>The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.
What's really fantastic, though, is that cryptocurrencies are currently in a large bubble themselves. Privacy of the exchanges is no better as you literally have to send them a picture of your ID. And several exchanges have been hacked with the money stolen. So far, I'd say cryptocurrencies (for the average joe/jane) are WORSE than regular banks. And, on the last point about micropayments, well Bitcoin now has such massive transaction fees and massive overhead that micropayments are even more impossible (without adding more layers).
The ideological/theoretical purity of cryptocurrencies is completely negated by using exchanges and by the perverse incentives of proof of work leading to enormous returns to scale for those who have developed custom ASICs.
Decentralization requires more effort than centralization, but something that requires effort doesn't generally grow very fast... And so we've centralized cryptocurrencies in a haphazard way, making them a lot easier for people to use--thus enabling cryptocurrencies to grow very fast--but also negating all the theoretical benefits.
Something useful will eventually come out of the current mess (and there are various initiatives that help address many of these flaws), but probably not before the Zeitgeist becomes disillusioned with cryptocurrencies.
If we went back, like 100 years...banks were not these secure, Federally-insured institutions with complex regulations, etc. Banks were robbed. There were runs on banks. They went out of business, people lost their deposits or their accounts. Just look at "It's a Wonderful Life" for a fictional example.
Everyone criticizing the current state of crypto as being worse than banks is missing the forest for the trees. These systems are early tech. Ethereum is barely 2 years old. It was easy to criticize dial-up internet, too. I'm sure Barnes & Nobles scoffed at Amazon at one point. Easy to do this, and assume this "dot-com" thing is just a bubble that's going away at some point.
Decentralization is ONE feature of crypto currency. One of several. It's not decentralization alone, but the combination of features that brings value to crypto, including programmable economic incentives (a powerful concept we're just learning the implications of).
To answer some of your other points: even exchanges are being built on the blockchain now. We have 0x, EtherDelta, etc, which allow you to trade tokens without revealing your identity. So, that problem is starting to resolve itself.
We have Proof-of-Stake coins like Qtum, which avoid the Proof-of-Work issues (Ethereum will be moving to PoS soon).
Still not sold on the idea that proof-of-work is inherently bad though. I consider that system very secure, as Bitcoin has proven. The blockchain itself has proven quite resilient to hackers, DDoS attacks, government intervention, etc.
I like your view as it's progressive. I think you're right to imply that the current state of crypto is a mere glimpse of better and more mainstream things to come.
+ the genesis block included the text "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks" (Source: https://en.bitcoin.it/wiki/Genesis_block)
>The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.
http://satoshi.nakamotoinstitute.org/posts/p2pfoundation/1/#...
Even the whitepaper has a bit about the weaknesses in financial institutions in the intro: https://bitcoin.org/bitcoin.pdf