So as a new type of money is introduced, at first, the money itself is the payment system (you take coins and banknotes from your pocket and give them to the marchant), and as economic activity and technology grow, the payment system gets taken over by bank transactions and stuff like that.
And in a way we currently see that already for bitcoin: lots of people keep their money not in their own wallet, but in that of an exchange, so it can be more easily traded. The downside of that is that you don't control your money anymore, and there's no legal framework to protect your ownership of that money, so people have been losing a lot of money to fraudulent and incompetent exchanges. But that change also kinda defeats the original purpose of bitcoin.
> But that change also kinda defeats the original purpose of bitcoin.
The original purpose of Bitcoin was to take power away from governments who could artificially devalue your money, not to protect you from fraud or ignorance.
Along with that also came the choice - how much do you want to trust someone else with your funds?
You can go full "zero trust" and build your own Bitcoin client from scratch, rely on your node to see what transactions are included in chain, and self-custody your own funds. You can have some trust and only self-custody your funds/use a multi-sign wallet with your family so you lower your personal responsibility to not lose funds, or you can allow someone else to hold funds for you if you fully trust them. You can also make any choice in between.
Having that freedom to choose the level of trust you want to have is one of the major values crypto offers, though most people will go with the "full trust" model since it's the easiest and they don't care about decentralization enough to worry about self-custody.
And in a way we currently see that already for bitcoin: lots of people keep their money not in their own wallet, but in that of an exchange, so it can be more easily traded. The downside of that is that you don't control your money anymore, and there's no legal framework to protect your ownership of that money, so people have been losing a lot of money to fraudulent and incompetent exchanges. But that change also kinda defeats the original purpose of bitcoin.