Bitcoin's complete lack of centralized trust and inherent deflation seem like they may become big problems over the long run. I get that the peer-to-peer nature of it is considered a strong point by many -- but it also exposes users to fraud with little recourse.

It's basically like carrying cash: you can walk around with $10,000 in your pocket, but if someone robs you and gets away, you're out $10,000. If someone steals your credit card, the bank has fraud protection measures in place that limit their losses, and they often can roll back transactions. Unless you impose a similarly regulated structure on top of Bitcoin (where banks are super-secure and won't transfer large amounts of BTC without an auditable authorization chain so people become personally liable for any fraud that may occur) you're not going to be able to solve these problems.

Deflation is a bigger issue, in my mind. The algorithmic scaling of Bitcoin basically ensures that it will either not be very much in demand at all, or it will become increasingly scarce relative to demand over time. This creates an incentive to buy and hold Bitcoin as its value has tended to go up over time. However, most of the modern economy is based on the assumption that money today is worth slightly more than money tomorrow. This creates pressure to spend or invest, rather than hold onto currency for any reason other than liquidity. If Bitcoin remains popular, it won't be because of its virtues as a currency.