Bitcoin, like many early technologies is just an adoption test right now. Who knows if it will gain mass use or not. If it fulfills a need for a wide enough array of people, it will. That's the basic way in which tech works.
Krugman's argument against Bitcoin, however, is 1) a statement of obvious facts upon which the Bitcoin framework works and 2) ignorant of the way in which technological advances and adoptions have made the world operate.
"...money...is useful only to the extent that other people use it...I guess you could make [the case that we need a new form of money] if the money we actually have were misbehaving. But it isn’t."
1) Obviously people only use money if other people use money. Krugman stating that sketch markets for drugs, weapons, and human trafficking are using Bitcoin because of the distinct advantages it provides those audiences shows that people are using it. Maybe not a huge amount, but, like I said, it's an adoption game right now.
2) Just like people who wanted to watch pornography using VHS before anyone else or the same people demanding online video before anyone else, sketchy markets have proven to often be precursors for mass technological adoption. Magazines weren't really broken in the early 80's, and VHS wasn't really broken in the late 90's. Easy transaction and consumption paved the way in dramatically changing those sketchy markets and the world at large.
I don't defend or endorse people selling drugs, weapons, and humans online. However, the truth is that they're major economic players who will need a way to transact with Bitcoins for more basic goods in the real world. If they want to change the way currencies work to suit their needs, it could stand a pretty good chance of happening.
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