The real promise of cryptocurrencies is electronic payment verification. The confirmation is through math and algorithms so instead of putting trust in 3rd-party financial institutions, people put their trust in a software algorithm. The confirmation is quite fast and quite cheap compared to paying transaction fees to the seven different institutions that confirm a credit card transaction.

In a poetic twist of history, alchemy was actually accomplished through the emergence of fiat currencies in the 20th century and not the chemical re-arrangement of an element or middle ages ‘magic’. A new monetary system will emerge out of the next global financial crisis and thoughtful investors would be wise to position themselves to be the winners in the new monetary system just as nations (like China) are positioning themselves.

You can’t eat it, you can’t burn it to stay warm, its only industrial use is as a good conductor of electricity. It only has value because of the human social contract that it has it value - and yet from eons past gold has been the most universal form of money.

To get more gold, it has to be dug out of the ground - that takes work and time. Gold as money forces discipline because to expand the money-supply of gold it requires work. 

Cryptocurrencies use technology to force the same discipline that nature forces with gold. The underlying technology behind cryptocurrencies like Bitcoin forces monetary discipline because to create more requires work in the form of computing power and electricity.

the system of consolidated financial control that Central Banks represent is cracking from the pressure applied by an unlikely source: technology. The financial world is moving into the Age of the Cryptocurrency and Central Banks are scrambling to either make the transition or get left behind.

The Thoughtful Investor sees through the ruse. Bailouts create a moral hazard. Period. Expansions and contractions of credit supply magnify the effect of the business cycle and contribute in drastic and terrible ways to manias, panics, and crashes.

1) why does erosion of purchasing power occur and 2) is this erosion in the form of ‘currency inflation’ a fundamental law of the universe?

In the broadest definition, HARD ASSETS are physical things that are obtained through work. FINANCIAL ASSETS are pieces of paper or digital 1s and 0s; financial assets are not physical and are HARDLY ASSETS