system automatically adjusts it to 10 minutes every 2 weeks. To be absolutely sure a transaction can't be counterfeited, one needs to wait at least 3 confirmations, or 30 minutes on average.
However, double spending a transaction in the stage before confirmation is in itself fairly difficult. If the merchant has taken some precautions, only the first 10 seconds is a real problem. Thus, at least with small amounts, Bitcoin is reliable enough for OTC as well. It's much more likely that merchants suffer from credit card fraud.
On top of this, Bitcoin can be supplemented with escrow. There is a system called "green addresses" which means that a trusted site handles the payment through a green address, which the merchant trusts 100%. Then the merchant can accept instant transactions.
"Like cash, if you lose your Bitcoin wallet, you lose your money"
Unlike cash, you can backup your bitcoins, and keep your Bitcoin wallet encrypted with a password at all times. This means that a smart Bitcoin user can recover from both a computer malfunction and a theft.
Bitcoin wallets can even be set up with 2 factor authentication, meaning that a code needs to be entered from a second device such as a smart phone. Then even key loggers are useless for stealing bitcoins.
"They can be stolen"
Indeed, but so can anything else.

Thanks Bitcoin Criminals, you are providing us with invaluable information. Especially as the myth that factoring large dual-prime composite numbers is allegedly 'asymetrically complex'. When in reality a very elementary algebraic method exists within ultra polynomial time constraints. Here is a hint,:- "You don't need a 'Sieve of Eratosthenes' to factor 10057, because 101 x 101 = 10201, subtract the dual prime composite, and the remainder is 12 x 12, and 101 + 12 = 113, and 101 minus 12 is 89. ...113 x 89 = 10057." The polunomial time method is only slightly more complicated, and can factor any large dual prime or multi prime composite in milliseconds, with arbitrary precision calculator software. The Royal Military Police Surveillance Division are very grateful to Bitcoin for the valuable intelligence. Thanks!

RE: large dual-prime composite numbers: Bitcoin doesn't use RSA public keys, so I suppose we're safe from the Royal Military Police Surveillance Division for now (phew!).
If you want to worry about police surveillance, I would be more worried about that little tracking device that we all carry around with us known as our "mobile phone."

This is the clearest article I have read yet explaining the nature of Bitcoin. The fact is that I am still muddled by it - sure I would have a dabble but how can I consistently price my products if the value of the Bitcoin is up and down? I would have to offer a price in an established national currency and accept Bitcoins at a quoted rate. That makes Bitcoin a payment method and not a currency.
I am reasonably computer literate having owned a PC computer since 1986. I am in business and I deal all over the world with reasonably big chunks on money. Frankly: if I don't 'get it' who will? If I cannot see how I can use Bitcoin to conduct my regular UKP 100,000+ export transactions I suspect not enough other people will either for Bitcoin to reach a meaningful critical mass.
One of the BIG problems with the existing money system is people don't understand it either; they don't know where money comes from, how it works, who produces it. But it is backed with the power of the nation state (whatever the hell that means but it is more than enough for most folk to buy into).
If Bitcon was produced, underwritten and guaranteed by eBay/PayPal or MercedesBenz or Sony or Tesco or some such other ghastly corporate enterprises with strong trusted brand profiles the public may just base their decision on blind faith in band confidence.
With Bitcoin being a difficult to understand protocol and of unknown robustness it is not going to change the world (in my humble esteem).

What if they changed their name to the Federal Reserve Bank; would that make it any safer and believable?