It irritates banks not, by the way, because they're oh so scared about this fantastic new competitor to "their" money and money related businesses, but because it's often used (when it's used) for illegal transactions.
The only downside to it all is if whoever handles your "account" (or wallet) is breached, or someone steals your "money".
Right now - no one will insure it. It'll come, and when it does - it'll likely be decentralized again, because that's entirely possible - throw 1% of your "account" into "insurance" and suddenly everyone is paying for their own insurance and third-party investigations into claims. That in itself will be heavily regulated by the companies running it, and I think the lower the fee - the more information they'll want from users.
Every single thing in your post makes zero sense.... it is all breathless hype.
Not true. Most of the post makes sense. Trustlessness and decentralization are pretty much the only benefits to bitcoin and others like it. There are obviously real costs for these features, but also real benefits. Do the benefits justify the current valuations - only the market can determine that. I personally am quite bearish on almost all cryptoassets (so I would not be considered a "pumper"), but certainly you must see the threat they pose to the incumbent masters of the monetary system?
Another example I've seen in real world use is the "startup" retail banks popping up throughout Africa that have no offices, and are purely operated over mobile.
The lack of regulation in these countries have lead to massive leaps in innovation in the banking space. Seriously, you can read articles about it - but until you go to countries like Nigeria or Kenya and try it out, it's incredibly impressive.
I'm not a major investor in crypto anything, I think most, if not all, coins created right now are completely pointless - but blockchain as a public, auditible ledger and fiat-backed crypto/tokens I think we'll see some very cool innovation that own't overhaul the banking industry completely. There's too many smart people in banking to get "caught out".
However I do think we'll see some new contenders in the space as the industry begins to break down into smaller units. And that'll be good for everyone.
Your "only downside" is enormous! I'd never consider paying my salary or keeping my savings in an organisation that has no regulation. My money could just disappear overnight.
You add that I could put 1% of the account into insurance, but that is essentially a 1% (yearly?) cost. Why would I do that when I can have a GBP bank account regulated by the FCA for free? In fact, the FSCS guarantees up to £85,000 per banking group (eg. HSBC).
We've seen entire banks collapse and people lose their money in the past decade alone. The early days of banking was rife with fraud and scams.
I don't expect this to change in the short-term, however think about the convenience you'd see on day-to-day banking and how fast new features could be developed compared with our current banking system. Even if you only held a very small amount in a "new bank" and "currency" and kept you significant savings and assets in a traditional bank, I could see this slowly chipping away at existing banking services very quickly once a consensus on currency is reached within a community.