I smell some Stockholm syndrome
Quite to the contrary. The problem is that many of these exchanges have been hacked recently. Seems like every month or so, one or the other of them ends up going belly up. Some of these aren't legitimate security failures, they are the result of lazy coding or security practices. Some are just out right fraud. It's the wild west right now.
However I have extreme faith that all of this is the result of a few bad actors in an ecosystem populated by "mostly" honest folk.
I'd like to see bitcoin adopted as a currency neutral exchange medium, something that can be spent offline as easily as it's spent online.
To do that we will need to have people willing to accept the currency, i.e. Merchants.
Those people will need a safe secure place to store their funds that is also liquid enough that they can change it into and out of whatever currency they need on the fly.
Safety means a couple of things here. First off it means that if I get a Euro for my cookie today I'll still have that same Euro tomorrow. To do that it means I either need to denominate my account in EUR or the EUR/BTC exchange rate needs to be at least somewhat steady. The way to do that is through arbitrage trading across the exchanges. As you know I'm already working on that one right now. Ideally the exchanges would run the bot themselves and normalize the prices via seamless inter-exchange arbitrage.
The second thing that safety means is that if I need my Euros (dollars, whatever), that they are still at the institution I left them at. Honestly, if the exchange suffers a security breach that should be their problem, not mine (the merchant or the consumer).
However it becomes my problem when it forces them to shut down due to a liquidity crisis and leaves me without my money.
The solution to that is 2 fold. For immediate needs there needs to be a debt buying fund that can refill or refund the BTC balances of the customers effected by the breach. For a fund like that to work there just needs to be someone willing to take a gamble and buy up the currently illiquid accounts at a discount and wait for the service to recover. (However the service needs to be willing to recover, some just roll over and die or pass the buck, that's where the risk is for the bailout fund.)
The best solution long term is for an independent agency to establish a deposit insurance fund.
Deposit taking institutions could buy into the fund. Their premium would a certain fraction of their holdings for instance 1% + a similar fraction of new deposits taken. Said fraction could be set up or down according to their adherence to a set of security best practices.
When one of these places suffers a liquidity problem, the deposit insurance fund steps in and resolves it by providing the necessary funds for the institution to continue operations, this would be a loan and not a gift, the loan would be fixed term and paid back over time with interest, thus providing an income stream to the fund and it's investors.
Like I said, easy enough. We just need honest folks to run it and more honest folks to join it.
