The situation is like the chicken-and-egg dilemma.
Definition 1:
'Good producer' is a producer that accepts bitcoins.
Definition 2:
If all the good producers together produce all that you need, then the number of producers is 'enough'.
Definition 3:
'Ideal state' is when enough good producers exist.
Theorem 1:
A producer will accept bitcoins if either of the following is true:
i. Ideal state has been attained.
ii. There exists exchanges that trade you physical currency against bitcoins.
Observation:
Once we are in the ideal state, we no longer need to have bitcoins converted to physical currency. So we don't need the exchanges to exist forever. We need exchanges only till enough producers have started accepting bitcoins.
Except the only ideal state is when you can buy anything in the world, not just "enough."
The great thing about good currencies is they can be exchanged for almost any currency and therefor can be used to purchase almost any good or service that is for sale.
Definition 1: 'Good producer' is a producer that accepts bitcoins.
Definition 2: If all the good producers together produce all that you need, then the number of producers is 'enough'.
Definition 3: 'Ideal state' is when enough good producers exist.
Theorem 1: A producer will accept bitcoins if either of the following is true: i. Ideal state has been attained. ii. There exists exchanges that trade you physical currency against bitcoins.
Observation: Once we are in the ideal state, we no longer need to have bitcoins converted to physical currency. So we don't need the exchanges to exist forever. We need exchanges only till enough producers have started accepting bitcoins.