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I think institutions here could play a key role in the future. There may will be many institutions offering this service somehow, competing with each other, and they will have to prove how trustworthy they are, maybe with algorithms or avoiding hacks/leakages.

Over time we would have some trustworthy new institutions where people could backup a piece of their key.

But I think it's a whole new set of problems, right? What if banks end up playing this role? it would be funny haha.






I can do even funnier scenarios. What if the institutions would actually store the crypto and promise to give it back to you when you need it? and what if the document stating that you have crypto in the institution itself could be used as a means of payment? I mean, Instead of making an expensive and slow on-chain transaction, we just agree that you give me the documentation that the institution gives the crypto to me instead of you. But wait, it gets even better. The institution could give you a discount or even pay you if you let the institution to lend the crypto forwards.

Oh, but wait... That sounds awfully lot like our current fractional reserve banking. Without any of the regulatory oversight and monetary policy aimed to regulate the money supply. Wonder what could go wrong?


All roads lead to banks.

Not in the slightest. Banks rent-seek on a fundamental part of a functioning economy: issuing credit. They have a privilege to print money for free, which they then "lend" at market rates. There's nothing "inevitable" about this, this is just how things were set up by the people in power.



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