" I don't really get the point of Bitcoin. Any legal transaction can be done just as easily and cheaply with PayPal or the right (no foreign currency loading) credit card. "
Bitcoin transactions incur little to no costs for parties involved in the bitcoin transaction.
Paypal doesn't charge when you pay someone else, but they do charge the recipient/seller. The same rule applies to credit cards (for which we normally pay a yearly fee). Merchants can pay as much as 4 % for a credit card transaction.
In a bitcoin transaction, you simply transfer money from your electronic wallet to theirs. This incurs no bank fees, no wire transfer charges, no currency conversion commissions, etc. With the current volatility of bitcoin exchange, it does incur some risk for private transactions, but merchants now have tools that allow them to convert bitcoin at the prevailing exchange rate to minimize that risk.
You can also quickly verify whether or not the bitcoin transaction went through (and when). The recipient can do the same. You just look at the block chain to see if it worked or is on its way.
Try to do that with an international bank transfer or by calling Visa when an online transaction has disappeared, gone awry or been trapped in the system.
The decentralized nature of the crypto-currency environment is both a weakness (because no one entity seems to control it, which causes concern, and leads to abuses) and a strength (because anyone who wants to can play at little cost).
The fact that the government has little to no involvement with bitcoin transactions is a mainstream-press sideshow that distracts the public from the true power of a bitcoin eco-system.
Fortunately for bitcoin and its users, nothing is more dangerous than a good idea.
The Silk Road bust has shown that the government can and will go after bad guys who use crypto currency for their nefarious deeds. Bitcoin is probably easier to trace then real cash.
Hence the reason cyber-crims are starting to make their own crypto coins and deserting bitcoin.
Bitcoin enables small (and large) businesses to save a lot by using it for online transactions. Essentially the middle man is gone. I would argue that the crypto-currency model is exactly what online payments and transfers would be using (think PayPal 2.0) , if they had been designed correctly from the beginning, instead of being bolted onto existing payment physical systems.
Any bitcoin regulation will most likely come from the bitcoin community.
In this respect, bitcoin works a lot like any open source software project.
So when will El Reg get a bitcoin icon? Or better yet, a bitcoin donation button?