Bitcoin utility.

There are three functions that formally define a currency in economic theory.

1 - medium of exchange
2 - unit of account
3 - store of value

Bitcoin's value is mostly premised on #1, where it excels. It also clearly satisfies #3 to some degree, but with a high level of risk and instability.

But bitcoin's use as a unit of account is negligible to non-existent, arguably even impossible. So... is it really correct to describe bitcoin as a "currency"?

It seems to me, it's actually something closer to a payment-processing system (#1), and that's a more productive way to conceptualise it. Its transactions are still overwhelmingly denominated in dollars (or euros, yen, etc., but mostly dollars). Bitcoin just functions as a near-instant pass-through, with dollars exchanged into bitcoin and then back into dollars. Often the whole process is automated. It's still dollars being used as the unit of account, in practice. Prices for goods and services are fixed, not in bitcoin, but rather in dollars, with the bitcoin price fluctuating freely with the minute-to-minute exchange rate. Profits and losses are still measured in dollars, and it would be near-useless to use bitcoin as a unit for that.

Holding bitcoin (#3) is a speculative investment in the future growth of its use... but you can't use it as a unit of account for economic planning purposes. You couldn't set an annual budget or keep your books using a unit that fluctuates so wildly and unpredictably in value. With a relatively high degree of confidence, you can know how much a dollar will be worth twelve months from now, and that it will be fairly close to what it is now. Good luck trying to do that with bitcoin.

So using bitcoin and other systems like it, does not provide an alternative to the dollar for that function. It's still only a partial replacement for the dollar, not a full-blown "alternative currency." You're using bitcoin as a medium of exchange, dollars as a unit of account, and can choose to use either as a store of value based on their relative risks. Bitcoin is, at best, a technology that functions as a sort of quasi-currency.