Sorry to knock your example, but Ipads have not replaced pen and paper. Pen and paper still have billions more users than Ipads.
Dollars continue to be much stabler than bitcoin, which is the most important characteristic of a currency. Until a bond market in Bitcoins emerges, this will remain the case. A bond market stabilizes a currency, because it stabilizes interest rates, and therefore savings rates. The savings rate in Bitcoin is volatile, which is why its purchasing power is volatile.
Imagine bond traders think that the purchasing power of the dollar is going to increse, i.e. there is going to be deflation in the dollar. They then buy bonds with the highest interest rate available for acceptable credit risk. This is because they expect the interest payments to buy more goods in the future, than the principal does now.
So they bid bond prices upward, to which bond sellers respond by bidding interest rates downward. This includes the rate on savings bonds, which encourages the public consume now, instead of saving for later. More consumption increases the price of goods in dollars, which decreases the deflation expectation, stabilizing the value of the currency.
The process plays out in reverse, to stabilize against inflation as well. However, what really happens is that these events occur very quickly, because the traders can anticipate them, and do not need to wait for the public to react. The net effect is that the value of the dollar scarcely changes day-to-day.