You avoid answering because you know that cash theft is a big hassle.
Bitcoin shares some of the properties of cash. This includes its advantages (direct people-to-people transactions, no account can be "frozen", pseudo-anonymity, etc) but also its inconvenients (thefts are hard to recover). And smanek's point is that if cash is good enough despite its weaknesses, then surely Bitcoin is good enough too.
Furthermore, unlike cash, Bitcoin has numerous ways to palliate these inconvenients. Two examples:
0. You cannot "back up" cash (if you put it in a bank, you lose all its aforementioned advantages), but you can back up bitcoins by making copies of a wallet file. Very useful especially when using deterministic wallets.
1. Cash can only be secured in primitive ways (physical security), but Bitcoins can also be secured by using wallet encryption, storing them offline, remembering them (brainwallet!). Soon you will be able to store them on tamper-proof credit-card-sized hardware Bitcoin wallets protected with PINs or similar.
I will be the first one to admit that Bitcoin is not yet easy enough to be used securely by inexperienced users. But these problems are solvable, and are being solved.
There are in fact some very clever ways to make completely offline and non-physical Bitcoin wallets.
Also, banks are protected in a way since they don't really hoard cash or valuables. They invest it which spreads out the risk.
Furthermore, the federal government will go after criminals to recover money. Good luck getting them to help you with BTC theft.
Consumer liability for unauthorized transfers. The consumer has limited liability if reported expediently.
You should read up more closely on the FDIC regulation -- they don't just provide insurance.
Also, a clever little loophole: if the bank goes insolvent paying their accounts back, you are then covered under FDIC insurance.
Would you say this is true for most users?
It's not that hard to provide people with a secure environment, as long as that environment is designed with with security in mind. A non-jailbroken smartphone is probably good enough, though a dedicated device might be better. And you can use live boots.
I can see a future where we use such (or similar) things to do money transfers.
* How does bitcoin storage work with offsite backups? If someone compromised the backup, would that give them access to your money?
* If you lose the file (hard drive crash, home burns down, backup system fails, whatever), does neither you nor anyone else have that money anymore? I.e., someone wouldn't have to gain access to the money themselves to deprive you of it?
there are also ways of generating bitcoin keys completely offline as well as producing signed valid bitcoin transactions completely offline. This way you can forward funds to keys that are not on a machine connected to the internet, or keys that are backed up only on paper (in multiple safety deposit boxes if you like). And also you can then put signed transactions from the offline machine onto a usb stick or whatever and then use a networked machine to forward those valid transactions to the bitcoin network.
Coinbase is doing something like this for their storage of customer funds. Coinbase seeks to be a bitcoin bank that wont get hacked or that if it somehow does get hacked (cough inside job, cough) that only very small losses could occur.
For example, Bitfloor (which had 250K USD stolen):
Verses Coinbase, which has no such history:
To be sure, I'm not advocating that my parents start using BitCoins. I just tire of this implication that somehow USD is, by virtue of being USD, automagically more secure than Bitcoins.
Armchair loud mouths (I have one in mind who went into hiding after trolling HN repeatedly) stop by for months following an online wallet incursion to tell us how stupid Bitcoin and Bitcoin users are.
For long-term storage of large amounts of value, use redundant flash drives in a safety deposit box.