the idea that most large investors would physically hold their investment on their iPhone is rather ridiculous to me
I never said that they should hold their private keys in an iPhone, but in a properly airgapped device, by backing up their seed phrase in some strong material like
washers, or in paper inside a locker. You should never hold private keys of significant value in an Internet connected computer.
Who has access to the safe? Why do they have that access? Who is monitoring that access? Who is monitoring that person for compromise by foreign or domestic criminals? Who made the safe? Who else could have the keys to it? How long would it take somebody to break into that safe? Who controls who has access to the safe, and under what procedures?
And what is the overall risk, in terms of analytics, that this safe is compromised?
Most people are probably not aware that the above items--and much, much more--are done every day by reputable large financial institutions, who follow standards like 27001 compliance and lots of other standards and practices. Employees of those institutions are background checked, fingerprinted, and so on.
What average consumer can rival this?
Large institutions sometimes fail--especially very new ones ala FTX and Binance and so on. And crypto brokers initially have existed with less regulation that helps ensure they correctly care for people's money.
Shall I google all of the stories about people who have physically lost their private keys?
Go on. Find me incidents of people who used reputable, open-source software in airgapped devices, like Passport or SeedSigner and got ripped off. Or beyond these. Find me incidents of people who simply got ripped off by holding their keys in an airgapped environment.
Find me the last time a major US financial institution like Citibank lost their customers bank accounts.
Again, your average consumer does not want to engage in
trade craft just to hold on to their savings. Most people don't do this for a living, they do other things.
And "airgapped" won't help you if a thief breaks into your house, takes your airgapped device, and then uses a
form of cryptanalysis that has thus far never failed to break even the strongest encryption.
There's obviously no perfect solution, and everybody can make their own decision about this, but the existence of large banks and brokers in the civilized world that hold most consumer wealth tells me that most people want to trust somebody else to guard their major wealth, not do it themselves.
I agree, but what I'm trying to tell you is that there is no regulatory framework for centralized exchanges, so it is a bad analogy. You're practically handing over your coins to a stranger with no compensation, trusting nothing but their word. In a civilized world, you do not only have the bank's and broker's word to rely on.
I agree with that, and I suspect that you'll see a massive shift to people using the ETF route to expose themselves to Bitcoin and other cryptos because they can use their larger and more trustworthy financial institutions e.g. their stock broker like Charles Schwab or whatever. These are companies that consumers have trusted for years and they stake their entire business on not losing customer data.
The existence (and fails) of companies like Binance and the others who have lost customer data speaks, I think, to the fact that crypto investing is basically brand new. As this market matures, the "pros" will come in and do it right--and there will be government regulations resulting from massive losses of consumer money. (My hope is that they leave the market open enough that it's optional for consumers e.g. FDIC insured or not, their choice).