bitcoin.org | mtgox.com
"It is obvious that electronic money will replace paper bills in the future. Not because they are better or worse than paper but simply because the methods of payment simply killed the need for paper bills. Instead of storing tons of paper and gold in their safes, banks will store the electronic money in their databases. The public will never touch that electronic money, they will be just a number in a bank statement. You won't have to install any bitcoin client. The only thing you will ever need is a authentication tool. It could be a card, it could be your cell phone, it will certainly be some sort of portable token."
Yet, I'm still not sure how eletronic money can really be democratic, not everyone has access to basic infrastructure.
http://eduardo.intermeta.com.br/posts/2013/1/18/bitcoins-and...
If bitcoins are deflating rapidly, those bitcoins have greater marginal utility if you hold on to them. However if they are deflating very slowly (not inertially) then people will spend them to get something that provides greater marginal utility now.
Humans are capable of putting a price on time (determine the marginal utility of time). Inflation is not the only economic circumstance that works for trade to occur. Economics is very relative and reflexive. The only entity that truly loses in a deflationary environment is the government, because they can't steal from its constituents by printing money and devaluing the money its constituents are holding.
More important than deflation or inflation is relative temporal constituency in the value of money. So long as money stays are relatively the same value for long stretches of time, i.e. it isn't volatile, then humans are afforded circumstances in which they can make rational judgements of value and utility.