My partner dropped his work to work full time on bitcoin project back in February. I think he was one of the first, who have bitcoins as main income source.

Currently bitcoin related projects are an unexplored land of possibilities :)

Could you elaborate on what he does and how it all works out? Sounds pretty fascinating, does he use Mt Gox or something else to convert to more recognized fiats?

Does he (and you) have a backup plan in case things don't work out as planned with Bitcoin?

Mining pool (http://deepbit.net). Yes, mtgox for now, though i hope that in a year or two i will be able to pay my rent with it directly :)

Currently the growth is exponential, so it takes time to scale it.

For me it's a side project, though it's becoming a large part of my income. If bitcoins fail - no big deal, just move on.

I would definitely not be willing to pay my rent directly in bitcoins. It is much more interesting to pay in silly worthless fiat governmental currency.

Currently to pay it i have to convert bitcoins to fiat currency (and lose around 2% in the process). I'd like to be able to skip this part.

I wonder how the IRS will choose to treat it. If you solve a block, have you made income or realized a capital gain? When you convert BTC into a national currency, what gain have you realized?

(Current_price - Price_at_generation)?

It seems like a legal minefield.

Yeah, it's probably better to just not pay taxes.

It is going to be difficult for the IRS to prove that you even own the Bitcoins with money laundering services and the ease of creating new accounts.

As more merchants accept Bitcoin, I will try to convert to fiat currencies only when absolutely needed.

^^this sums up my impression of the bitcoin community.

Bitcoin is backed by what? Oh, right, scarcity.

I'm watching Bitcoin along two axes-

One, how much value is notionally stored in the system. At this moment, it's roughly $51.4 million (6.192M bc at exchange of 8.3 usd), which is starting to be interesting. An order of magnitude higher, and it's definitely interesting.

Two, what can actually be bought with the currency? This is still lagging considerably. It's almost entirely trinkets or not-very-interesting services that have no marginal cost to the producer. No one has put much faith in Bitcoin by putting their livelihood on the line with it, and that makes it less interesting.

There's a fledgling trade in controlled substances via Silk Road, but having that as a primary example makes me considerably less interested. Not only am I not in the market for such, growth in this area virtually guarantees the ultimate failure of Bitcoin due to government action.

The right approach to grow Bitcoin as an actual currency which is truly exchanged for goods and services is to offer something that people really want exclusively through Bitcoin. The extreme example would be the iPad. One producer, very high demand. Dollars (and thus value) would flood into the Bitcoin system with something like that.

But where's the incentive for the producer? If you've got something people want, why would you offer it only via a currency no one uses?

There's your core dilemma, and why it's all t-shirts and domain registrations.

"...virtually guarantees the ultimate failure of Bitcoin due to government action."

Owe ya, I sure do miss "Bittorrent".. boy do you remember that. Too bad the Gov shut it off.

Also,

"why would you offer it only via a currency no one uses?"

You would not that would be vary stupid. That is why Apple take EUR, USD, and so on....

bittorent does not require the "real world presence" that bitcoin exchanges do. While its true it can really never be completely shut off, its very easy to target the major exchanges that an efficient and liquid economy needs. If you are suddenly unable to covert bitcoins to real money, they arnt worth much.