An interesting question, and option 2 seems to be the likeliest option. However, I would qualify it and say that it was created with the intention of having it fail. This would ease the introduction and attractiveness of any regulation, or prohibition, of virtual currencies.
If a government were to create it with the intention of it lasting, then I would imagine they would have designed it such that the supply of the currency increased with the number of transactions; I'd like to hazard the guess that this is both possible, and would prevent both inflation and deflation. Why is preventing both of these necessary? Had they included inflation, it is unlikely bitcoin would have attracted its initial users - that is, the libertarians et al. Similarly, had it been deflationary, then this would possibly constrain government; no seignorage, and the real value of debt rising over time.
If a government were to create it with the intention of it lasting, then I would imagine they would have designed it such that the supply of the currency increased with the number of transactions; I'd like to hazard the guess that this is both possible, and would prevent both inflation and deflation. Why is preventing both of these necessary? Had they included inflation, it is unlikely bitcoin would have attracted its initial users - that is, the libertarians et al. Similarly, had it been deflationary, then this would possibly constrain government; no seignorage, and the real value of debt rising over time.